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Germany: the future strategy of Penny

Discount Retail Chain Penny (owned by the German REWE Group) has benefited for years from being more innovative than the rest of the discount sector. But the competitors have woken up. And with the "Markthalle" concept Penny threaten to get bogged down in Cologne.

You probably didn't even notice that, but at the beginning of October Penny got a new managing director and in a previous interview with the REWE online magazine "One" he was not only to be seen in a picture with his predecessor, the two even smiling with their hands shaken!

This is truly a tremendous new event for the German discount. At least nobody is used to the fact that the previous number 1 at a discounter, will suddenly be recalled after it has long since fallen out of favor in the top corporate days because they were intended to change.

But Penny has always been special in German food retail, especially since the REWE subsidiary noticed ten years ago that it would probably not be long to continue the business model as before.

Insider tactics: innovation

And you probably have to be grateful that the red-spot Aldi and Lidl challenger was not renamed "Billo" (or the like) before a decade because: “Penny was the dirty discounter for many. That is why we initially discussed the possibility of a name change to make a complete restart”, mentioned the previous boss Stefan Magel.

This was quite successful in many ways, because Penny dared to pursue a tactic neglected in the discount retail sector: innovation. “We weren't brave enough for a long time. But that has changed. Today we try things out and keep making changes that competitors take up later", says Magel and has right, at least related to the past. Penny renovated his appearance, dared to become supermarket early, positioned its own private label brand(s) new, put out of the mass, outstanding concept stores in surprising designs, scan & Go and markets that adapted to the location-instead of them to cover a standardized concept for giant areas.

A clear alarm sign

It is all the more incomprehensible that some mistakes that others have made years ago seems to make up: with the "Markthalle" concept, which is supposed to make the penny variety more visible and that special offers thematically sorted into range of range shelves.

Wherever there is plenty of space for it, it looks pretty good. The new penny boss Stefan Görgens also knows that when he admits that "no all-encompassing answer for smaller stores has yet been found. Which make up a not so small part of the Penny store network, especially in large cities-and still be expanded into a "market hall", even if they were more suitable as a "booth".

The sales development of the redesigned markets is "good overall", says Magel in this spring to the specialist press, but vary greatly and lie "between minus 10 and plus 30 percent compared to the old concept".

Actually, this would have to be perceived as a clear alarm in Cologne, because you have obviously developed a concept that is perceived very, very differently by customers. Some swear by the new design and understand the guided customer grouping and routing in the store immediately, others not at all.

Eternal supplementary purchase?

It goes without saying that you cannot always please everyone, but with an approach that is very loved and very hated at the same time, it should be difficult to reach the wide mass. Penny has to do exactly that in order not to be perceived as an eternal supplementary purchase.

You can no longer rely on the other discounters one step ahead of Cologne. Aldi and Lidl have long since noticed that they themselves have to be innovative to meet the demands of their customers: be it with vegan ranges, organic food in association with quality or modern city stores. Penny may be more agile to implement new things. But the others have the financial power to change something in the market.

For the current crisis, it has been prepared for declining sales due to increasing energy and personnel costs, according to Cologne, and possibly also the reduction of the basket purchase of the discount customers.

Nevertheless, Penny has to face several major challenges in the future: The discounter, at least in larger cities, must not miss digitization. The cooperation with Wolt for the delivery of app purchases is at least a start.

Can it be a little bit fresher?

At the same time, you have to concentrate on old virtues of stationary trade, and that would include, for example, to me: not to bring the impression that the remains of the mother REWE are primarily unloaded in the fruit and vegetable department in terms of quality and freshness have nothing to do with their own supermarkets. Exactly this insight often arises from the "first-class freshness" that Penny claims for itself.

It will be the highest time that the focus of lighthouse projects such as the sustainability market and initiatives opened in Berlin Spandau, such as the well-intentioned "funding penny", is again on what the majority of stationary shops could benefit and a good start to it: to stop, to stop to continue to be booked everywhere.

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