Last year was not good for retail. The industry association predicts a small increase for 2024. Many companies have lost confidence. For various reasons.
2023 was difficult, 2024 may not be any better or at least a little better. Retailers in Germany have to prepare for another year with many challenges and uncertainties. Stefan Genth and Alexander von Preen from the German Trade Association tried to be optimistic during their appearance, but the outlook for the new year is not very positive.
For this year, the HDE only expects a mini-plus of one percent in retail sales compared to 2023, adjusted for prices. Retailers in Germany are not very confident. According to an association survey, two out of three companies recorded less profit in the second half of 2023 than in the same period last year. One in six retailers rate the current business situation as good. Only 21 percent assume that sales in 2024 will be higher than last year. Expectations are similarly low across almost all industry segments.
Top topic: reluctance to buy
There is a reason for the negative view: many old problems will remain in retail this year. This is shown by a look at the top topics that, according to the HDE survey, have the greatest influence on companies’ everyday lives. What concerns them most is consumers’ reluctance to buy, followed by the burden of bureaucracy, rising energy costs, price developments, labor shortages, the loss of attractiveness of the city center and the effects of the wars in Ukraine and the Middle East. Consumer uncertainty will probably also dampen the mood in 2024 – consumers will remain thrifty, the trade association expects.
It is not foreseeable that this situation will evaporate quickly. The economic forecasts also show this. All major economic research institutes recently revised downwards their already not extremely optimistic economic forecasts for 2024. The International Monetary Fund (IMF) only expects growth of 0.5 percent for Germany. Meanwhile, things are going much better elsewhere. The IMF has raised its forecast for the global economy to more than 3 percent.
Disappointing Christmas business
Retail is still finding it difficult to return to the time before the corona pandemic. Shopping in city centers has long been possible again without restrictions, but footfall has not increased as much as hoped. This was also noticeable in the Christmas business, which is so important for the industry and was disappointing. According to the Federal Statistical Office, real sales in December were actually 1.7 percent below the previous year’s level. For the whole year, dealers – adjusted for price increases – actually had 3.3 percent less in their coffers last year than in 2022.
As in the previous year, the food trade was particularly hard hit. In nominal terms, sales in 2023 were only higher due to the increased prices; adjusted for these, they fell by 3.9 percent. On average, food will be more than 12 percent more expensive in 2023 than in the previous year. In online and mail order sales, real sales also fell by 3.9 percent in 2023. At least things went better for retailers of textiles, clothing, shoes and leather goods. Adjusted for prices, they recorded 2.6 percent more sales than in 2022.
The renewed insolvency of the Galeria Karstadt Kaufhof department store chain is almost symbolic of the retail situation. “Department stores are magnets for traffic in city centers,” said von Preen. It is now important to develop a business model that can also help other retailers in the area.
“The time for silence must be over”
Retail will also continue to have other problems in 2024. In addition to the 120,000 unfilled positions, this also applies, among other things, to the difficult collective bargaining negotiations. Even after more than 60 rounds of negotiations, there is no agreement in sight. The political environment is not getting any calmer for the industry. With the attack by the Houthi militias on merchant ships in the Red Sea, another construction site was recently added. According to a “Handelsblatt” report, several companies are preparing for delivery bottlenecks and delays. A possible consequence could be gaps in shelves and further increases in costs, both for the economy and for consumers.
The leadership of the trade association took a clear stance on the recent protests against right-wing extremism and the AfD. “It’s good and it’s time for all decent Democrats to join forces and make it clear which side the majority is on. The time for silence must be over, now it’s time to show their colors,” said von Preen.