German retail changes underscored by Quelle demise

21st October 2009, Comments 0 comments

Germany's retail sector is weaker than elsewhere despite it being the biggest European economy.

Berlin -- Changes in the German retail sector were thrown into the spotlight on Tuesday after the administrator of venerable catalogue retailer Quelle said it would have to be liquidated.

"Following intensive negotiations with many investors, neither creditors nor the judicial administrator see an alternative to liquidation," a statement said late on Monday.

Quelle was thus headed for extinction after 82 years, with the likely loss of around 7,000 jobs.

"All the workers" in Germany will lose their jobs, Johann Roesche from the services union Verdi said, although activities in central and eastern Europe were expected to continue for now.

The fate of other units belonging to the troubled Arcandor group remained to be seen meanwhile.

Germany's retail sector is weaker than elsewhere despite it being the biggest European economy and Quelle's parent company Arcandor has failed to grasp changes brought on by Internet shopping.

"Quelle did not have the infrastructure or the know-how to compete in the Internet," said Maro Artzberger, senior vice president at the EHI Retail Institute.

As it lost market share, consumers began to doubt whether the company would continue to exist and banks began to withhold the credit needed to buy merchandise up front, Artzberger told AFP.

"All this combined brought down Quelle," he said.

The company tried to restructure its activities but 2007/2008 sales of nearly three billion euros (4.5 billion dollars) left it far behind the market leader Otto, which sold 15 billion euros in its 2006/2007 fiscal year.

Otto will now reign supreme over the German mail-order market while attention turns to Arcandor's loss-making department store chain Karstadt.

An executive at the German retail giant Metro said last week that his group did not need to add Karstadt to Metro's line of Kaufhof stores, dampening hopes of a possible tie-up between the two companies.

"Karstadt will have a similar fate to Quelle," Artzberger said, because both are situated in the middle of the retail market, which in Germany is being hollowed out as discounters drain away customers.

Shopping malls were now moving into inner cities "and they are taking over the role of department stores," he added.

"This is something department stores have big problems competing with."

Quelle's demise will also affect jobs at Deutsche Post, a logistics giant that owns the express courier group DHL.

A Deutsche Post spokesman told AFP the company was "analysing" the situation and said 3,000 of its workers were involved in shipping goods from the entire Arcandor group.

Quelle activities abroad -- it is present in 17 mainly eastern and central European countries -- will be the subject of a separate sale process, the administrator's statement said.


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