Wuppertal Christoph Werner, son of dm founder Götz Werner and chairman of the management of Germany’s largest drugstore chain, reassures consumers: The shortage is a “short-term phenomenon”: “So the production does not have to be increased, just redirected, supplies are guaranteed.”
However, given the hamster purchases and access restrictions for the branches, the 47-year-old admits that the current crisis is “the biggest challenge in the company’s history,” said dm. The almost complete shutdown of the retail sector in response to the corona virus had been “a black swan”, for a long time no one had thought it possible.
He himself is currently getting bitter customer letters because toilet paper is rationed, and with his management team he defines formulas for customer admission because there are no clear rules: “Shop space X 0.7 / 10” is now the default that is to be guaranteed that there is only one customer in every ten square meters of retail space and that the authorities have nothing to complain about.
Werner makes it clear that it is now a matter of protecting employees and customers as best as possible, ensuring supplies – but politics is also required. “If there are inconsistent rules at country or even local level, slower implementation and unsettled people are the result – and that’s the last thing we need now.”
Read the full interview here:
Mr. Werner, where are we on the phone – are you still going to the office?
Yes I’m in the office. Here at the dm headquarters, we call it “dm-dialogicum”, but we are only a few colleagues, most of whom work from home.
You have invested a lot in digitalization at dm in recent years. Is this paying off now?
We are lucky because we opted for teleworking and desk sharing very early on. Here in Karlsruhe all employees have laptops, mobile work is a matter of course. So we could now simply switch to home office without any significant change in productivity – even if we of course had to switch to crisis management. Our way of relying heavily on personal responsibility is also an advantage, so that the branches can make local decisions and that we have always invested a lot in IT and high-performance systems. We can therefore adapt many things quickly.
Do you have an example?
Until now, the cashiers had to take our gift cards in hand and scan them to load them. Now that we are supposed to avoid physical contact and have put plexiglass panes at the cash registers for protection, we have found a way that customers can scan the cards themselves – on the barcode readers, where they also read their Payback cards. It’s a minor matter, but for our employees it makes a huge difference in the current situation.
Do you see opportunities in this crisis, for example for creativity?
There are opportunities in every crisis. But what we’re currently experiencing in Germany is tragic and the biggest crisis since World War II. Many people worry about their jobs, their health, the older generation is in quarantine.
An older man lives on the same floor where I live. I have now thrown in a letter and offered to help him when he needs something. Then he called in the evening and said: He can no longer see his grandchildren, can no longer do his voluntary work, he suffers from loneliness. Yes, in principle there is an opportunity in every crisis. But now it’s about getting through the difficult time.
Now you might think: The dm branches are open, people are tearing about your products, you are doing well compared to the many closed shops. Or is this time also a crisis for dm?
We have been around since 1973, and this is undoubtedly the most difficult phase in the company’s history for dm. We have over 40,000 employees in Germany, most of whom work in our branches. In the past few weeks, we have seen increasing stocks of people becoming more concerned and hectic. This is an enormous burden for the employees – coupled with the awareness that there is a real health risk of contracting the corona virus.
What is going on in the branches?
We supply two million customers in our markets every day. Suddenly the feeling arose that things are not enough, some feel subjectively threatened and are no longer as accommodating as usual. There is sometimes massive hostility. I also received bitterly angry letters: for example, how our employees could get involved in regulating how much toilet paper you could buy.
I received bitterly angry letters: for example, how our employees could have to regulate how much toilet paper you could buy. Christoph Werner
Speaking of toilet paper: it feels like the situation should relax, all supplies have been replenished?
Oh, there are wonderful considerations of what people do with it, just what is circulating on WhatsApp. My favorite is a picture of a farmer making a furrow in the field and sawing toilet paper. One thing is clear: the topic moves the nation. One explanation we have: People are now only at home, no longer in the office or in hotels, and notice that the role is running out more quickly. This increases the demand in the trade, the goods in the shop sell faster. Customers notice this again and begin to stock up.
Since we have a very continuous flow of goods, this leads briefly to the phenomenon that there is really nothing left in the store – at the same time, nothing is used in restaurants and hotels. The production therefore only has to be rerouted, replenishment is assured.
When is the bottleneck on the dm shelves removed? The end of the week?
Soon. I have exciting conversations with our logistics manager, there are very different perspectives.
Does this crisis show us the limits of your just-in-time supply chain?
The retail chain has extremely efficient processes, especially in logistics. The goods come when the minimum stock is reached. This works well if the environment remains stable – especially for us, where we don’t work with special offers. At the moment there are demolitions. Now we have to adapt the processes, closely monitor the turnover speeds of the individual articles.
Was that foreseeable? We heard about Corona for the first time at the end of last year, but the reports were very different and the drama was not immediately recognized. Theoretically, it was possible to close the majority of the retail sector to combat a pandemic. We couldn’t imagine that in practice. It was a black swan for us.
Is this sudden changeover a driver of flexibility or innovation?
First of all, the situation is extraordinary: normally you move closer together during the crisis, now we should keep our distance. This is exactly what makes it so challenging for brick-and-mortar retail, because retail is actually a social event. He lives through the people who advise, respond to customers, take them by the hand – all of this is now to be avoided. So this is a very difficult situation. And what will be when it’s all over? Will we shake hands again?
Will customers look forward to doing business again? SYou have recently experimented a lot with omnichannel strategies or express pick-up in Munich.
Yes, this is a huge opportunity in this situation. All online retailers are currently experiencing massive capacity problems. We also had delivery delays in our online business. Due to the enormous demand, the delivery time has jumped from two to three working days to nine to twelve working days. We’ll get a grip on it, we’ll be back at two days soon.
We have also been dealing with branch pick-up for years. We have now suspended our test run in Munich because the quantities exploded in the markets. But we are working on offering this option of shopping nationwide: that at 10 a.m. you order something that you can collect in the branch in the afternoon. That would also be a way for people with risk factors.
Did you already have to close branches or warehouses due to corona diseases?
No. So far, we are only aware of two corona cases in the company that were diagnosed retrospectively when there was no contact. But we have to reckon with someone getting sick and we have to close sales outlets.
With your employees in the branches, you speak of great commitment, but also of uncertainty. What else can you do for them?
Overall, I first see a heroic effort under these difficult conditions. As a company, we want to protect people’s health and ensure the security of supply for the population. So now we have to create protection in both directions. This is made more difficult by the fact that many of the authorities’ requirements are ambiguous and are interpreted differently by regulatory agencies – unambiguity and clear rules are now necessary.
Do you feel adequately supported by the authorities and the state?
Now is not the time to blame. And I know that the people in the authorities work around the clock. But the inconsistency is a problem. We need clarity so that those responsible in the branches can meet the requirements, especially when, for example, the regulatory offices come and even threaten with closures.
If we want to organize and implement something quickly for 2000 dm stores in Germany, we have to plan it on a general staff basis. If there are inconsistent rules at country or even local level, slower implementation and unsettled people are the result – and that’s the last thing we need now.
Are the planned state aids in the right place?
Honestly: I am not yet able to see this. I think of two points for retail: Rents alone result in enormous fixed costs, and even if loans are granted now, they have to be repaid at some point. What if the business slumped so badly? The second point concerns customer behavior: Perhaps shopping habits will change permanently. For example, it is conceivable that people can now discover how much can be done online or by teleworking, and that they will make fewer business trips in the future. That would have an enormous impact on the hotel industry and mobility.
That sounds like a big change.
In management we often speak of the “VUCA” world, which is derived from the English acronym for inconsistency, uncertainty, complexity and ambiguity. We are now right in the middle of VUCA. And it still feels oppressive.
But as radical as the decisions of the federal government and the collateral damage to the economy are, there is no alternative. Now it’s all about people. And as my father always says, I also believe that the economy is there for people, not people for the economy.
Mr. Werner, thank you for the interview.
More: Why the new boss of Germany’s largest drugstore chain, Christoph Werner, doesn’t want to be measured by numbers.