BERLIN — Germany’s retailers want equal rights, which, in the 24-7 world of e-commerce, means being able to stay open for business when they want, any day they want, including Sunday.
“I think retailers have to go to Karlsruhe [the seat of Germany’s two highest courts],” declared Lovro Mandac, chairman of the board of the 137-door Galeria Kaufhof department store chain.
Speaking at the Management Forum’s 10th German Retail Real Estate Congress that closed here last week, Mandac questioned, “Why can people make purchases from their sofas on Sunday and yet can’t shop in a store on Sunday? Even sex cinemas are allowed to stay open. We’re driving people to boredom.”
Playing on the slogan “On Saturdays, Daddy belongs to me” that led the union drive for a 40-hour, five-day workweek in Germany in the Fifties, Mandac now argued, “We need Sundays. We have to give the families this time to go to the city centers and do something together.” The current laws, which give local governments the responsibility for regulating the number of permitted Sunday shopping days per year, “no longer have anything to do with worker protection,” he said.
Mandac and other speakers called for “equal fighting chances” between stationary and online retailers. “We see 25 percent of online orders being made on Sunday. We want equality and we’ll have to fight for it, or the Web will take even more [of the business],” Mandac said.
Germany’s retailers and developers are facing a widespread structural change, starting with the shift from brick-and-mortar to online sales, falling consumer traffic, the re-urbanization of the retail landscape and an overall demographic shift to city centers, an aging population, rising energy costs and changing consumer habits and demands, speakers pointed out.
To complicate matters, consumers and their preferences are hardly a homogeneous lot. As Stefan Genth, director of the German Retail Federation (HDE) outlined it, if you look at today’s German consumers, 52 percent are traditional buyers with a preference for in-store purchases, 31 percent are selective online shoppers (for books or CDs, for example) and 11 percent are enthusiastic online shoppers. But if you focus on people under 30 years of age, 23 percent are traditional buyers, 52 percent are selective online shoppers and 20 percent enthusiastic online shoppers, whereas the breakdown for the younger smart native population sees only 9 percent in the traditional category, 65 percent selective onliners and 26 percent enthusiastic onliners. “We have a changing consumer structure and this trend is not reversible,” Genth stated.
However, while the distinct online proclivities of the younger generations have broadly shaped cross- and multichannel retail strategies, Germany’s demographics also point in another direction. In 2025, there will be twice as many people over 60 as under 20, whereas in 2035, Germany will have the oldest population in the world, Ulrich Reinhardt, scientific head of the Foundation for Future Studies in Hamburg, told the audience.
He described 70 percent of the German middle-class consumers as “luxese,” sometimes buying on a luxury level, and at other times “askese,” or ascetic. The upshot: a boom of brands on the highest and lowest price levels.
Service, Reinhardt emphasized, will be the holy grail for retailers. At present, only one out of every four German consumers feels well served in the stores, and three-quarters have left stores because of bad service, he reported. “In the long view, we will see a renaissance of consumer orientation in the stores, and it makes sense for retailers, because they can’t win the price war,” he said.
A similar high-low divide can clearly be seen in retail real estate locations, according to the HDE’s Genth. “Prime locations remain prime, but the midrange locations are more and more under pressure. And there’s real need for action in rural areas.” Moreover, when it comes to scale, and global trends in shopping center design, Derek Barker, managing director of Haskoll Architects and Designers, forecast “bigger or smaller centers will be gaining pace, not medium-size ones.”
He and others underscored the growing importance of shopping centers as entertainment hubs, with gastronomy, leisure and lifestyle activities, as well as iconic design playing an increasingly pivotal role. “We need to create places people want to visit and enjoy,” Barker summed up.
The most controversial presentation came from Alexander Graf, founder and director of eTribes Framework, a Hamburg consulting firm specializing in e-commerce. The basic thesis behind the popular concept of multichannel is that when stationary retailers offer their wares online, consumer loyalty to their store allows them to sell, Graf explained. “But this loyalty doesn’t exist.
“E-commerce and stationary retail are two completely different forms,” he continued. In stationary or brick-and-mortar retail, you have a selection of vendors leading to selection of product and ending in purchase of product, whereas e-commerce is about selection of product leading to selection of vendor and then purchase of product. Retailers in e-commerce are pure service providers, and given the extremely low margins in online channels, “we believe multichannel is not helpful for stationary retailers. The margin doesn’t bear it out.”
In the view of Graf’s firm, brick-and-mortar retailing will always have relevance, but more as a marketing tool. “We say it’s important for brands to have stationary stores to build brand image and to upgrade brand recognition, but 60 percent of the cost of the store is to support the brand and 40 percent will be a marketing expenditure so that the brand can sell its products in general,” Graf said. Such a scenario doesn’t suggest a financially viable future for multibrand formats, including department stores.
The current prospects for Germany’s retail scene nonetheless look promising, according to both the latest GFK consumer climate report and the HDE’s most recent forecast.
At the start of 2014, German consumers were definitely upbeat about the economy, with income prospects climbing to a 13-year high. GFK reported their willingness continued to grow, beating out November’s seven-year high, and said the overall consumer climate was further boosted by a recent slump in the propensity to save.
The HDE is expecting sales in 2014 to grow 1.5 percent to 439.7 billion euros, or $592.77 billion at current exchange. “Underlying conditions for consumption in Germany have never been so favorable,” Genth said. Food sales and e-commerce are expected to fuel growth, with online sales growth forecast at 17 percent, reaching sales of 38.7 billion euros, or $52.17 billion.
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