Downtown Demand

Urban Retail Comeback

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  • Why it matters

    Why it matters

    • Overall, German retailers have reason to be optimistic, but things don’t look so sunny for rural shops and some food producers.
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  • Facts

    Facts

    • In 2015, customers spent more in Germany’s retail stores than at any time during the last 20 years.
    • The German Retail Federation expects further growth of 2 percent this year.
    • While retail space at the centers of 82 German cities increased by about 7 percent over four years, more and more supermarkets in less populated areas are closing.
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    Audio

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German retailers enjoyed blockbuster sales revenue in 2015, and the national trade association predicts further growth of 2 percent this year.

The assessment from the German Retail Federation (HDE) comes as the retail sector is transitioning. Online shops are eating into brick-and-mortar stores’ market share, it says.

Meanwhile, retailers increasingly are looking to locate new outlets in downtown areas, according to the EHI Retail Institute in Cologne.

Germans appear to be in a spending mood. In 2015, German shoppers bought more furniture, bicycles, electronic and other retail items than at any time during the last 20 years, the HDE announced last week in Berlin. The association’s report confirmed initial estimates made by the Federal Statistical Office in Wiesbaden.

The HDE expects that in the mid-term throughout Germany, every tenth store will close. In some individual districts of large cities, branch stores are also reportedly having problems.

The retailers found that customers spent €482 billion ($539.5 billion) in stores – an increase of 3.1 percent compared to 2014. The 2015 Christmas season alone put €87 billion into cash registers.

“People are treating themselves to something,” says HDE general manager Stefan Genth, adding that he is optimistic about 2016. His reasons? Low inflation, high employment and low interest rates that are likely to contribute to predicted growth of 2 percent.

Online retail showed an increase of 11 percent in 2015, and the retailers’ association predicts the share of online business in total retail revenues could rise to as much as 20 percent by 2020.

That the retail sector is in transition doesn’t automatically mean all brick-and-mortar retailers are losing customers, though. Even though many shopping zones and centers had fewer visitors for a brief time after the terrorist attacks in Paris last year, well-situated stores overall are attracting even more customers – and retail space is increasing in Germany.

According to the Society for Consumer Research (GfK), retail space at the centers of the 82 German cities with more than 100,000 inhabitants each increased by around 7 percent over four years. In particular, large retail chains are expanding, whether they are supermarkets, drugstores, clothing stores or home improvement stores.

At the same time, more and more supermarkets in less central, sparsely populated areas are being closed. Mr. Genth said the HDE was concerned about the trend, but “we can’t operate stores where no one lives.”

Demand is moving to the cities, and supply follows. For customers who remain in rural areas, this means having to travel farther to stores. Online retail can’t compensate completely.

“This is one of the greatest challenges we will be faced with in the coming years,” Mr. Genth said.

The HDE expects that in the mid-term throughout Germany, every tenth store will close. In some individual districts of large cities, branch stores are also reportedly having problems.

“Everyone wants to have stores nearby, but nobody wants to have a delivery truck at their doorstep at five in the morning,” it says.

In contrast to the general euphoria of retailers is the mood of producers. At the Green Week food fair in Berlin, farmers vented their frustration recently. They are reaping little benefit from the flourishing economy. The farmers object to price dumping in grocery stores – and are deeply worried about an even tighter concentration of retailers if the Kaiser’s-Tengelmann chain is taken over by market leader Edeka.

The retailing association said these concerns were justified but said such things aren’t the only cause for concern: “Even if we were to double food prices, that wouldn’t solve the plight of farmers.”

 

This article originally appeared in the newspaper Der Tagesspiegel. To contact the author:redaktion@tagesspiegel.de

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