University of Teesside
Teesside Business School

Management-Report Karstadt

von: Volker Schmid

Table of Contents

1 Company Profile ... 1

2 Customer Analysis ... 1

3 Analysis of the Organisation’s Marketing Strategy ... 4

3.1 Outline: Marketing Mix ... 5
3.2 STEP Analysis ... 5
3.3 SWOT Analysis ... 7

4 Analysis of a Marketing Weakness ... 10

5 Alternative Solutions to solve the Marketing Weakness ... 11

References ... 15

Appendix A Age pyramid, Germany
Appendix B Performance of the “true” over-the-counter retail
Appendix C Competition of Karstadt

Executive summary

According to the Financial Times (2004), one of Europe’s largest department store and mail-order group KarstadtQuelle AG may have to dismiss about 20,000 to 30,000 of its employees and to sell approximately 77 of its smaller warehouses as well as all retail chains including SinnLeffers, Wehmeyer, Runners Point and Golf House (Vasterling, 2004).
The over-the counter segment of the KarstadtQuelle AG dropped by 5 percent from 7.3 in 2002 to 6.9 million Euro in 2003 (KarstadtQuelle, 2003) which is under performing its sector. In the year 2003 the group generated a total sales of 15,270.40 million Euro with 100,956 employees and 2,621,4 thousand square meter sales space (KarstadtQuelle, 2003).
As the current marketing weakness concerns the over-the-counter retail which is one out of KarstadtQuelle AG’s four segments, this management report focuses on the warehouses which are under the legal unit called Karstadt AG (see company profile section 1).
The report has the aim to identify and describe the customers of the Karstadt AG, to discuss the marketing strategy of that organisation and to analyse a current marketing weakness within the KarstadtQuelle AG’s operations. Finally it provides a plan how that marketing weakness can be resolved. It applies a variety of different marketing concepts and tools such as customer segmentation, Ansoff-matrix, marketing mix, SWOT analysis, and STEP analysis.
Finally, the research and the analysis showed that the customers of Karstadt AG are all citizens of Germany from all classes, all age groups, all social milieus (McKinsey, 2003). Its overall marketing strategy is to give the “customers what they want” (KarstadtQuelle AG, 2003).
The marketing weakness of KarstadtQuelle AG is the usage of the classical warehousing concept which has reached the declining phase of its life cycle, targeting a disappearing customer segment. One solution would be the transformation of the classical warehouses in Shopping-Centres with a large number of specialised shops.

1 Company Profile

KarstadtQuelle AG is one of European’s largest department store and mail-order groups (Plunkett Research, 2004). It consists of mainly four business segments: over-the-counter retail (OTC), mail order business, real estate and information and technology services (Datamonitor, 2004). Karstadt operates 180 department stores, 32 sport stores and 305 speciality stores. Its department stores such as Karstadt and KaDeWe represent around 50 percent of the German market share in this business (Plunkett Research, 2004).

Karstadt AG is a 100 percent subsidiary of KarstadtQuelle AG and the largest department store retailer in Germany. It includes 187 warehouses (Karstadt, Hertie, KaDeWe, Wertheim, Alsterhaus) and 32 sport departments (Karstadt Sport). 50.000 employees generated a turnover of 5.9 billion Euro (KarstadtQuelle AG, 2003).

2 Customer Analysis

This section identifies and describes the customers of the Karstadt AG using a consumer market segmentation approach suggested by Doyle (2002).

The KarstadtQuelle AG includes B2C as well as B2B operations. However, the Karstadt AG serves a mass consumer market. McKinsey (2003) states that daily 2.5 million citizens of Germany from all classes, all age groups, all social milieus shop in one of Karstadt’s department stores.
The wide product portfolio regarding the over-the-counter (OTC) sales corresponds to the previous statement. It includes fashion, personality, living, sports, multimedia, food & drink, and other (KarstadtQuelle, 2003). Consumer goods are defined as “goods that are sold to individuals for their own of their families’use” (Brassington and Pettitt, 2000). Karstadt AG is therefore operating in a consumer market compared to an organisational market (B2B). Actually McKinsey (2003) criticised that Karstadt AG does not know more that its potential customers are all German citizens. Nevertheless, the revenue of Karstadt AG is generated by the German market. Therefore, the German population plays an essential part for the further customer analysis.

Even there is a lack of information about Karstadt’s customers it is possible to characterise the customers in more detail using a geographic, demographic, psychographic and behavioural consumer market segmentation approach (Doyle, 2002).

According to McKinsey (2003), Karstadt serves all regions of Germany. In the annual report (2003), KarstadtQuelle AG says that it operates 189 warehouses under the brands Karstadt, Hertie, KaDeWe, Wertheim and Alsterhaus as well as 31 sport stores under the brand Karstadt in Germany. However, one has to distinguish between urban or rural areas as all stores are located in urban areas such as e.g. Düsseldorf, Berlin or Hamburg to attract more customers (ZAK, 2004). Most of them are located in the city centre especially in large cities in Germany (McKinsey, 2003).

Analysing the demographic characteristics of the Karstadt customers, one can conclude that all age groups are covered by the wide product range, reaching from men, women to children clothing. Regarding the product portfolio, the offered products are addressed to all sexes. People from all occupation are shopping in Karstadt from the teenager to business men over housewives etc. (McKinsey, 2003). And as many immigrant workers live in Germany, principally from Turkey, Yugoslavia and Greece (Datamonitor, 2003) many different religions and races are represented in the Karstadt stores. Because of the good reputation and attraction also many foreign customers are buying Karstadt products (Preuss, 2004).

The psychographic analysis includes e.g. the social class and the lifestyle types. The products offered by Karstadt are of average quality with average prices as it reflects the main target group: the middle class (Maximow, 2004). They cover nearly all kinds of life-styles (see product range).
The brand loyalty (behavioural aspect) of the Karstadt customers remains low (Kliger and Dembeck, 2001).

However, after the identification and description of the current customers it is essential to investigate if this segment will change in the future. Therefore, the development of the German population is analysed in the following.

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