Germany: This is how the low-cost retailer Action is overrunning the retail trade
- DRC Discount Retail Consulting GmbH
- 2 hours ago
- 7 min read
Discount Variety Retail Chain Action is expanding at a rapid pace in Germany. Internal documents show ambitious profit targets and how Action became a money-printing machine for the investor 3i.
Action now operates 3190 stores in 14 European countries. The non-food discounter is expanding at a rapid pace. Year after year, Action increased its turnover to almost 14 billion euros (2024), conquering new countries again and again, most recently Switzerland, Romania and Portugal.
For its majority owner 3i and his manager action is about what you would call a home run in baseball. Arguably one of the most lucrative private equity deals of all time. A once-in-a-lifetime investment.
In 2011, according to the annual report, the British financial investor invested 114 million pounds in Action with its 245 branches at the time. Today, more than 14 years later, 3i values its stake in Action at just under £21 billion, 188 times.
But what is the formula for success behind the numbers? Why do the Dutch turn over four to five times as much as rivals like Tedi or Kik on the same area? And what are the long-term goals of Action and the private equity firm 3i, which has held its stake in Action for more than 14 years now?
The Handelsblatt has spent weeks researching Action and its owners, evaluating internal documents and talking to insiders. They provide insights into the strategy of a profit machine and show who earns how much from it.
Success with the Aldi principle
The Dutchmen Gerard Deen and Rob Wagemaker founded Action in 1993. The two friends converted their junk shop in Enkhuizen, North Holland, into the first action market. They adapted the discount concept as once invented by Aldi founders Karl and Theo Albrecht in Germany in the 1950s: few products, low prices, efficient logistics.
But while Aldi and Lidl are also developing their own real estate, the Action founders refrained from buying in order to tie up less capital. Instead, they opened locations by leasing space that became available. "A fundamental decision was made early on not to set up our own project development," says an ex-Action manager.
In 2009, the founders ventured into Germany, opening the first branch in Schüttorf near the German-Dutch border, later in Osnabrück (2010) and in Cloppenburg (2011).
But the big expansion only started when the British financial investor 3i took over the majority of Action in 2011. Step by step, the low-cost retailer expanded its branch network. In Germany, initially geographically limited in the Ruhr area, in order to keep the distances to the central warehouse in Zwaagdijk in North Holland short.
The Dutch set themselves ambitious goals, looking for affordable rental space everywhere, preferably retail parks on the outskirts of the city with spacious parking areas.
But because administrative law in Germany was particularly complicated and the expansion expertise was too low, the claim of the financial investor and the reality of Action diverged. "Their expansion goals were too ambitious, the location reviews too superficial," recalls Uwe Hillemeyer, who accompanied Action's expansion as a real estate agent and brokered numerous spaces to the low-cost retailer.
"In Germany, it happens that there is an official somewhere who does not rent because Action wants to offer seven square meters of stationery, but this is not provided for in the development plan." But later, according to Hillemeyer, Action professionalized its expansion in Germany – with experienced people and clearer processes.
In 2016, Action began to expand nationwide. In 2017, the expansion reached its absolute peak with 80 new stores in one year. Sales in the stores grew and Action also began to open branches in major German cities such as Munich, Berlin and Düsseldorf.
The motto: Returns first
At the forefront of Action is Hajir Hajji. The Dutchwoman, 45 years old, started stocking shelves at Action at the age of 17. She worked her way up step by step. She later managed the branch operations, then the retail area. Hajji was responsible for purchasing, advertising and logistics. She knows, it is said, action like no one else.
She has been managing the group since 2022. Insiders say her management style is centralist, but this has less to do with Hajji as a person and more to do with Action's strategy, which has always been based on efficiency, clear guidelines and fixed indicators.
The stores are standardized to just under 1000 square meters, the delivery comes inexpensively (also because it is not perishable) in double-decker trucks. Action offers almost 6000 products, 95 percent of the assortment is the same in every store, in all countries.
Whether a branch is opened at all is ultimately decided not by the local manager in Poland, Switzerland or Germany, but by the headquarters in Zwaagdijk, insiders report to Handelsblatt. The managers in the states would have to orient themselves to strict targets for new branches.
The catchment area must have at least 30,000 inhabitants, and a maximum of five percent of the expected turnover may be spent on rent. The radius of the catchment area varies, in metropolitan areas a few hundred meters around the branch are sometimes enough to get the necessary number. Locations that did not meet these requirements were excluded from the outset, at least in the early days of Action.
"People have understood that you have no chance of finding a branch in Munich if you only estimate five percent of the costs for rent," says one who accompanied Action's expansion as a manager.
But on the other hand, the company management and 3i strictly monitor how much profit each branch yields. The motto: Returns first. "The value of the company is all the higher the better the economic indicators."
"Almost no one can do that in retail"
According to insiders, Action plans to turn over almost four and a half million euros per branch in rural areas. In top urban locations, the figure is up to eight million. At the request of the Handelsblatt, Action denies the figures, looking at each store individually: "We have data from more than 3000 stores and determine our net sales expectation based on the type of location," says a spokeswoman.
How high the Dutch demand for returns is shown by a profit calculation available to Handelsblatt. For a location in northern Germany, the low-cost retailer planned according to internal calculations with a contribution margin of 15.5 percent – after deduction of personnel, rental and other operating costs. According to the document, sales should increase by almost 20 percent within three years.
"Almost no one in retail can do that," says Carsten Kortum, a professor of commerce at the Baden-Württemberg Cooperative State University, who evaluated the figures for the Handelsblatt. Action does not comment on the figures, but emphasizes that not a single branch is making losses.
The core of Action's success, according to trade professor Kortum, is the high profitability per space. "Action manages to achieve four or five times the sales of rivals such as Tedi or Kik in the same area," says Kortum, who headed the non-food division at Lidl for several years.
The secret lies in the assortment: According to Kortum, the drivers of this profit machine are the "products of daily use", food, household care, pet food and personal care articles. In other words, goods that customers know well, buy spontaneously and bind to the new retailer. Experts also speak of "fast-moving consumer goods" because the items can be sold in large quantities and at comparatively low prices. "This brings an enormous gross turnover," says Kortum.
One and a half billion pounds for 81 managers
When the financial investor 3i joined Action, no one expected it to become one of the most successful private equity transactions in history. "You didn't know that you would come across a vein of gold," says an ex-manager of 3i.
Actually, the British's ambition was to exit after three to five years: a time frame typical of the private equity world to increase the value of the investment and sell it again at a profit.
Today, the stake has brought some managers life-changing wealth. After all, those who work in the private equity industry participate in the return on an investment. In the industry, this is referred to as "carried interest".
In the case of 3i, there were 81 current and former managers who, thanks to Action, repeatedly received parts of their profit participation in tranches over the years. 3i bought the first carry from its employees in 2020. A former 3i manager, who wishes to remain anonymous, makes it concrete: "3i distributed almost half a billion British pounds to its employees at the time."
Over several stages, the managers received more and more millions of dollars. In the 2025 financial year, 3i bought the remaining profit shares from the 81 managers. If you go through the 3i annual reports from 2020 to 2025, you come to a sum of around one and a half billion pounds.
Private Equity as a Retailer
In the meantime, 3i has been invested in Action for a good 14 years. Over the years, the British investor has repeatedly increased his stake; meanwhile, 3i holds almost 57 percent of Action. The discounter represents 76 percent of the fair value of the investor's private equity portfolio.
But in the meantime, some people are wondering whether the success of 3i doesn't depend too much on the success of Action. "If you invest in 3i shares, you are buying the stock of a retailer," says an ex-manager. "Investors are looking for private equity exposure, i.e. diversification across different investments."
Others believe Action's $21 billion valuation is exaggerated.
Last week, 3i's share price collapsed. Investors feared a revaluation of the discounter after Action reported lower sales growth than planned for the third quarter.
As early as September 2024, Shadowfall, the British hedge fund that had also bet against Wirecard, had built up a multi-million short position against 3i because it considers Action's valuation to be excessive.
Investors, management and the outside world are asking themselves when the time has come for 3i to sell its stake: whether by IPO, partial sale or via the entry of a new investor. In order for a future exit to be as lucrative as possible for 3i and its co-investors, Action needs a new growth story that makes investors dream of an even rosier future.
A narrative could be an expansion of Action into the USA. And initial indications suggest that Action could soon take this step. In July 2024, Action raised $1.5 billion in debt financing through the U.S. market. "That was a huge issue for us," says an insider. Although the loan is not intended for US expansion, winning over the American capital market opens up "huge opportunities" for 3i and Action.
