In times of digitization, how do maintain a steady course for a traditional company such as Deuter with a narrow product range and a clear focus on a specialized market segment? How do you hold your ground against big players such as Amazon, whom Deuter unequivocally does not want to supply?
We asked Martin Riebel. Since 2013, he has been managing director of Deuter and the Schwan-Stabilo Outdoor Group, to which the company has belonged since 2006.
ISPO.com: Mr. Riebel, the European Court of Justice has just ruled on the legitimacy of resales over platforms and marketplaces — a dispute that Deuter, along with others, set off years ago. How do you see the current situation?
Martin Riebel: The topic is very complex. Selective distribution agreements vary greatly — on one hand between the industries and of course also amongst each other. We can only judge our own situation here, where, in the litigation against Cortex Power, the Frankfurt Higher Regional Court found in our favor on appeal and prevented the sales over the Amazon platform in accordance with our selective distribution agreement. We still do not want to sell via Amazon, and we have included stipulations to that effect in our contracts.
Do you sell to online-only retailers?
No, we do not sell to online-only retailers. Rucksacks are products that require a good deal of consultation to provide the customer with information and advice. We therefore have a selective distribution strategy, which allows the end customer to have the product fitted via our brick-and-mortar retailers and to order online via those retailers too.
What do you think of the new marketplaces, the ones emerging now among retailers too? What does your online strategy look like?
If eventually we get to the point of having our products on the marketplaces of good retailers, I have no problem with that. The point there, of course, is the ability to offer the customer a wider product range, to go into greater depth. We just don’t want a bazaar like Amazon.
We ourselves have decided that we will not run our own online store. Our store runs through our partner Commerce Connector, meaning that all products in our store are sold via selected retailers. It works really well, and we have above-average growth rates here. But the retailer makes the deal — otherwise we’d be contradicting ourselves. We still see retailers as an extended arm to the customer.
Which challenges are currently the most important for the trade and industry? How has the trade changed recently?
Both — trade and industry — must clearly distinguish themselves. With regards to the outdoor market, which is still quite young, that is definitely a challenge as more things are intermingling nowadays, including sports and fashion. We think innovation is the key though. With every product, we want to see a clear area of application in sports, and that means there is always a focus on function.
And then if students want to wear our rucksacks in the city too, we don’t stop them. But we don’t make any retro collections with old-fashioned carrying systems, the sort of thing that’s currently in fashion, although we could easily do so with our history.
We don’t follow the path of opportunism and, as a family business, we don’t have to. We’re not driven by our quarterly turnover. Fundamentally, I believe strongly in the future of the outdoors. With more people sitting all day long at the office, and with the cities growing, the outdoor industry and being outside will become more and more important.
What changes are you expecting in the next few years?
In comparison to other larger sports brands, we see retailers as our route to the end consumer, both now and in the future. I wrote my thesis in 1988, and in it, I predicted there wouldn’t be a specialist trade from 1995 onwards. In other words, nothing is going to change nearly as much as the current hype suggests. Nevertheless, the trade will evolve, and it will not only face problems from digitization but also, for example , from whatever follows.
But the digital side will grow dramatically, and that is where the trade is investing enormously right now. Above all, our big partners are getting better all the time. Here, however, there will be a massive consolidation in favor of the quickest and best. The future is the seamless combination of experience and good advice on the shop floor, information and easy access via the Internet, and a high level of logistical service. As a brand, we have to adapt to that.
What effect is the digital transformation having on your business?
We are already investing a large proportion of our marketing budget digitally. In cooperation with selected retailers, we enable the end consumer to shop online via our website using Commerce Connector and, via our B2B platform, our retailers can order products around the clock.
What challenges can you foresee regarding digitization?
Digitization presents challenges to both trade and industry. There will definitely be retailers who have problems if they do not evolve. Of course selling online is now inevitable, but that does not mean that the brick-and-mortar trade is at risk because of that.
The end consumer will continue to seek out the shopping experience in store and gladly listen to advice — but then also increasingly order online. In other words, digitization also offers opportunities. Today, the end consumer can already be reached more directly via social media. We are experimenting a lot there and have formed our own online marketing team.
The end consumer is clearly better informed in advance due to the Internet, and that presents the shop assistants in store as well as Internet sales with new challenges. We are therefore taking our training requirements more seriously than ever — both in brick-and-mortar stores and online.
Is digitization also affecting production?
We have been exchanging data with our production operation for a long time. In the future, however, we will be working on a shared platform, and we are investing heavily in an even better network. The exchange of information is become increasingly digital, right up to the 3D design. Ultimately, the point is to become more efficient, for one thing.
We are in the special position of having had a supplier for our rucksacks for over 20 years. The supplier is based in Vietnam and works exclusively for us. The wage increases in Vietnam are about 12 to 13 percent per year, and these costs cannot be passed on. Instead, we are trying to offset them by being more efficient.
In order to achieve this, we have started a project with our production business in Vietnam and the Fraunhofer Institut. A new production hall is currently being built.
How close are you to the customer — do you integrate feedback from your customers into the product development?
It is one of our most important principles to have enthusiastic outdoor athletes within the product development department who can contribute their own personal experiences within the community directly to the development of the product.
In addition, we work closely with mountain guides and athletes, who are regularly in our offices making suggestions for improvements. Furthermore, we take responses from purchasers and sellers from the specialist trade very seriously. And we also receive direct feedback from the end consumer. Based on this mixture of information, we constantly try to grow.
What developments are you expecting in the next few years in the industry?
It depends on the area. In comparison to the classic sports market with large, dominant players, there are still a lot of small brands in the outdoor sector. In Italy alone, we have more than 200 outdoor brands, but there are no longer clear differences among them. In other words, the industry must be more mindful of useful product innovations in the future, and of service innovations and the ability to deliver. Without doubt, there will be a consolidation, and possibly even to a greater extent than among retailers.
In total, you only have two suppliers. One in Vietnam for rucksacks, and the other produces the sleeping bags and is based in China. That is unusual! Is the motivation there sustainability again?
With sustainability, it is all about the triad of economics, ecology and social sustainability. We have been leading the way when it comes to the social standards of our production operation in Vietnam. We have been a member of the Fair Wear Foundation for many years, in the highest category, Leader Status, since the first audit, and we won the Best Practice Award for the way we reduced overtime.
In addition, we are Bluesign partners and a member of the German Partnership for Sustainable Textiles. It is clear that the supply chain is reliant on mutual trust. If one side makes mistakes, it will have an impact on the other. For that reason, we also don’t have any pricing negotiations in the usual sense — we always have to agree somehow. Like in a successful marriage.
What are you expecting from the trade fairs with regards to digitization?
Good question. The ISPO Munich is currently very actively involved in knitting together an offer for the trade and the industry, which goes well beyond the provision of trade fair space. These digital endeavors will also be necessary so that the trade fairs continue to serve as an international communication platform for useful dialogue between industry, trade and increasingly end consumers as well.
How is the current season going up to now? How is the feedback from your customers looking?
We are really happy with how the current season is going. The Spring-Summer 18 collection will soon be shipped, and it fared well in pre-ordering from sellers — above all internationally with a double-digit increase. We have worked on new color concepts — away from the typical German block designs and more focused on monochrome colorings.
The communication has also become more emotional, and all that has resulted in very good feedback, particularly in the United States and in Scandinavia. We are proud of that. As far as the current sell-off among retailers goes, we’re down to zero now. In the next year, we are expecting more momentum, driven above all by innovations in the product such as the Futura Sensic carrying system, which is even more comfortable.