Dramatically rising energy and many food prices are causing problems for more and more people in Germany. According to a representative study commissioned by the German Retail Trade Association (HDE), over a quarter of the population (27%) is very afraid of not being able to handle the money.
Effect: Many consumers’ buying behavior has changed noticeably over the past few months, making life difficult for retailers.
“Rising inflation is significantly reducing the purchasing power of customers,” HDE CEO Stefan Genth said on Tuesday in Berlin. Sellers can feel it. Due to high inflation, retail sales will increase in nominal terms by 3 percent to € 607 billion this year, HDE predicts. In real or inflation-adjusted terms, sales would drop by two percent. According to a recent HDE survey of 800 companies, nearly half of retailers (44 percent) even expect nominal sales to decline throughout the year.
Loss of sales for supermarkets
Losers can make up a large chunk of the grocery trade. During the pandemic, supermarkets and discounters took advantage of many events and pub visits being canceled and people often working from home. In order to at least have a good time at home, many people are digging deeper into their pockets when shopping for groceries in 2020 and 2021. You’ve taken something for yourself. This resulted in a strong increase in sales, especially to supermarkets.
But that’s yesterday’s news. In the first five months of this year alone, supermarkets have already had to deal with a four percent drop in sales, according to the latest data from research company GfK. Because now people are looking at the cent again. According to GfK, special offers are used more often, purchases are made more often at discount stores, and instead of branded products in the basket, own brands of chains appear more often. Market researchers have found that a purchase or two is simply avoided to save money. It hurts the shopkeepers, but at least they were able to build a financial cushion during the pandemic.
The situation in the stationary textile trade is completely different. From a boutique to a department store, the fashion industry was back to normal this spring. According to the Federal Bureau of Statistics, after the dramatic drop in sales in previous years, sales in the textile industry were only 1.1 percent below May’s pre-crisis level.
Even more online trading
“There were many catching-up effects, and the sales of suits also increased significantly again as there were more celebrations again,” said Axel Augustin of the Textile Trade Association (BTE). But it could have been a flash in the pan some in the industry are now fearing. In any case, HDE assumes that in the face of inflation, consumers will tighten their belts not only in their food trade, but also in other purchases.
E-commerce is likely to do much better this year than its traditional competition, which HDE predicts could increase its sales by a nominal 12.4 percent to a good EUR 97 billion in 2022. In real terms, this would correspond to an increase of around 9 percent. For comparison: On the other hand, stationary trade may only increase in nominal terms by 1.4 percent to almost EUR 510 billion, and in real terms may even lose 3.5 percent. In this way, he would lose market share again to online trading. However, the growth of e-commerce is also slowing down significantly. Last year, the increase in sales here amounted to almost 20%.
However, a bad consumer climate is not the only problem facing retailers. Traders are also suffering from rising energy prices. Genth reported that electricity costs for a modern supermarket with a sales area of 1,000 square meters rose from 80,000 to over 140,000 euros in a year. “If we fail to tackle the energy cost situation, it will be a real challenge for retail,” warned an industry expert. “Then the sites and businesses are at risk.”