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„Often people are waiting too long instead of just taking action“

As an insolvency administrator, trustee or general representative, you have accompanied a number of companies in the fashion business – Laurel, K&L, Gerry Weber, Wöhrl, Escada, Rena Lange, Stefanel, and most recently Adler and Hallhuber – and therefore have excellent insight into this industry. Now the market has just gone through a crisis like never […]

As an insolvency administrator, trustee or general representative, you have accompanied a number of companies in the fashion business – Laurel, K&L, Gerry Weber, Wöhrl, Escada, Rena Lange, Stefanel, and most recently Adler and Hallhuber – and therefore have excellent insight into this industry. Now the market has just gone through a crisis like never before. Who do you think are the winners? Who are the losers?

First of all, it’s important to note that the crisis didn’t start with Corona. 2008/2009, in the face of the financial crisis, was the first major wave, followed by another one2015/16. Especially in the noughties, there was an incredible retail hype on the part of the industry. Manufacturers opened stores en masse and believed they could imitate Zara & Co. However, they often didn’t have the right understanding of the end customer that the local retailer has. There was also often a lack of good controlling, as own stores are not a sure-fire success. So they acquired loss-makers – in a situation where the market was already oversaturated and there was far too much sales area. Then online retail came along as a further game changer. In this regard, it’s quite healthy for the market to take a step backwards. Corona was just an accelerant.

Who will be left behind?

The winners will certainly be those who already had a strong online business before Corona. When I look at brick-and-mortar retail, I get the impression that there is often a lack of a clear strategy. Thinking that you only have to have an online store, which usually runs rather poorly than well, is not enough if you neglect the previous business model at the same time. As a result, the stationary shopping experience has also been lost for the customer to a certain extent.

And on the industry side?

The problem, I see, is that most of the brands in Germany are older. There is hardly anything fresh and new. In the fall of a brand’s life, it’s difficult to reinvent oneself and attract younger target groups again.

Can you think of an example where this has been successful?

Take Burberry. It was a very dusty English brand that managed to reposition itself and enjoy lasting success.

I was recently at the Katag CEO conference. There weren’t that many unhappy faces. Apparently, the state aid has had an effect and the feared wave of insolvencies has failed to materialize.

That’s true. Some have been able to survive. On the other hand, they have to realize that many things were financed by loans. And these loans have to be repaid at some point. So in some cases, problems were simply postponed to the future. And it has to be taken into account that a considerable part of the problems was simply passed on to the producers, mostly from Asia, who were hardly able to defend themselves due to their lack of market power.

You have just completed the insolvency process at Adler. There, you raised a massive alarm in a press conference, you spoke of a “bloodbath” and “Merkel’s personal unemployed people.”

These words were intentionally chosen by me. I did indeed find the government’s approach to be wrong. To say to companies that have become insolvent as a result of the ordered lockdown: Sorry, but that no longer makes sense for you, it’s your own fault – I didn’t think that was right. The decisive criterion for me was always whether jobs could be saved. Why should the ailing store next door, which was perhaps just as close to insolvency, receive aid and the Adler Group, which was able to document that it had great chances of survival, not? Our little outcry had an effect. I think Adler was the only insolvent company to receive a loan from the economic stabilization fund. This is being paid back, by the way. Without the loan, we probably wouldn’t have made it.

Your other “Corona victim” was Hallhuber. Closing down the company completely and then starting up again was a pretty radical step. Your idea?

I was the administrator there, so I mainly supervised the process. We had no choice but to freeze the company completely. Of course, that was a very radical step. All leases were terminated, all employment contracts were terminated. We were forced to declare insolvency within insolvency, the so-called insufficiency of assets. Then to reactivate the business operations, implement an insolvency plan and thus get out of the proceedings again, that has never happened in this form in Germany.

Surprisingly, this has hardly been picked up by the media outside the trade press. What happens to the liabilities?

If I have insufficient assets, it’s clear that the creditors will get nothing. The strategy only worked because we were open with everyone involved. The management explained the concept to the lessors and the employees and promised to reactivate everything later. And so, with few exceptions, everyone cooperated.

When you look at “your” insolvency cases, is there anything like a pattern? Commonalities that have led to this situation?

Every case is different. But if you ask about patterns: What I encounter again and again is a lack of customer orientation. Who is my customer? What does he or she expect? What does the brand stand for? They say, “Our customer is the woman over 50, but at some point, this customer will be 70 or 80 and will have completely different clothing requirements. But who is the new 50-year-old?

Are there other patterns?

When things aren’t going so well, savings are made in marketing and personnel on the floor, as these positions can be tackled easily and quickly. But this really sets the downward spiral in motion. In multi-label stores, they need consulting to get the merchandise to the man or woman. If I take the employees off the floor, that doesn’t work anymore.

That’s easy to say, of course. If the sales don’t come, cost savings are needed after all.

But not at the wrong end, because otherwise the savings will only increase the economic losses. And if they then have to invest, the money is missing. A third point for me is scaling too much. If growth happens too rashly, efficiency often suffers, and then the downward spiral also looms. I am not a fan of maximum scaling.

To what extent do the demands on management change in a specific crisis?

First, a decision-maker must face the truth and not gloss over a situation. Take the online issue. At the beginning, many thought it would pass and customers would return, instead of being honest and developing a Plan B. Second, management needs to develop a clear crisis strategy and communicate it openly. I believe that those involved – be they employees or even lessors and suppliers – will then go along with a lot of decisions. Real estate experts also see the situation much more realistically than they did two or three years ago. In negotiations, every partner wants to be sure that there is a convincing strategy.

And that’s enough?

Well. People often wait too long instead of just taking action. Sometimes it’s better to get started than to wait for the fifth consultant study. Very often, things are obvious.

If you look around at trade shows and the usual industry events, and compare the audience there with that at digital conventions such as the K5 conference, for example, you get the impression that these are two worlds with completely different protagonists and types. Yet these are retailers here as well as there. Could it be that we are currently experiencing a kind of generational change in the market? And that the new world will inevitably replace the old?

We’re right in the middle of it. But: There are also many exaggerations and overrated providers in the startup world. Many business models are not about making a profit, but primarily about collecting money. In any case, not all things that glitters is gold, and quite a few end up with us insolvency administrators. But startups can certainly be a role model in terms of innovative strength. I believe that brick-and-mortar retail will always exist. But they also have to be innovative in order to survive. What has really changed at many department stores over the years? What is really new and creates the much-vaunted shopping experience?

How does a company have to be built to survive in an increasingly digital environment?

I see very different companies. Some are still managed very patriarchally, which is a dying pattern, even if it still works very well in some cases. On the other hand, there are modern companies with flat hierarchies that still don’t work. It always gets difficult when there are cultural changes, because that affects the inner identification with the brand. I sense very quickly when I come into a company whether it is well managed or not. I can often tell at the first staff meeting what the employees are like.

Are the “old” companies structurally at all made for the modern age? If you put a top manager from Zalando at the very top of – let’s say – Adler, he’ll wither away like a primrose. Because Adler works in a completely different way.

You won’t turn Adler into Zalando, that’s true. But that doesn’t have to be the case if Adler is to continue to operate successfully. Apart from that, Zalando is not all that profitable.

But it may have a promising future. Even the choice of topics is significant. While the stationaries, fighting for their lives, protest in front of the Chancellor’s Office, Zalando publishes a diversity report.

My advice is to take a look at the balance sheets and see if they can really afford all that, or if there’s just someone else paying for it.

I hear a certain skepticism there. You wouldn’t buy Zalando stock.  

I would like to combine the best of both worlds: the sanity from the old world and free spirit and curiosity from the new world. If we combine that well, we would be a step ahead.



Dr. Christian Gerloff is like the industry’s top crisis manager. As an insolvency administrator, the co-owner of the Munich-based law firm Gerloff Liebler Rechtsanwälte has assisted with numerous cases, from Escada and Rena Lange, to Wöhrl, K&L and Escape, to Gerry Weber and most recently Adler.