We are used to news of major retailers shutting down stores, but not all of them have the online channel to fall back on. This is what Swedish hardware retailer Clas Ohlson is hoping to do, as it announced in its six-month report that it would close its store network outside the Nordics – meaning the UK and Germany.
The story is different in the two markets – the UK business launched back in 2008 but has struggled despite investment by the company. The company has six stores in total in the UK, including in London, Manchester, Liverpool, Reading, St. Albans and Kingston. It also had one in Croydon which it closed in August.
The four German stores, all in Hamburg, are a relatively recent pilot launch which Clas Ohlson has now decided are unviable.
The logic behind the move lies partly in the company’s online sales growth of 43% in the second quarter, compared to overall sales growth of 8%. The company expects to save SEK75 million (€7.32 million) per year through the closures, although it will face a one-off cost of €20.5 million.
Clas Ohlson clearly hopes that the lower cost of online will be a more efficient way of gaining growth in these markets, but at first sight this may seem like something of a gamble considering that 96% of the brand’s overall sales come from the store.
In addition, 38% of new revenue over the last six months has come from new stores, the retailer said.
So what explains this faith in online? Clas Ohlson might highlight the €5.1 million it has put into IT systems over the last six months, as well as its efforts to broaden the range of online capabilities and increase its delivery capacity.
But it is also important to note that the business outside the Nordics contributes very little to the overall pie – €6.7 million in the quarter or only 3.2% of total sales, more than a quarter of which will be covered through cost savings. This may be more relevant to the decision to close physical stores there than a strong conviction that online will plug the gap.
Indeed, in its home markets there is no sign that Clas Ohlson has lost faith in the store model. Between August and October, the firm opened three stores in Finland and three in Sweden.
In November it added an extra one in Sweden, with another to follow there in March. 2019 will also see the addition of three more stores in Finland.
Overall in the year it plans to open a net figure of 10 to 15 new stores.
While the store is set to remain, Clas Ohlson’s vision for these stores is evolving, with the Clas Ohlson Lab Store in Stockholm serving as a testing ground for new innovations before they are rolled out more widely. Recently it worked with Microsoft to install screens in the windows of the store displaying promotional images to lure in shoppers.
Fellow Scandinavian retailer Pandora recently announced it would open fewer stores after disappointing financial results.