City centres: Consumers are losing interest in shopping

City centres: Consumers are losing interest in shopping

Poor consumer sentiment, poor sales: 2024 will not bring the hoped-for turnaround for brick-and-mortar retail either. Many people are increasingly bored with city centers.

Many consumers in Germany do most of their shopping in small and medium-sized towns. This is shown by a representative survey conducted by the YouGov opinion research institute for the location monitor of the German Retail Association (HDE). Cities with fewer than 100,000 inhabitants can therefore score points above all with short walking distances, a pleasant, relaxed atmosphere and clarity. Medium-sized towns – i.e. those where more than 20,000 people live – are also valued for their wide range of shops and restaurants.

“The good supply of consumer goods, the quick accessibility of the city center and attractive shopping opportunities make small and medium-sized towns particularly livable places,” says HDE General Manager Stefan Genth. A direct comparison of the data is not possible because the survey was carried out in this form for the first time. For Genth, the results are “much more positive than expected,” and the situation in the centers of smaller towns is “often nowhere near as bleak as is often portrayed.”

For the trade association, this is good news in the thicket of bad news. However, the issue of city centers is and remains difficult, brick-and-mortar retail is still in a serious crisis, and there is no improvement in sight.

Buying mood remains poor

The uncertainty among consumers caused by the crisis is declining slightly. This is the conclusion of a new study by the Cologne-based retail research institute IFH. Nevertheless, brick-and-mortar retail is continuing to lose relevance – and consumers are increasingly losing interest in shopping. The proportion of consumers who say they often see something while strolling and then buy it has fallen from 46 to 42 percent this year, according to a survey by the IFH. More than one in three, more than last year, would like to shop more in city centers, but find it boring “because the same retailers are everywhere.” This feeling is particularly pronounced among higher earners.

Retail in Germany is suffering from a shortage of skilled workers and the bankruptcies of well-known chain stores such as Galeria and Esprit. Along with the construction industry, the industry is the most affected by bankruptcies, as evaluations by Creditreform and Allianz Trade show. According to HDE, around 46,000 stores have had to close across Germany since 2020. The growing number of vacancies is also a cause for concern. According to the EHI retail research institute, in almost 30 percent of cities and municipalities there is a vacancy rate of more than 10 percent in the pedestrian zones. In 40 percent of cases it takes longer than six months for the space to be re-let.

What also continues to plague companies is the reluctance to buy. 2022 and 2023 were heavily influenced by the poor mood, and this year the hoped-for upturn has failed to materialize. Consumer sentiment has recently deteriorated even further, as the regular surveys by GfK and HDE show. Despite inflation now declining, consumers are still paying close attention to prices and offers when shopping.

Although the data platform Hystreet counted more pedestrians in German city centers in several months in 2024 than in the previous year, this obviously did not have a noticeably positive effect on retailers. Between January and April, sales in German retail were only 0.1 percent higher in real terms, i.e. adjusted for price, than in the same period last year. The European Football Championship also did not bring the hoped-for turnaround.

Stationary retail loses in all product categories

The trade association is forecasting a sales increase of just one percent for stationary retail in 2024, adjusted for inflation. Retailers are not very optimistic about the future. According to a recent industry survey conducted by the HDE, every second entrepreneur expects worse sales than in the previous year, and less than 30 percent believe that business will be better. Two out of three are seeing declining customer frequency at their stationary locations. The business situation is particularly bad in the furniture and furnishings, shoes, household goods and toys sectors.

“In all consumer goods sectors – clothing, furniture, electronics and leisure products – we are seeing a further decline in purchases in brick-and-mortar stores and, in contrast, an increase in online purchases,” says IFH Director Werner Reinartz, Professor of Marketing at the University of Cologne. This trend will continue in 2025. E-commerce expert Jochen Krisch recently gave retailers the somewhat polemical advice in the podcast series “Exchanges”: “Sell the brick-and-mortar stores if you have no online ideas and invest in Amazon shares.”

Nevertheless, consumers still fundamentally know what advantages brick-and-mortar stores offer them. According to IFH, they particularly value being able to take products home with them, try them out and touch them. These are the most common answers from customers when asked about their reasons for buying. Many also mention the security of getting high-quality products and not buying from fake shops.

“People want to feel the material, they want to know if the item of clothing fits and not send a thousand things back and forth,” says Johannes Berentzen, managing director of the retail consultancy BBE. “I’m not worried about brick-and-mortar retail. The retailers have it in their own hands.” From his point of view, small and medium-sized towns with short distances to shops have another advantage. “Especially for an ageing society, good accessibility is becoming increasingly important. Public transport in big cities can only partially compensate for the often long distances.”

Source: Stern

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