Discounter Kik's methods come under scrutiny

By AFP

July 15, 2010 Updated Apr 12, 2009 at 4:01 AM CDT

Sales women paid five euros (6.6 dollars) an hour, Asian subcontractors with dubious practices, and counters in the shape of swastikas -- in Germany the success of textile discounter Kik has kicked up a storm.

The latest example: a court in the western city of Hamm recently ruled as "indecent" the salaries paid to saleswomen Martina K., 47, and Ursula Grunwald, 62, who received 5.20 euros per hour.

Kik will have to pay them between 8,900-10,500 euros in back pay and raise their salaries to 8.21 euros an hour.

In all, 3,500 Kik workers in Germany, of a total 15,000 worldwide, are paid five euros per hour and receive the strict minimum in state health and pension benefits according to the services trade union Verdi.

"Our workers might have to do more than others, but in exchange they have a secure job," the co-founder of Kik, Stefan Heinig, told German media.

Heinig has a reputation of an obsessive cost-cutter. In his 2,700 stores, the decoration is minimal and there is no music and no air conditioning.

Kik, a German acronym for "client is king," deals with the low cost suppliers, including many in Asia, and changes them often if needed.

Goods arrive directly at a centre in Boenen, western Germany, and there are no middlemen.

Kik's prices are therefore hard to beat. In a Frankfurt store, goods are piled high or are still in boxes, and customers can find a pair of kids' jeans for 2.99 euros or a military print T shirt for 3.99.

A small black and white cotton dress, the origin of which could not be determined, cost 4.99.

In nearly 15 years of activity, Kik, which is majority owned by the German distributor Tengelmann, has steadily gained market share and posted sales of 1.4 billion euros last year.

In Germany or in eastern Europe, where the company is expanding, the group targets families with kids, "thrifty people and socially weak people," according to its Internet site.

Heinig was asked by the German daily Die Welt in 2007 about his models and replied: "I call them Mc AlKea. McDonalds, Aldi, and Ikea are model businesses for me."

Aldi is a hard-discount German supermarket chain.

Like those companies however, Kik's social policies are criticised by unions and non-governmental organisations.

In Germany there is no works committee, a spokeswoman confirmed, while one attempt in Austria ended up in court.

According to testimony provided by Verdi member Henrike Greven, staff are watched closely, their bags and even their cars are regularly inspected. The managment has also hung posters urging workers to turn in others who steal.

At suppliers, such as in Bangladesh, clothing sewers must sometimes work seven days a week at jobs that do not pay a living wage and that have been slammed by the "Campaign for clean clothes." Some are said to employ children.

Heinig has acknowledged that could not be ruled out.

Kik rejects charges by antifascist Internet sites which call it "a Nazi store."

In 2007, clients were shocked to find counters were shaped like swastikas, a symbol used by Nazis and which could be seen in Frankfurt.

"It is a completely normal presentation in retail," a spokewoman said.

She said the chain has never been condemned by a court and stressed Kik's commitment "against racism."

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