Media-Saturn electronics chain faces e-commerce challenges

BERLIN/DUESSELDORF (Reuters) – Europe’s largest electronics chain Media-Saturn said on Wednesday it was restructuring its business in response to a rapid shift to online sales, avoiding a new phase of power struggle between its owners.

Media-Saturn, the majority-owned subsidiary of German retailer Metro that operates more than 950 stores in 17 countries, is set to integrate its online and offline sales more closely and will set up a new “e-business” unit to coordinate strategy.

“European electronics retail is currently facing significant challenges. As a market leader in the industry, we have decided to undertake a profound reorientation to secure ourselves for the future,” CEO Horst Norberg said in a statement, calling it the biggest shake-up since the company was founded in 1979.

Media-Saturn’s entry into the e-commerce market was delayed until 2010 due to a long-running dispute between Metro and the chain’s founder Erik Kellerhals, who still owns a nearly 22 percent stake.

That power struggle flared up again on Tuesday when Kellerhals attacked Metro’s management of Media-Saturn. Metro responded by saying Kellerhals was damaging the company and its employees with “incredible and bizarre” comments.

In an interview published Wednesday but conducted before Kellerhals’ latest salvo, Norberg said Media-Saturn had the support of all owners for its strategy, adding that he had noticed greater resistance to change from some store managers who at times tried to “cling to the past.”

“The conflict has little impact on our daily activities,” Norberg told German daily Die Welt.

The latest war of words erupted after Kellerhals last week appealed on his website for applications to replace Norberg when he retires. Norberg, 66, said he still enjoys the job and wants to keep his contract until the end of 2015.

“THROUGH THE TROUGH?”

Media-Saturn’s online sales, which have been booming after a slow start, are now growing rapidly. But some investors say the chain’s goal of ultimately generating 20 percent of sales from online sales is not ambitious enough, questioning whether store managers have the right incentives to promote online sales.

Media-Saturn, the world’s second largest consumer electronics chain after Best Buy, which competes with

Sales at Dixons Retail and Darty Plc fell 0.7 percent to 6.6 billion euros ($9.12 billion) in the final quarter of 2013, hit by depreciation of currencies in Eastern Europe.

Industry experts expect another decline in the January-March period when Metro reports results on May 8. Media-Saturn accounts for about a third of Metro’s sales.

Metro shares were down 0.4 percent at 09:50 GMT, down 1.3 percent in the European retail index <.SXRP>.

Media-Saturn said it would invest in technology as part of its new strategy, but would also make cuts to its administration, with plans to lay off around 200 staff.

Norberg said the growth of e-commerce means Media-Saturn will likely have to close some stores or reduce their square footage, but added that he still expects to increase the total number of stores to more than 1,000 by the end of 2014 or early 2015.

“There are still many people who like to browse and see innovations, as well as listen to explanations of new things. Trading in stores is far from over,” he told Die Welt.

“I am confident that we have already come through this crisis and will achieve much greater success in the coming years.”

Norberg said Media-Saturn, in a bid to stay ahead of players like Amazon, is launching a pilot program to offer home delivery within three hours in major German cities.

He said he is piloting a discount store called Media Markt Depot in Hungary and plans three more in Poland and possibly other countries. He is also testing Saturn Connect, a smaller store format focused on mobile phones, laptops and computers, in Poland and the Netherlands.

(1 dollar = 0.7237 euros)

(Reporting by Emma Thomasson and Mathias Inverardi; Editing by John Stonestreet)