And now it is! For over 15 years, Migros has defied all textbooks on strategy and sales. It has thrown all modern management knowledge to the wind. They were already thinking of questioning the internationally established management models and studies. But now came the reality check and, because it was years too late, it was correspondingly harsh. 1500 jobs were cut and, as a first step, four brands were sold: Hotelplan, Mibelle, Melectronics and SportX. It comes as no surprise that the specialist stores are being hit hardest. In recent years, they have attracted attention by failing to differentiate themselves and increasingly losing ground to online providers. It doesn’t take much imagination to see that other specialist stores will also soon be up for sale. A similar development will certainly soon be seen at Coop. Click here for background information. What does this mean for the future of Swiss retail?
To answer this question, several levels need to be considered. The sale of specialist stores, if buyers can be found at all, will open the door to Swiss retail even further for international providers. As the core business of Migros and Coop has also fallen completely out of time, the pressure on both players will increase. For retail as a whole, the focus will be even more on costs and efficiency. Better advice, better customer data and digital value-added services will become even more of a distant prospect. As a result, the actionitis surrounding price management will reach new heights and customers will continue to be educated to pay attention to price above all else.
And what does this development mean for the competition? The remaining SMEs will have an even harder time. But local online retailers will also come under further pressure. After all, the Coop and Migros specialist stores are “cows for the slaughter” that have been able to take market share bit by bit every year without much resistance. This will certainly become more challenging with new international market players. For employees in the retail sector, it is very likely to become even more uncomfortable. Given the current working conditions, this is actually inconceivable. But in the red ocean of Swiss retail, only those who rigorously keep costs under control will survive. There will be no further training, strengthening of digital sales skills and transformation for the time being. Margins are still high in relative terms, but the market is far too small.
Is there any hope at all? If you look at Globus, the optimism dwindles. Sold to an entrepreneur who is more on the sporty side of corporate management, it is likely to be difficult to sell all the unprofitable specialist stores and concepts. But even the young guns in the Swiss start-up sector are more likely to focus on the 1,000 niche online store for dog shavers instead of taking a holistic approach to the future of retail. The smokescreens of industry associations and academics, who for years saw the future in value-added shoppingtainment, are adding fuel to an already blazing fire. Yet the answer to the challenge is quite simple. As a high-wage country, Switzerland can only be successful with premium concepts. It has become clear that retail concepts of the future must work throughout Europe. So it is “sweet” to see Migros thinking about a better management structure in the Swiss market and selling Mibelle because it is too internationally oriented. This statement inevitably makes you think of the established management models and again you run the risk of believing that Migros knows more.
So what does the solution look like? It is the combination of log-in, customer data, IT expertise and personal, data-driven customer advice. Retail needs to be understood as a convenience club where every customer is guided through the endless product jungle and can optimally satisfy their prestige needs. This requires the clarity to only allow people into the stores who log in and create a profile. Retail is no longer about logistics, but about trustworthy advice with clear added value. As with stadium visits and e-commerce, only those who register will be allowed in. This is based on powerful IT systems that support the salesperson in making highly personalized suggestions to the customer. Imagine a woman not buying a bra, but receiving the perfect bra tailored to her needs in a secluded atmosphere. For going out, for work and for sports or Netflix evenings. It’s no longer about space and stock. The focus here is on customer data, quality of advice and empathy. Digitalization and automation can do a great deal here. The concepts would also work abroad and the ocean would turn blue in a miraculous way.
It would actually be so easy. But neither the start-up scene is addressing these issues, nor do existing online pure players realize how vulnerable brick-and-mortar retail actually is. The fact that Migros only recently considered selling alcohol shows how little awareness of the problem there must be among management. Things are likely to get much worse before they improve again or foreign countries take over retail. So the future of Swiss retail looks bleak.
