NewsAre Media Markt and Saturn threatened with the end?...

Are Media Markt and Saturn threatened with the end? Expert sees electrical market chain in acute danger

Created: 10/10/2022, 5:01 p.m

Will Media Markt and Saturn soon disappear from the electronics retail landscape? An economist sees failures and worries about their future.

Munich – Media Markt and Saturn are only competitors at first glance. Because they have both been part of the Ceconomy group since 2017 as the MediaMarktSaturn Retail Group alongside Deutsche Technikberatung. The change in consumer behavior is more of a problem for them than just existing side by side. Alongside global players such as the online giant Amazon or the new market entrant Coolblue, the group is increasingly finding it difficult to secure its place in the consumer electronics market.

Economist Gerrit Heinemann, who teaches business administration and trade at the Niederrhein University of Applied Sciences, explained in an interview with Business Insider what the future of the more than a thousand branches is like. And why Media Markt Saturn is now “about bare survival”.

Media Markt Saturn: The group faces existential problems in the market for consumer electronics

Things seemed to be looking up for Media Markt Saturn. During the height of the corona pandemic, sales in their branches fell noticeably. A slight recovery of 18 percent only became visible in the second quarter of the 2021/22 financial year. However, the current economic crisis could possibly soon bring the group to its knees. Ceconomy has already reacted in the recent past by closing branches. According to Heinemann, the end for the electronics store chains founded in 1961 (Saturn-Hansa) and 1979 (Media Markt) is now a serious risk.

“Sales,” according to Heinemann, “are becoming less and less across the board, which affects trade in almost all product groups”. However, the electronics sector has two disadvantages compared to other sectors. On the one hand, most of the products sold come from third-party manufacturers. Customer loyalty to private labels is therefore hardly possible. On the other hand, the competition is immense. If you are looking for a smartphone, for example, you can buy it from thousands of suppliers worldwide.

The comparison creates a tough price war, with stationary shops having to compete with online trade. Amazon in particular is considered to be the fiercest competitor here. The e-commerce giant is not only able to offer customers completely different conditions because of its sheer size. As a result of the branchless business model, Amazon also saves a lot of costs that would arise in area retail.

Media Markt Saturn: Expert complains about omissions in e-commerce and core competencies

However, as Heinemann emphasizes, Media Markt Saturn is not just a victim of the circumstances. Rather, the group failed to adapt to the changed consumer behavior. On the one hand, according to the professor, the well-founded step into e-commerce was missed. “With the arrogance of the market leader” they rejected advice from Amazon-Germany in 2003, discontinued an online shop that had been opened for a short time – and then put it online again in 2012 without any changes. Since “seven years in e-commerce are [but] like 100 years in brick-and-mortar retail”, this approach has “shot itself in the foot”, which has left it lagging behind the competition ever since.

In addition, the feature with which stationary retailers can score – namely advice – has been completely neglected. The competition in retail is doing “significantly better” here, while Media Markt Saturn is undermining the independence of customer service by subletting retail space to manufacturers – which is of course financially relieved. “Of course, a Sony consultant would also like to sell me a Sony television,” Heinemann outlines an example. “As a customer, I no longer feel like I’m being given independent advice.”

Geschäfte der Elektronikhändler Media Markt und Saturn
At Media Markt and Saturn, discounts will no longer apply once new products go on sale © Sven Simon/Imago; Joko/Imago; Collage: Sabrina Wagner/RUHR24

Economist Heinemann: Media Markt Saturn must now take these measures

In view of all these points of criticism, it is also clear to Heinemann what needs to change at Media Markt Saturn so that the group has a future in the electronics industry. “It is quite obvious that the problem is that the area is far too large,” says the economist. The immense area costs too much money and would not be put to good use, rather it makes the branches “too confusing and therefore shopping too time-consuming.” The shortage of skilled workers can also be counteracted with downsizing.

Furthermore, e-commerce must be established and generate at least 50 percent of sales in order to remain competitive. This requires a centralization of the markets in order to be able to set the course uniformly and implement it promptly. Marketing should also take a back seat to the analysis of customer behavior, since it only makes sense to adapt it accordingly. (askl)

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