Economic uncertainty, inflation, wars: Christmas business is the most important time of the year for retailers. But the prospects for good sales in November and December are poor.
Retailers in Germany urgently need a little Christmas miracle. After a difficult year for the industry, strong sales weeks at the end of the year would be particularly important. In some industries such as toys, books, jewelry and consumer electronics, the months of November and December account for a quarter of annual sales. But the pre-Christmas anticipation in retail has been dampened.
Because too much is coming together at the moment, which is dampening the prospects of a good Christmas business. As in the previous year, economic uncertainty, inflation and wars are again weighing on consumer sentiment. According to a survey by the German Retail Association (HDE), almost 80 percent of retailers assume that many customers will be reluctant to shop in the coming weeks.
This year an average of 295 euros for gifts
Adjusted for price increases, the HDE therefore expects a decline in sales of 5.5 percent in November and December compared to 2022. According to a representative YouGov survey commissioned by the HDE, consumers want to spend an average of 295 euros on Christmas presents this year. According to the representative survey, almost every second person plans as much money for gifts as in the previous year, 28 percent less and only 10 percent more than in the previous year.
According to a study by the auditing and consulting firm EY, the gift budget has fallen from 252 to 250 euros, the lowest value since 2014. Taking high inflation into account, this is a slump. In 2019, before the pandemic, consumers wanted to spend 281 euros. “People have adapted their consumer behavior to the increased prices; they are simply buying less,” says Ole Schröder, CEO of Schufa. According to their own assessment, most people in Germany would have to get by with less money. A Schufa consumer survey shows that just over half (55 percent) of those surveyed stated that they have had less income since the beginning of the year.
Nationwide warning strikes are looming over the Christmas period
Retailers must expect further hurdles in the Christmas business. December doesn’t just have two fewer sales days. And in the collective bargaining dispute in the industry, the Verdi union has announced that it will continue the nationwide warning strikes during the Christmas season. Because of the war in the Middle East, traders fear that large demonstrations could prevent people from going into the city centers. The desire for it is no longer particularly strong anyway: according to the EY survey, only 39 percent of people think the pre-Christmas shopping experience in city centers is important – in 2019 the proportion was still 59 percent.
The majority of consumers no longer look for gifts while strolling around town, but rather on the Internet. Vouchers, toys, books and cosmetic products remain particularly popular with consumers. But the prospects for e-commerce are not particularly good either. Adjusted for prices, the HDE expects a decline of 4.3 percent in the Christmas business compared to the previous year. At least the expectations at the mail order company Otto are cautiously optimistic. According to this, customers spend slightly less per order than in the previous year, but the number of orders has nevertheless increased by 14 percent.
“We hope that the Christmas business will be better than expected. The situation is often better than it is subjectively perceived. What is decisive is people’s gut feeling,” says HDE Managing Director Stefan Genth. The traders also rely on the emotional factor. They hope that winter weather, festive lighting and Christmas markets will encourage people to come to city centers and treat themselves.
Hope, hope, hope – that’s the motto of retailers, and not just until the end of December. Also that inflation will decline again in 2024 and the situation will finally return to normal.
Source: Stern
