The Kase: too greedy, the signal might disappear soon

The strange cubic machine is at the entrance of the store. In the vast The Kase store, in the Forum des Halles, right in the center of Paris, customers come to buy a smartphone case and leave it in this strange express personalization machine: in a few minutes, the automaton prints any plastic content on the protection – from a little love note to a holiday photograph, including a drawing of a unicorn – all for 35 to 40 euros. And roll! “We sell several dozen shells every day, calculates an employee. People come back after Covid.”

Looking at this May’s activity, there’s nothing to suggest that The Kase is in trouble. Behind the scenes, however, is the berézina: part of the activity has already been liquidated and the other has just been put on sale. If the pandemic didn’t help the signal, the problems don’t date back to the virus. For seven years, the network has been accumulating losses (over 40 million euros in total).

Bursting with debt, he can no longer pay his suppliers: the total of unpaid invoices is now around 15 million euros! Soon, without a declared buyer, there will be nothing left of The Kase adventure. An unexpected result that illustrates how, by wanting to grow very fast, a well-launched company can quickly take a back seat.

Because the story began under the best auspices. In 2012, the brand was created by two successful entrepreneurs, brothers Jean-Emile and Steve Rosenblum, co-founders of online sales site Pixmania, not very amateurs in the business. To support them, they were also surrounded by prestigious partners: Marc and Laurent Grosman, the leaders of Celio, the Barthes brothers, at the head of PhoneAndPhone, or Xavier Niel, the head of Free. Most of all, they seemed to have a great idea.

At that time, the French abandoned, one by one, their traditional laptops to equip themselves with smartphones, compatible with the nascent 4G network, and found themselves owners of much more expensive and fragile phones. Which naturally drives the hull market, growing by 20% in 2013 according to the GfK institute. Determined to follow this trend, the Rosenblum brothers acquired solid sourcing in Turkey and Asia, imagined an effective way to improve the product (customization) and thus developed a more profitable business, generating comfortable margins around 10% .

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They quickly began to dream of opening hundreds of points of sale all over the world: Kase World Wide, based in Luxembourg, was even founded with that in mind, with several branches in Singapore, the United States, Hong Kong, Belgium, Switzerland… But there you have it, all in their ambition, the bosses took a lot of risk. In 2013, they bought all of The Phone House’s French stores: the arrival of Free shook the telephone distribution market, and the English channel wanted to leave France; the Rosenblums saw the opportunity to go from 5 to 119 stores in a few weeks. Unfortunately, the operation turned out to be too calamitous and too structuring for the company to digest the bad surprises.

First, the duo suddenly found themselves in front of hundreds of employees, many of whom didn’t want to change brands. From the beginning, 125 contested his transfer, arguing that his job was no longer the same, and filed legal action. “Some no longer came to work, others refused to sell anything, forcing us to initiate costly redundancy proceedings,” explains Jean-Emile Rosenblum. We entered a quagmire.”

From the industrial court, on appeal, to cassation, the proceedings continued until today and should be decided definitively next September. But the damage is already done. “This conflict has disrupted the group,” said Emilie Meridjen, a lawyer for The Kase. Robbery, sabotage, absenteeism, employees at war closed some stores.

Management has struggled to get rid of the most troublesome outlets. In 2014, it placed The New Kase (the entity that grouped the former addresses of The Phone House) into bankruptcy and dissolved a total of 69 stores to focus on the most profitable locations, without social conflicts. But it wasn’t enough.

While the company still had dozens of stalls to manage and so many commercial leases to honor, hull sales began to take off. In 2020, this segment weighed just 125 million euros, less than in 2012. “The fashion effect of this personalized accessory is a little out of date, underlines Tariq Ashraf, telecommunications consultant at BearingPoint. Above all, consumers buy them less regularly because they keep their smartphones longer, between three and four years.

Despite the weight attached to social imbroglios, the company has tried to pivot, as professionals say, that is, to change its business model. Seeing sales of new smartphones decline (-8% in 2020 according to GfK), Kase tried to turn to a more dynamic market: remodeled, starting at the end of 2018. wheelbarrows and special know-how to restore them”, analyzes Augustin Becquet, general director of Recommerce.

The case, therefore, was no longer won and had barely been launched when the Covid wave forced the closure of stores… Weakened, the company found itself quite unable to face the weight of its debt. In a final outburst, it tried to get its insurer Axa to bear €3.5m in operating losses recorded during Covid. But she lost the case last year. When you don’t want…

However, in between, no one is really worried about Rosenblum. “I have known the two brothers for twenty years and I know that they will be able to recover”, says the vice president of cryptocurrency expert Ledger, Sébastien Badault, who helps them in their new start-up. Enough shopping, back to the Internet! They recovered the Pixmania brand and raised 11 million euros to offer the sale of smartphones with insurance and a trade-in offer to later refurbish them. Forty investors trust them, including, once again, Xavier Niel, apparently not scalded. It remains to be seen, however, what will happen to The Kase’s creditors and employees.

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