Digitalisierungsstrategie von Kärcher: CMO Christian May im Interview

First of all, hopefully it's a longing brand for all garden and house owners. But yes, my name is Christian May. I am on the board of Kärcher, responsible for sales, service, and marketing. And before that, I was managing director of German sales for a long time and took care of sales of all our products in Germany.

2.6 billion euros. We take care of everything related to cleaning. We try to make life a little easier by developing good, innovative cleaning solutions and solving problems that are still difficult to clean or not as easy to clean as one would like. We are aligned in that direction, and innovation is one of the most important things. We always try to make something better than the solution that already exists on the market. That's where we come from, and that's what distinguishes us. In this sense, we have developed many products, and I think almost everyone has come across one of our products or held it in their hands.

And of course that includes the high-pressure cleaner you just mentioned. That is certainly the most well-known product we have. That's also how Alfred Kärcher started.

At the very beginning, the hot water high-pressure cleaner was his invention in the 1950s. That's how it all began. The strategy to focus strongly on cleaning, but also many other newer products that should be well known. The portable high-pressure cleaner, which everyone knows from private households, was only invented in the 1980s, so it's not that old.

But also beyond that, for example, a window vacuum cleaner. We practically created that market. There was a solution that simply didn't exist before, which was still done completely manually. Or now, very timely with the weather, we have developed an electric ice scraper to clear car windows, and that is also very popular.

Exactly, the window cleaner. For those who don't know it, it's like a small vacuum cleaner, a small battery-powered one. You can't imagine how it works. But I myself have various kitchen appliances, I have to say, not all devices convinced me. The garage vacuum cleaner, for example, I bought from another brand. But this window cleaning is actually much faster. And yes, I'll tell you, it's fun. It's always a necessary evil, but you can get large window surfaces clean in a few minutes.

Yes, it is very important, no question. On the other hand, the other products have gained enormously in importance in recent years. Especially since we have also focused strongly on indoor cleaning. This year, for example, we have just launched a device for cleaning hard floors, a floor cleaner. That's a market we completely created. There are already competitors, but we always take care of cleaning problems that were not well solved before. That is one of the great strengths of Kärcher, that we always manage to occupy such fields. So the high-pressure cleaner is still very important, but it is now flanked by many other products that solve other everyday problems and offer differentiation.

Yellow and anthracite, but basically it's true. It's about 50-50. About 50% of our revenue comes from private households and about 50% from commercial use. The products often have a similar function, like a high-pressure cleaner, but they differ in robustness and durability. A high-pressure cleaner for private households is not used eight hours a day, maybe once or twice a week. In commercial use, it could be used every day in a car wash, so it needs to achieve different service lives. To make that clear externally, we decided to differentiate by color. So all products designed for commercial use are more robust and durable, made in gray, and the devices for private households are yellow. That doesn't mean they wouldn't last, but they are adapted to the conditions in private households.

On the one hand, there are areas that currently have no solution. Hard floor cleaning was such a topic. Hard floors have always been cleaned, but there was no mechanical cleaning solution for wet cleaning. So we developed a device that combines vacuuming and mopping in one step, significantly simplifying cleaning. Those are new markets we can occupy and develop. It was similar with the window vacuum cleaner and the ice scraper. Those are fun and we can offer a good solution to consumers. In areas that are already heavily occupied, it's different. There we compete with competitors for market share. It's about offering a better product or better customer experience at the end of the day. Can we reach customers better? Do we have better service? Not just production, but also service. Whoever offers the best package for the customer wins.

Basically, at the very beginning we actually had direct sales. Then in the 1960s, it was heavily characterized by trade. At first, it was specialized trade, and then there was a first wave. I said earlier that we invented the portable high-pressure cleaner in the 1980s. That actually coincided with the development of DIY stores at that time. The big consumer markets developed, and the DIY store landscape developed. The triumph of the high-pressure cleaner certainly also had to do with the fact that we were able to develop this market together with the trade and achieve high distribution of this product. So during that time, we sold very strongly through trade, both in professional and retail. That was by far the strongest sales channel. There was essentially no direct consumer approach from our side. That then developed further. The trade landscape evolved, and at the end of the day, we are always very customer-focused. Of course, we think about where the customer wants to buy our brand, where the customer wants access to our product. That is the leading criterion for us when deciding which channels to go into and where to sell.

The first question is actually: where does the customer want to buy? That's a question we always had to answer. And that certainly led us to eventually say, okay, we need a direct access. But step one, even before that, was the consideration of how we present ourselves online. The internet itself, not the shops, was already much more developed. Then at some point the question arose: who has the interpretive sovereignty over what the product can do? Are we providing the right data? Eventually we said we need a digital presence, we need the interpretive sovereignty over what such a product can do online. And if you take it a step further, that only makes sense if you are found. All my data and information I can provide make no sense if nobody finds us. And to be found, and that's no secret, a product must be purchasable. If it's not purchasable, it will rank poorly. So it was clear to us that we had to develop a shop where the products are also purchasable, where customers have access, so that it has a certain relevance at the end of the day. That's the path we took. It has nothing to do with working against the trade. We said, how can we ensure these information and access? Because customers want that. You also have to consider that we have over 3,000 purchasable products today, and we no longer find a retailer who lists all our products. But every customer, even one with an older product, must have the chance to buy a spare part, accessory, dust filter bag, whatever. So there must be a central possibility, and the trade cannot provide all of that. We are happy to cooperate with the trade, we support it where we can, but with the mass, it's no longer possible to bring everything under one roof.

Well, from a revenue perspective, it's only a small share. It's not a huge share. The mass is still done with the trade, or also with direct sales in the professional area. The direct sales share is significantly higher there. We have our own salespeople and service technicians out there who directly serve large customers. But it is still important for us to have our own shop to offer customers the opportunity to buy directly from the brand, to get direct feedback, to have direct contact with the customer, and to be able to offer all products without exception.

That's a difficult question. On the one hand, we have reached a volume that is not so easy to map ourselves, even if we wanted to. So from my perspective, we still need the trade because we can't handle all those goods flows ourselves. That's one side. The other side is pricing. But we believe in the prices we set for our products. We are not the ones who want to start a price war. We list our products at the recommended prices online. We can't do anything about what others do. We are not responsible for that at the end of the day. So to some extent, our hands are tied. Sometimes I am sad when I see at what prices our products are sold. I am of the opinion that it is not necessary, but it is the decision of the trade.

We could do that, but then I come back to my philosophy mentioned at the beginning: we are multi-channel distribution. We want to be where the customers want to see us. Not all customers want to buy online. There are enough reasons why they like to go to retail, why they like to buy in stores. They might buy many other things and also buy the ice scraper there. So if we excluded all these customers, we would make it much harder for them to get this product. We don't want that.

Of course we have that discussion. We observe it. But as I said, ultimately prices are at the end of the day something we are not allowed to influence. We look at what is happening, but it is also an important customer for us, no question. But it's not that we have a huge dependency. We look at all possible outlets and try to manage it well, which from my perspective we have succeeded in so far.

Yes, that is actually the case. I see a strengthening of retailers that were previously purely stationary, who are now also picking up online to an increasing extent. You mentioned Hornbach, but also for example, Obi has invested a lot. In effect, almost all DIY stores have jumped on the bandwagon and are trying to strengthen this topic in their category. They have a big advantage over Amazon because they have pickup points. I can put together items, especially bulky items, and pick them up at the store. I can assemble everything beforehand and then pick up my order, which would otherwise be difficult to deliver home. So there are advantages that stationary retailers can have, especially in this combination if they play it well. And it's good if there are more players, if our traditional specialized trade becomes stronger in the online area and uses that strength.

And I think it's worth mentioning that especially in this difficult phase this year in spring, everyone who had online access to customers in some form had a big advantage because it remained open, and also access to the store was possible. Within Europe, there are many like ManoMano or Discounter that are pure online models, but there are also many that run combined models and are becoming stronger online. That gives customers more options, more choice, and they can turn to specialized retailers, so there is a good selection.

We have already dealt with this topic very intensively and have made various attempts. But one problem is exactly what you describe: a large part of the devices are simply too cheap. They are actually bought. Renting and returning is almost too much effort. In the steam cleaner area, there is also a hygiene issue because it is used in areas where you want to be sure the device is absolutely clean. There is a bit of a hurdle. In the area of high-pressure cleaners and garden tools, the device prices are higher, so it would be more interesting, but so far it hasn't been well received. We have tried it through our own channels. It becomes interesting when it is an application that actually occurs rarely. For example, what is very well received is the topic of spray extraction, like cleaning upholstery or carpets. Devices for that are very gladly rented. We offer that at all our Kärcher Centers. We also have offline direct sales with our own outlets, own stores. How many are there in Germany? There are 15 in Germany, and in the same format about 40 more operated by retailers, called Kärcher Center. There we have the complete range offline and the corresponding service. And there we can also realize such rental models because we need the locations. Otherwise, it would be very difficult to cover.

We can do that too. But it is actually the case that we work closely with the trade. The trade is changing, and the trade itself knows that the future will look different and that cooperation with manufacturers must function differently in the future. We already provide the trade with a lot of digital material so that they can use it accordingly. That helps because we ensure uniformity in advertising and ensure that the right things are communicated about the individual products. And how the future looks, whether we might do much more ourselves, that could be. Because ultimately, most of the money is buried in logistics, and nobody wants to pay for that. We want to pay for the product, not for transporting the product.

We need smarter solutions in cooperation with the trade because customers still want to see and touch devices, especially expensive ones like high-pressure cleaners. We need points of contact and a shopping experience.

We don't do door-to-door or party sales. We want to be where customers are, at trade fairs and markets, often with the trade. We don't go to customers' homes. It's become harder because people are rarely home during the day. We focus on what we're good at: stationary retail and working with trade. We have a webshop for a long time, and we also sell parts. We have competence in digital areas. We tried a model in Malaysia and Russia where we delivered products personally, but it was too expensive. The idea of a yellow car is not completely off, but we haven't pursued it.

For us, it's always about how to stay close to customers and what future models will be. In the case of Kontor, it's about the construction sector. We wanted to understand how to reach customers there. We do regular market screening and invest early to learn. Only one in fifteen startups is really successful, but the main reason is to understand new business models and distribution channels.

We invest in it. Every few years we decide whether to continue self-development or buy a system. We have a core team that develops the shop, but many other departments are involved: finance for payment, logistics for availability, product managers for product information. We have about 100 people in our digital subsidiary that handles all digital topics, including app development for third parties. In total, about 50 people in the center work on digital content and web shop development. We operate 40 webshops, one per country.

There are countries like Moldova where we do 80% direct sales, but they are smaller. In Kazakhstan, a small part is direct. It depends on the trade structures. Regarding Amazon, I don't see a big breakthrough yet for professional users. There is competition from other platforms. It's still a small share.

Regarding Amazon, I don't see a big breakthrough yet for professional users. It's still a small share.

We have a gateway for smart watering. Digitalization must provide real customer benefit, like telling you when the device is too hot and needs a break. It shouldn't be just for the sake of it. Product registration helps us provide better service. In B2B, we already have fleet management with GPS and geofencing. For consumers, it's starting to become interesting. We have a robot that works with an app. We'll continue to add more products, but only with functions that offer real value. Regarding the US, brand awareness is much lower. Our US business is 80% commercial. We are strong in commercial high-pressure cleaners and upright vacuum cleaners for carpets. The consumer business is smaller than in Europe. Regarding competition, we've received the Plagiarius award multiple times. For a small commercial cleaner, the copy was visually almost indistinguishable. But we hope the durability is different. Platforms like Amazon give unknown brands market access. In Europe, it hasn't happened yet in high-pressure cleaners, but it could. We must be present on all channels where customers search, from the start. That's the best defense against competition.

Service Partner has software that supports building cleaners daily. We had software for machine management, and they fit together perfectly. We are now rolling that out together. For internal innovation, we have New Ventures. One product is Kairos, a kitchen composter that was very successful on Kickstarter. We continue to explore new business models and stay open to all topics.

Thank you. The product is called FC? It's a cool product. For anyone with a lot of floor space, it makes life much easier. That's what Kärcher stands for: solutions for daily life that make cleaning easier and even fun. We've done everything right then.