Will Blokker become the next bankrupt store chain?

Edition 28 June 2018, by Sagar Harinarayan

In the recent past, several companies have experienced bankruptcy. Even famous organizations, which had gained a good reputation over many years, have plummeted into a sudden tragic abyss. Euroland (cosmetics, sweets, household items) went bankrupt in January 2017 due to poor results and stiff competition; Witteveen (clothing) declared bankruptcy in July 2017 owing to a massive tax debt; Kijkshop (electronics, household items, jewellers) followed suit in January 2018; and Supertrash (clothing) went down in February 2018 as shareholders lost hope after parent company Wayahead suffered huge losses. This list is by no means exhaustive; several other big names may be added. But who is next?

Blokker Holding is a privately held Dutch company, owned by the Blokker family. It is present in twelve countries and had a revenue of over 2.1 billion euros in 2015. Many popular brands fall under its umbrella – Blokker (household appliances), Big Bazar (household appliances), Bart Smit (toys), Budget (household appliances), Casa (furniture and interior decorating), and Cook&Co (food and dishware), to name a few. After a prosperous 2015, times began to change. Blokker suffered a 180 million euro loss in 2016, followed by a whopping 344 million in 2017, pulling the net revenue down to 1.58 billion. 2017 was expected to be a financial disappointing year as a one-off investment of 154 million was used for restructuring. The holding company commented: “The costs and write-offs of this extensive restructuring have had a major negative impact on the results. The disappointing commercial performance of all store formulas also weighs heavily on the result.” In 2017, Blokker Holding closed hundreds of stores, divested all retail chains and focussed primarily on the Blokker chain. But at the same time, hundreds of Blokker stores have been shut down, along with a few Leen Bakker, Intertoys and Xenos Germany outlets. Big Bazar and Maxi Toys were sold as well. All these sales generated revenue, which was re-invested in Blokker. Online retail started doing very well, contributing 15% of net turnover. Nextail, the online wing of Blokker Holding, was integrated with the Blokker stores in order to solidify the foundation. Such strategic moves led to a bright final quarter of 2017, lending a ray of hope. The number of customers visiting stores began to rise and the acting CEO of Blokker, Michiel Witteveen, called this ‘a cautious signal that things are getting better’. He further stressed: “Working on recovery remains a tough process that we are all working hard for, and the unremitting efforts of our employees during this difficult time are highly praiseworthy.” However, this doesn’t imply that 2018 will bring a sudden transformation. Results for this year are still expected to be negative, but things are gradually changing.

V&D was a large chain of departmental stores which suffered bankruptcy. Back in February 2015, the question everyone was asking was if V&D would continue to exist. Its decline was attributed to an array of possible causes. Firstly, the rise of online retail provided stiff competition to V&D, which was slightly late at venturing into that space. Secondly, brands like Irish Primark and Swedish H&M were flourishing as healthy competitors for the same market share. This was certainly not helped by the fact that V&D lacked an exclusive identity. Thirdly, items in the V&D outlets were not the cheapest. Alternatives like De Bijenkorf were therefrore often preferred by consumers. Lastly, V&D’s real estate was sold by the joint British-American ownership to Sun Capital. This was believed to have increased operation costs, but is contested by many as being a major cause. After all, one always needs to pay for real estate, whether it is through capital expenditure or rent.

But will Blokker go down the same way? Marketing expert Cor Molenaar feels it was right for Blokker Holding to intervene and steady the ship. Furthermore, the company has a huge real estate portfolio, as a result of which its financial position is still healthy. However, the departure of Blokker’s CEO has received a lot of criticism and supposedly created a negative atmosphere within the company. However, Molenaar thinks that it is impossible to judge the situation from outside. Blokker has been avoiding the media and is trying to focus on the positives. It is crucial to inspire employees and stakeholders to fulfil the comeback dream. Molenaar also emphasizes that Blokker has a way with smart advertising, which has led to busier shops. This surely indicates an ascendency. Molenaar’s colleague Paul Moers insists that Blokker Holding should continue rebuilding. “They have devised a good strategy, but should not swallow too much,” he said. He reiterated that the staff must be kept satisfied and any measures to ensure this must be undertaken.

In order to survive, Blokker must play to its strengths. Any attempt to target a low price market will be futile. Stores like Action and Hema have established a stronghold in the lower segments. Both of these have new owners who will devise big plans to grow and diversify. In such times, Blokker must refrain from taking very bold steps. As Molenaar and Moers say, if Blokker continues to do what it is doing, it will become a strong player again in a few years. Once it has attained some stability, it can focus its efforts on expansion and innovation. Nevertheless, Blokker must learn from V&D’s shortcomings, as it brought on its own demise by sticking to conventional ways. Lack of ambition could haunt Blokker in the future and therefore a fine balance must be found between rebuilding and growth. Either way, exciting times lay ahead for Blokker; one hopes that it will continue to be a household name for years to come.