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Digitale Transformation

Karstadt goes digital: New strategy of department store chain revealed

A letter sent by bricks-and-mortar retailer Karstadt to its suppliers spells out the company’s latest digital strategy – one that relies on cross-channel sales and online marketplaces, scheduled for implementation in the near to medium future.

18 Oct. 2017 Source: t3n Tobias Weidemann
Source: Karstadt / Hood

The eCommerce portal has published successive excerpts of a letter sent by the Karstadt department store chain to its suppliers. In this letter, Karstadt explains its short and medium-term digital strategy, one that relies primarily on marketplaces – its own, but also outside ones.

"This means that, together with our partners, we want to sell and offer services across all channels – in a way that is more consistent than for most other retailers. People can order our products for pickup at our downtown locations in 79 different cities while on the go, using their smartphones and apps, or by visiting our online shop and sales platforms from the comfort of their homes," according to the letter.

Karstadt to ship ordered goods to the desired sales outlets (not so new)

In 2017 it should actually be a matter of course for a department store company to combine its bricks-and-mortar sales with eCommerce. Karstadt is now obviously increasingly relying on "Click & Collect", i.e. online shopping with pickup at the store. This is something that can be understood from the point of view of the customer, who wants to save shipping costs and is already downtown. However, this does not justify the expensive department store rental rates in prime downtown locations. The customer can use the "Click-&-Reserve" feature to have the desired item in the appropriate size delivered to a store of his or her choice. The return of goods, especially short-term apparel, has always been a common practice between stores – and a popular service for customers, at least in premium department stores and clothing chains.

Marketplaces are also intended to play a decisive role – as is already the case elsewhere. To begin with, the eBay clone, which Karstadt surprisingly acquired in the spring, and to which many in the industry had reacted with an astonished "what next?". And second, also making use marketplaces like eBay and Amazon. "We will also be offering our product range on other platforms such as, Amazon and eBay, thus opening up an additional sales channel. Cooperative arrangements with other platforms and the use of Amazon Pay and other services are also planned," according to the letter.

Karstadt: Initial measures to be implemented shortly

Karstadt plans to implement some of these measures very soon, i.e. in time for this year's Christmas sales season: "It is our goal to implement the Click & Reserve feature by the end of November 2017 and to have using by mid-October 2017," the letter to the company’s business partners says.

Towards the end of the letter, however, the tone becomes more brisk: "If, contrary to expectations, you wish to refrain from pressing ahead with us to help digitize Karstadt, we would ask you to inform us accordingly by October 13." A rather unusual tone for long-standing business relationships, but in all likelihood aimed at accommodating those premium brands that, in the interest of brand awareness, are eager to keep digital sales in their own hands and not keen to be listed by the likes of eBay or Amazon.

All in all, the letter leaves the reader with mixed emotions: For the digital strategy of a large corporation, there is not much meat on those bones. As for the "marketplace offensive" announced by the company this spring, only a few aspects remain which can be described as innovative. Clearly, the company has to adopt a two-pronged approach: On the one hand, the promotion of its own marketplace, which has not made much headway in recent years, and will probably require a great deal of commitment if it is to play a more important role in the short run. On the other, the plan to rely on established partners who, however in return, will demand a substantial cut of the take. It remains to be seen how the retailing group can expand its potential from a primary focus in the traditional department store business to eCommerce as well.