The drastic price increases for energy and food are overshadowing the Christmas business this year. Many people have to save on gifts and celebratory meals.
Fewer gifts, smaller Christmas trees and cheaper festive meals: many people in Germany have to tighten their belts at Christmas in view of the high inflation. This is causing unrest in retail. According to an industry survey by the German Retail Association (HDE), around 70 percent of retailers expect Christmas business to be worse than in the previous year.
In fact, Germany seems to be gearing up for Christmas savings: In view of the high energy and food prices, more than half of consumers want to spend less money on Christmas presents this year or even do without them altogether. This is the result of a representative survey by the opinion research institute YouGov on behalf of the German Press Agency.
Half want to spend less or nothing
According to this, every fifth person wants to spend “significantly less” money on Christmas presents. Another 22 percent plan to spend “slightly less”. At least 8 percent stated that, in contrast to the past, they even wanted to do without gifts altogether. But it’s not just about presents, many want to tighten their belts around the festival too. One in five (18 percent) wants to do without a Christmas tree this year or at least buy a smaller one. Around 17 percent of those surveyed want to spend less on Christmas dinner.
In retail, this sets off alarm bells. Because for many retailers, regardless of whether they sell jewellery, toys, electronics or fashion, the weeks leading up to the festival are the most important of the year. Normally, the money is much looser than usual during this time. But this time it could be different.
The HDE assumes that real retail sales in November and December – i.e. adjusted for price increases – will be 4 percent below the previous year’s level. However, due to high inflation, nominal sales will increase by 5.4 percent to around 120.3 billion euros. “Sales only grow through inflation-related rising prices,” said HDE CEO Stefan Genth. It is a difficult time for trade.
Online trade is also affected
Even the online trade, which was used to success in the Corona crisis, is not immune to the slump in consumption. According to the HDE forecast, e-commerce sales should increase by a nominal 1.4 percent in the Christmas business. In real terms – i.e. adjusted for inflation – online trade is also threatened with a minus of 4.5 percent.
In fact, the Bundesverband Paket & Expresslogistik (Biek) expects significantly fewer e-commerce packages in November and December than in the previous year. Only 415 million shipments from companies to consumers are expected – around 30 million fewer than in the previous year.
“Mood barometer” continues to fall
The fact is: money is currently tighter in many households than it has been for a long time. Postbank’s “Mood Barometer 2023” published on Thursday makes it clear how much the financial situation has deteriorated for many households since the beginning of the year. In January, 11 percent of those surveyed stated that they could hardly pay for their own living expenses because of the increased prices. In September, this proportion had already risen to over 18 percent.
In addition, almost two-thirds of those surveyed (62.1 percent) expect their financial situation to deteriorate in the coming year. For comparison: a year ago it was only 26 percent. Such a level of pessimism has never been observed since the start of the Postbank survey in 2015, the pollsters reported.
Inner cities particularly affected
The resulting slump in consumption is hitting many retailers, who are still suffering from the effects of the corona pandemic, particularly hard, especially in the shopping streets of the inner cities. According to current figures from the Federal Statistical Office (Destatis), sales of stationary retail clothing in the first nine months of this year were still 11 percent below the pre-Corona year 2019. In the book trade, the minus was 21 percent, in the toy trade at 17.5 percent and in consumer electronics retailing at 7.4 percent.
In view of these figures, the German trade association confirmed its forecast that up to 16,000 shops could close their doors forever this year. This development is particularly noticeable in district centers, but also in small and medium-sized communities.
As far as the hits in the Christmas business are concerned, surprisingly little has changed despite all the political and economic turbulence. According to a current HDE consumer survey, gift vouchers, toys, books, cosmetics, clothing and, last but not least, cash are particularly popular as gifts.
For retailers, this bit of normality is perhaps even a sign of hope that Christmas shopping will ultimately have its own laws. In any case, industry spokesman Genth assured: “We are not writing off the Christmas business.”