Future of the luxury department store
KaDeWe rescued by one of Thailand’s richest families
November 10, 2024 – 7:26 p.mReading time: 3 min.
As a consequence of the Signa bankruptcy, the KaDeWe Group filed for bankruptcy at the beginning of the year. This is what the three luxury department stores have become.
According to management, the reasons for the bankruptcy went beyond Signa’s financial difficulties. The then CEO of the KaDeWe Group, Michael Peterseim, cited the “exorbitantly high rents” that Signa, as the parent company, had charged as the main reason for the difficulties in a press release. That’s why “sustainably profitable business is almost impossible” – despite record revenues. With 728 million euros, the 2022/23 financial year was the most successful in the company’s history.
In addition to the “Kaufhaus des Westens” in Berlin-Schöneberg, the KaDeWe Group also includes the luxury department stores “Alsterhaus” in Hamburg and “Oberpollinger” in Munich. In June, the group of companies was completely taken over by the Thai Central Group - thus ensuring its continued existence.
The Thai Central Group had already acquired the property of the Berlin “Kaufhaus des Westens”, as Berlin’s Senator for Economic Affairs Franziska Giffey wrote on Facebook – for at least one billion euros. The high rents that Signa had charged are no longer necessary.
Central was also long considered a likely investor for the group of companies. The mixed company was already the majority owner with 50.1 percent – Signa only owned 49.9 percent of the company. The Central Group is owned by the Chirathivat family – one of the richest families in Thailand. In 2021, her assets were almost 12 billion euros. The group also holds shares in luxury department stores in Italy, Switzerland and the UK.
The management of the KaDeWe Group is all set for a new beginning. “As a strategic investor, the new owner of the new KaDeWe-GmbH can help achieve long-term goals and consolidate its position in the luxury retail segment,” said a letter quoted by the Reuters news agency.
Nevertheless, not all employees were taken on. As the news agency reported, around 100 of the 1,700 employees lost their jobs. The majority of them worked in administration. As the rbb writes, the department stores have made cuts, especially in the Berlin branch – primarily in the gastronomic offering.
Despite the takeover, it is not certain how bright the group’s future really is: As the broadcaster rbb24 writes, several experts assume that rents were not the group’s only problem – and that the numbers were probably glossed over somewhat. According to his statement on the public broadcaster, economic expert Gerrit Heinemann estimates that around half of the sales were not actually generated by the group itself. The sales of companies that have rented space in the department stores also appear in the stated gross transaction value.
Auditor Karl-Heinz Wolf, who examined KaDeWe’s balance sheets for rbb, also comes to the conclusion that the group’s losses have increased steadily since at least 2015: “This development is an economic disaster.” For him, the group’s problem is not the high rents – the problem is the lack of customers even before Corona.
The Berlin “Kaufhaus des Westens” was opened in 1907. During the Nazi era, the Jewish owners at the time were forced out of management and expropriated. In 1943 the house was destroyed by a crashed American plane and was finally restarted in 1950. The house has 60,000 square meters of shopping space.
Time.news Interview: The Future of Luxury Shopping in a Post-Pandemic World
Editor: Good afternoon, and welcome to Time.news! Today, we have a special guest, Dr. Anna Schmidt, an expert in retail economics and luxury market trends. We’re here to discuss the recent developments at the famous luxury department store, Kaufhaus des Westens, or KaDeWe, particularly its acquisition by the Thai Central Group after filing for bankruptcy. Welcome, Dr. Schmidt!
Dr. Schmidt: Thank you for having me! I’m excited to discuss this important topic.
Editor: Let’s dive right in. KaDeWe, known as one of the leading luxury department stores in Berlin, faced significant challenges that led to its bankruptcy. What were the primary factors contributing to this situation?
Dr. Schmidt: The bankruptcy of the KaDeWe Group is a multifaceted issue. While the collapse of Signa, its parent company, played a crucial role, the exorbitantly high rents charged by Signa were identified by former CEO Michael Peterseim as a critical barrier to sustainable profitability. Remarkably, despite their record revenues of 728 million euros in the 2022/23 fiscal year, the financial structure was untenable.
Editor: That’s fascinating. It seems counterintuitive that such high revenues weren’t enough to keep the business afloat. How do extreme operational costs, such as rent, affect luxury retailers differently than other retailers?
Dr. Schmidt: Luxury retailers often rely on a delicate balance between exclusivity, exceptional service, and pricing strategy. High rents can eat into profit margins, making it challenging to retain the quality and personalized service that luxury consumers expect. Unlike fast-fashion outlets, luxury brands can’t simply sell higher volumes to offset costs, which makes their pricing structure and overheads particularly crucial.
Editor: With the takeover by the Thai Central Group, what changes do you foresee in the management and operational strategies of KaDeWe?
Dr. Schmidt: Given that the Central Group already had a stake in KaDeWe, their acquisition likely points to a vision of stability and growth. They are now positioned not only to rethink the rent structure but also to leverage their vast experience in luxury retail—having shares in luxury department stores across Europe. This could lead to new offerings that align better with modern consumer expectations.
Editor: Considering the newly established leadership and strategy, do you think KaDeWe will continue to be a frontrunner in the luxury market?
Dr. Schmidt: I believe KaDeWe has the potential to reclaim its position as a luxury leader. With the Central Group’s deep pockets and strategic insight, combined with a potential reevaluation of their commercial approach, they are well-placed to innovate. However, they must also remain attuned to changing consumer behaviors, particularly post-pandemic, where online shopping and experiential retail have gained significance.
Editor: Let’s talk about the workforce implications. It’s reported that approximately 100 of the 1,700 employees lost their jobs during this transition. How can a company balance necessary operational cuts with maintaining skilled labor for customer engagement?
Dr. Schmidt: That’s a difficult challenge. Layoffs, particularly in back-office roles, can often be essential for financial recovery, but losing skilled staff can impact customer service and brand loyalty. Successful companies usually focus on training remaining staff and ensuring they are engaged and motivated. Additionally, the new management might consider employee feedback in shaping the future culture, recognizing that a well-supported team can directly enhance the customer experience.
Editor: Great insights, Dr. Schmidt. Looking ahead, what do you think are the key trends we should watch for in luxury department stores as they adapt to a post-COVID-19 market?
Dr. Schmidt: We should pay attention to several trends: first, the amplification of omnichannel strategies, where in-store experiences are seamlessly integrated with online platforms. Second, sustainability will continue to rise as consumers demand transparency and ethical practices. personalized shopping experiences, including technology-driven customer engagement, will be key to attracting luxury consumers who seek exclusive offerings.
Editor: Thank you, Dr. Schmidt, for your valuable insights on the future of KaDeWe and the luxury department store landscape overall. It’s a moment of transformation for these iconic establishments, and engaging discussions like this help us understand the complexities at play.
Dr. Schmidt: Thank you for having me, and I look forward to seeing how these developments unfold!
Editor: And to our audience, thank you for tuning in to Time.news. Be sure to follow us for the latest in luxury retail news and trends!