Mega distribution center too big Migros is wasting hundreds of millions by going it alone
A new investigation shows how Migros is losing hundreds of millions of francs. It's all about inefficient structures and questionable management decisions.
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- The construction of an oversized distribution center at Migros Aare resulted in a loss of 100 million francs.
- Eleven different administrative levels and separate purchasing strategies cause additional costs of up to 300 million francs per year.
- Specialty stores are being sold, foreign business is being wound down and central processes are being streamlined in order to increase efficiency.
Migros is in the midst of a far-reaching transformation process. While the company celebrates its 100th anniversary, the entire organization is facing massive cuts. Competition from Aldi, Lidl and online retailers is putting MIgros under pressure, but internal errors are also playing a major role.
One particularly costly example of mismanagement is the "Logistics Platform 2030" in Aare, a flagship project that turned out to be a billion-dollar mistake, as reported by "SRF".
Former Aare boss Anton Gäumann built a gigantic distribution center without involving the affected cooperatives in advance, insiders report. The Basel and Neuchâtel/Fribourg cooperatives, whose cooperation was speculated on, refused to participate. The result: a third of the facility stands unused.
"Not everything went perfectly," admits Guido Rast, head of Migros Lucerne and Chairman of the Board of Directors of the new Supermarkt AG. Nevertheless, the entire ten Migros cooperatives and their subsidiaries had to take responsibility for the wrong decision - with a loss of 100 million francs.
The problem with the regional princes
Migros is not a classic group, but a complicated network of ten autonomous cooperatives that often block each other. Each cooperative has its own departments for finance, marketing and human resources - an expensive multi-track system that costs up to 300 million francs a year. Purchasing is only to be centralized in order to save costs with Supermarkt AG, which will be founded in 2024.
However, the regional princes, as the cooperative bosses are derisively known, are helping to control the new purchasing organization. "We don't want to compare ourselves with Coop," explains Rast, "but we need to work more closely together." However, a complete merger like the one at Coop is not planned.
An expensive experiment comes to an end
Migros' specialist stores are also facing liquidation. For years, the Federation of Migros Cooperatives bought the goods for M-Electronics, SportX and Co. - and guaranteed the cooperatives a fixed margin, even if products were not sold. "A fully comprehensive insurance mentality that was unsustainable," former MGB managers criticized to SRF. As a result, the specialist stores made a loss of CHF 100 million in 2023 and are now being sold. M-Electronics becomes Mediamarkt, SportX becomes Ochsner Sport.
Another disaster was the failed expansion plans of Migros-Industry abroad. The cosmetics subsidiary Mibelle, the joint venture in India and the adventure in the USA caused losses in the millions. The purchase of the US company "Sweetworks" in particular proved to be a bad investment: after years of poor planning and unprofitable operations, 160 employees were made redundant in 2023. "Nobody in Switzerland saw the big picture," complains a former manager.
After years of fragmentation, the cooperatives now have to reorganize themselves. Either they reduce duplicate structures and cut costs efficiently, or the historically evolved system of decentralized cooperatives is in danger. "We now have a different structure," says Guido Rast. However, it remains to be seen whether the new Supermarkt AG will really bring the hoped-for savings. The coming years will show whether the traditional company can reinvent itself - or whether it will fail because of its own system.
