Loss of purchasing power: The price explosion is throwing the trade upside down

The dramatically rising prices for energy and many foods are causing problems for more and more people in Germany. According to a representative survey commissioned by the German Retail Association (HDE), more than a quarter of the population (27 percent) is now very afraid of not getting by with the money.

The result: the shopping behavior of many consumers has changed noticeably in the past few months and this is making life difficult for retailers.

“Rising inflation is massively reducing the purchasing power of customers,” said HDE CEO Stefan Genth on Tuesday in Berlin. Retailers feel that. Due to the high inflation, retail sales would increase nominally by 3 percent to 607 billion euros this year, the HDE predicted. In real terms – i.e. adjusted for inflation – sales would shrink by two percent. According to a recent HDE survey of 800 companies, almost half of retailers (44 percent) even expect nominal sales to fall for the year as a whole.

Loss of sales for supermarkets

Losers could include large parts of the grocery trade. During the pandemic, supermarkets and discounters benefited from the fact that many events and visits to pubs were canceled and people often worked from home. In order to at least have a nice time at home, many people dig deeper into their pockets when shopping for groceries in 2020 and 2021. You treated yourself to something. This brought strong sales growth, especially to supermarkets.

But that’s yesterday’s news. In the first five months of this year alone, according to the latest figures from market researcher GfK, supermarkets have already had to accept a four percent drop in sales. Because now people are looking at the cent again. According to GfK, special offers are used more often, people shop more often at discounters and instead of branded items, the store chains’ own brands are more often in the shopping cart. The market researchers observed that one or two purchases are simply avoided in order to save money. That hurts the grocers, but at least they were able to build up a financial cushion during the pandemic.

The situation is completely different in the stationary textile trade. From the boutique to the department store, the fashion trade was in the process of recovering from the Corona low this spring. After the dramatic slump in sales in previous years, sales in the textile trade were only 1.1 percent below the pre-crisis level in May, according to the Federal Statistical Office.

Even more online trading

“There were many catch-up effects, and the sale of suits has also increased strongly again because more festivities took place again,” said Axel Augustin from the Textile Trade Association (BTE). But this could have been a flash in the pan, some in the industry now fear. In any case, the HDE assumes that, in view of the inflation, consumers will not only tighten their belts in the food trade, but also with other purchases.

Online retail is likely to fare significantly better than its brick-and-mortar competition this year, which according to the HDE forecast could increase its sales by a nominal 12.4 percent to a good 97 billion euros in 2022. In real terms, this would correspond to an increase of around 9 percent. For comparison: Stationary trade, on the other hand, is only likely to increase by a nominal 1.4 percent to almost 510 billion euros and even lose 3.5 percent in real terms. He would thus again lose market share to online trading. However, the growth of online trade is also weakening significantly. Last year, the increase in sales here was almost 20 percent.

However, the poor consumer climate is not the only problem retailers are struggling with. Traders are also suffering from rising energy prices. Genth reported that the electricity costs for a modern supermarket with a sales area of ​​1,000 square meters had risen from 80,000 to over 140,000 euros within a year. “If we don’t get the energy cost situation under control, it will be a real challenge for the retail trade,” warned the industry expert. “Then sites and companies are at risk.”