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Rossmann must 'beware of saturated market'

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Rossmann must 'beware of saturated market'
Photo: DPA
09:47 CEST+02:00
Germany's number two drug store chain, Rossmann, should look before it leaps into the gap left by the demise of rival Schlecker, German retail analysts have warned, saying the domestic market is nearly saturated.

Better expansion and sales opportunities exist abroad and online, according to a story published Friday in the Tagesspiegel.

On Thursday Rossmann's chief, Dirk Roßmann, said he wanted to put more pressure on market leader dm.

"I don't necessarily want to be the number one. But I want to be so close that the number one can feel my breath," Roßmann said on the occasion of the company's release of its 2011 figures.

Those showed the privately-held firm broke the €5 billion sales mark for the first time. Profits rose by 10.5 percent.

The number two chain wants to add 110 stores to its 1,612 and take on 1,900 new full and part-time workers.

The company expects to hire some now unemployed Schlecker workers, especially in southern and western Germany, but has not specified how many. It is also interested in taking over some of Schlecker's real estate.

However long-term there is only limited growth potential, retail experts say, because the German drug store market is pretty much saturated, Denise Klug, an analyst with Planet Retail, told the paper.

She thinks dm and Müller, another chain, can expand in northern Germany and Rossmann can add some locations in the central part of the country.

"In the long-term, drug store chains must grow via their foreign business," she said. Rossmann has stores in Poland, Hungary, the Czech Republic, Albania and Turkey. The chain dm operates in Hungary, Croatia, Austria, the Czech Republic and Romania, among others.

Online business is another way for these chains to grow, Klug told the paper. Rossmann generated €34 million of sales online last year, while dm sells its in-house brands on Amazon.

The retail analyst says both businesses, which are hardly at all represented in smaller towns, could "significantly increase" their business online.

Roßmann, told the business daily Handelsblatt he was well aware of the tough market conditions, especially in Germany's big cities, where Rossmann stores not only compete with dm, but with similar products being sold in discount stores like Aldi and Lidl.

"We slash prices here like in no other country," Roßmann told the paper. He refused to say how many of the 1,612 Rossmann stores were losing money, but did admit it was a three-digit figure "and that's too much."

DPA/The Local/mw

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