Globus to export success to Czech market

Discount Store News, May 1, 1995 by Laura Liebeck

Next year, Kmart won't be the only big retailer in the former Czechoslovakia. Globus will be knocking at the door.

Attracted by the possibilities the understored market holds, Globus, based here, will embark on an expansion program that will eventually install 10 hypermarkets and its Baumarkt home center division--which looks like a larger version of The Home Depot--starting in Prague.

Competing with Kmart will not be a problem for Globus, said Jorg Ulmschneider, general manager of nonfood for the $3 billion retailer. Kmart's stores in the Czech Republic and in Slovakia are general merchandise only units, and are not highly regarded by either Globus executives or many other operators in the United States and abroad. (Kmart did report that sales there improved by 8% in '94.)

Globus, which operates 24 hypermarkets and 21 do-it-yourself centers, plus beverage barns, gas stations and car washes in Germany, plans to devise a merchand sing program specifically geared to Czech shoppers, exactly as they have done in Germany, and promises to maintain tight inventory control over the stores.

In Germany this year, Globus will open two new hypermarkets and at least six to seven more Baumarkts. It also recently opened its second consumer electronics store called Alpha Tecc, located inside the hypermarket. These unit are joined by a repair shop that offers a two-year warranty on its products. Globus hopes to open 20 more CE units in '95 and locate them beside the hypermarket. So far, no international expansion is slated for this concept.

Alpha Tecc stores feature dedicated sales personnel that work on salary, not commission. The departments offer 35,000 music titles plus an extensive selection of large and small appliances, including refrigerators, dishwashers and personal shavers.

Overall, Globus' hypermarkets and Baumarkts are located in cities and suburbs, depending on population and land availability. But it prefers suburban locations where land is more plentiful. Stores can either be one level or two. Globus is quite willing to adapt its stores to available space.

All units are responsible for their own profits and store managers run their stores with almost complete autonomy--with separate buying staffs concerned only about their own unit. Such a loose corporate structure enables the company to micromarket effectively in all areas of the stores. Store executives are not loose canons, however; they must meet certain company mandated sales and earnings goals. Headquarters is seen as a "coordination office."

Such a structure is already showing signs of strain as growth requires more centralized controls. Ulmschneider said Globus is now considering central distribution and central buying. In fact, in March Globus opened a distribution center for import goods. Already, national suppliers are visited by all of the buyers.

Retailing, Globus style, relies on a few lessons learned from Wal-Mart--the biggest of which is for each Globus store to offer only top quality products au the lowest price in town.

In fact, Globus' prices have to be the cheapest, Ulmschneider stressed. The retailer's core customer is the low- to middle-class shopper for whom price is a priority. In addition, Globus offers no layaway service and no credit, although the latter is now being considered. Globus also has an extensive private label program. And it offers a collection of goods it calls "Fair." These items have been selected for being top quality products available at exceptionally sharp prices. Special signs and stickers are used in the store to remind customers of these special deals.

In general, the Globus hypermarket is a basic store that resembles a U.S. discount store of the 1970s. Fixturing and signage are utilitarian and merchandising displays lack flair.

"We don't try to copy the department store or higher-end store. We don't want to give the customer the impression he's in Macy's or Sears. We are pricewise No. 1," said Ulmschneider.

Globus' strength, like other European hypermarkets, is in food retailing; in fact, food sales account for 55% of a typical hypermarket's business, said Ulmschneider. He noted that food pulls customers through the "emotional" area of the store--general merchandise--to the area where they come with a shopping list.

Globus tries not to disappoint. At one hypermarket, a 200,000-sq.-ft. store that produces sales of between $160 million and $170 million per year, the food department is clearly the star. Among the big food categories here are fresh meat and produce, which ase merchandised in one large area resembling an open-air market. It is, according to Ulmschneider, "the most important part of the store." And it shows.

The unit employs 45 butchers to keep up with the meat demand, about 30 pigs and 12 cows worth per day, Ulmschneider said. that supply is sold out by 6 p.m. daily when the store closes. One Saturday in March, customers stood two deep in front of the sausage area where dozens of varieties are made on the premises.