Trading company Depot repositions itself after bankruptcy. The result: the branch network is reduced to well under 300 stores. Depot boss Gries explains why.
Niedernberg.
Insolvent decoration retailer Depot will close at least 27 branches in Germany by the end of the year. The CEO of the retail company, Christian Gries, told the German Press Agency. 17 have already been closed. The branch network will be reduced to 285 stores. It is likely that more will be closed. Negotiations with some owners are still ongoing. “We will constantly close stores that we don’t make money from,” Gries said.
Most of the affected employees will be transferred to other branches. With the planned closure of the 27 branches, around 50 of the 3,350 employees will lose their jobs. At the headquarters in Niedernberg, Lower Franconia, the number of employees has been reduced from around 650 to 500 since the beginning of the year.
Depot is a subsidiary of Gries Deco Company (GDC). Due to impending insolvency, the company filed for self-administration in July.
According to Gries, the general conditions for retailers have changed. Raw material prices, additional costs, container fees and rents have increased significantly. Transportation costs would have increased tenfold in six months. It is hardly possible to operate the current business model profitably. But even Gries admits mistakes. Not only was unnecessary excess stock accumulated in warehouses. “We realized too late that many customers were changing their purchasing behavior due to high inflation.”
The furniture retailer, of which Depot is part, has fallen on hard times recently. Image: Alicia Windzio/dpa
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The furniture retail sector is particularly affected by poor consumer sentiment. Many families are reluctant to buy consumer durables, says Sabine Frühwald, consumer expert at market research firm Consumer Panel Services GfK, which is part of YouGov. The number of purchasing households decreased by one million compared to 2019. In the first half of 2024 the turnover of furniture retailers was almost 14 percent lower than five years earlier.
A recent and representative Appinio survey shows that two thirds of customers say they are currently buying fewer household products, furniture and furnishings because they can no longer afford them.
Depot and other retailers have also lost market share to rapidly expanding non-food discounters like Action. Further competition comes from portals such as the Chinese online marketplace Temu. Gries complains that this puts European retailers at a competitive disadvantage. “We comply with standards and have our own departments for quality assurance and supply chain law. When we sell a table, we have to prove in which region the tree was felled.”
What does Gries want to do differently in the future? “We need to improve, stand out with an amazing product and price mix, and offer more experiential shopping again.” They would like to continue the concept of “Rooms”, in which small consignment shops are integrated into larger surfaces of other retailers. Nearly 150 of them remain in Rewe, Toom and Edeka stores. Others, like Kaufland, were closed.
According to its own information, last year the company achieved a turnover of around 390 million euros. Gries did not provide current profit and loss figures. Depot also operates in German-speaking countries. In Austria this year the branch network was reduced from 49 to 29, also due to bankruptcy. In Switzerland there are 34.
What measures is Depot implementing to support employees affected by store closures?
Time.News Interview: Reshaping Retail Amidst Bankruptcy – An Interview with Christian Gries, CEO of Depot
Editor: Welcome, Christian Gries, CEO of Depot, to the Time.News interview. It’s certainly a challenging time for your company and the broader retail landscape. Could you start by sharing how the decision to close 27 branches by the end of this year came about?
Gries: Thank you for having me. The decision wasn’t taken lightly. Our first priority was to ensure the viability of Depot during these difficult times. We recognized that some stores were not profitable, and with the rising costs in raw materials, transportation, and rents, it was unsustainable to keep them open. We had to act decisively to safeguard the future of the company.
Editor: You’ve mentioned that the retail environment has changed dramatically. What specific factors do you see as the most impactful on Depot’s operations?
Gries: The abrupt increase in transportation costs—tenfold in just six months—has been a massive blow. Additionally, the rise in raw material prices and the overall economic climate, particularly inflation, has shifted consumer buying behavior significantly. We’ve noticed that many customers are becoming more cautious, which forces us to adjust quickly.
Editor: Speaking of consumer behavior, data suggests that there’s been a drop in purchasing households, as noted by experts like Sabine Frühwald from GfK. How has that influenced your strategic changes at Depot?
Gries: Absolutely, that’s been pivotal. We realized too late that customers were changing their purchasing patterns, driven by economic pressures. The accumulation of excess stock was one of our mistakes. We have to adapt our inventory practices to align more closely with customer demand and preferences during these uncertain times.
Editor: It’s reassuring to hear that the company is looking to learn from past mistakes. Despite the negative implications of store closures, can you elaborate on what you plan to do for the employees affected by these changes?
Gries: Yes, of course. While we anticipate that around 50 employees will lose their jobs due to these closures, our approach has been to transfer most staff to other branches. We are committed to reducing the impact on our workforce and ensuring that our employees remain integral to our operational reshaping.
Editor: What does the future hold for Depot, and what steps are you taking to ensure long-term stability?
Gries: Our strategy moving forward involves not just consolidating our physical presence but also reevaluating our entire business model to ensure profitability. We aim to embrace more digital solutions and streamline our operations, so we are better equipped to respond to market changes. The self-administration process we entered in July has given us the flexibility to restructure without losing sight of our core values and customer needs.
Editor: It’s clear that you’re navigating some deep challenges, but also seeking opportunities for growth. Lastly, what message would you like to share with your customers during this transitional phase?
Gries: I want our customers to know that Depot is committed to being a reliable source for their decoration needs. We are reshaping ourselves to serve them better, and though these changes might seem unsettling now, they are intended to lead us toward a stronger and more efficient retail experience. Thank you for your support and understanding during this crucial time.
Editor: Thank you for sharing your insights, Christian. We look forward to seeing how Depot evolves in the months ahead amidst these changes.
Gries: Thank you; it’s been a pleasure.