Migros is making a big loss: This is how expensive Galaxus.de’s expansion abroad is

The sharp increase in sales also has to do with the expansion of the product range. This year the product range of the German online store has doubled to over three million products.

Loss of 60 to 65 million euros in 2023

The Swiss, who have been involved in the German online market since the end of 2018, are paying a heavy price for the success they desire. Maxim: To reach a critical size as quickly as possible by accepting initial losses and thus catch up with the leading providers. A common strategy worldwide, but also an expensive project: Galaxus.de has incurred a loss of €120 million by the end of 2022 since the first financial year in 2019. The company does not want to set or communicate an upper limit on the red numbers for this expansion: “At the Zurich headquarters they say: “The numbers are big. But these are normal amounts to invest to quickly launch a business in a new market. We are developing within the planned framework. Startup costs will continue to increase.”

Here’s how much is predicted in Galaxus.de’s current report for 2023: “The negative outcome for 2022 is expected to develop in proportion to this year’s sales growth and be around 60 to 65 million euros.” In 2022 it was still minus 49 million euros.

Higher costs occurred at all levels in 2022, especially advertising spend, which increased from 10 million euros to 24 million euros. The report notes that financial protection from Switzerland has clearly diminished on the cost side of the expansion project in Germany: For the first time, the Galaxus.de services of the Swiss parent company Digitec Galaxus AG were invoiced and this amounted to 7.7 million euros.

Maternal loan increased in June 2023

But the Swiss mother continues to strive to make the delicate Galaxus.de plant grow. According to the report, the current loan commitment of 150 million euros was increased to a total of 217 million euros in June 2023. The company does not want to predict over the years how long Galaxus’ European campaign will continue to bring losses. In the “Outlook” section of the current annual report, it can be predicted that the project will probably take as long as before: “Galaxus Deutschland GmbH’s focus over the next five years will continue to be on quickly achieving a relevant size in the industry. electronics industry Trade market.”

It is quite common, especially in the e-commerce space, for market entry to incur high startup costs. In the case of Galaxus.de, the costly overseas campaign is reaching a sensitive stage. At Migros, which owns 70 percent of Digitec Galaxus’ shares, focusing strictly on the core business is currently on the agenda. Old digital plans are in trouble, with Migros’ new boss Mario Irminger recently pulling the plug on the Sparrow Ventures digital lab. The progress of the European Galaxus campaign will also depend on how the chances in Zurich are seized.

Galaxus itself is confident. Because investments in Germany were also valuable for raids on neighboring countries. «We were able to open Galaxus stores in France, Italy, Belgium and the Netherlands without additional marketing or personnel costs. “These investments will pay off in the long run.”