Christmas business: Every year again: slump in consumption and dealer frustration before the holidays

Advent calendars and Christmas cookies are on the supermarket shelves. Preparations for the festival are underway in some city centers. Lighting is being installed and stalls are being set up for the Christmas market. Things are getting serious. Most people in Germany start buying gifts in November. Each person budgets an average of 297 euros for gifts, as a representative YouGov survey commissioned by the German Trade Association (HDE) shows. That is two euros more than last year. Vouchers, toys, cosmetics, books and clothing are again particularly popular.

For many people the Christmas season is the most wonderful time of the year, for retailers it is the most important. Most sales are made in the weeks before the festival. The companies are hoping for a somewhat conciliatory conclusion. Will Christmas business be better than 2023, when many were disappointed? The HDE does not expect this. According to the association’s forecast, things will at least not go any worse for the entire retail sector, i.e. stationary and online. Adjusted for inflation, sales are therefore likely to be at the same level as the previous year.

2024 did not bring the desired upswing

2024 was difficult again. The year did not bring the desired upswing and was even worse than expected. The trade association revised its annual forecast significantly downwards this week. Only a nominal increase in sales of 1.3 percent to 657 billion euros is expected. Adjusted for price increases, this corresponds to zero growth compared to the previous year. The association had actually forecast a nominal increase of 3.5 percent for this year.

The reason: Many people save instead of consuming extensively, even though inflation has recently weakened. However, prices that have risen many times and are perceived as high, wars and economic uncertainty continue to depress sentiment and the mood to buy. Consumption is to a large extent psychology, says HDE President Alexander von Preen. “Things aren’t looking really good here at the moment. That means people are more likely to hold on to their money.”

One in three people want to spend less on gifts

There is hardly anything to suggest that the buying mood will surprisingly pick up at the end of the year. According to a representative Appinio survey, one in three want to spend less money on gifts than in 2023, only 12 percent more. Customers are primarily avoiding non-essential purchases such as electronics, household products, furniture, clothing and shoes. 70 percent say they can afford less than they could six months ago.

No other topic currently scares people in Germany as much as the rising cost of living, as a recently published study by R+V Insurance shows. Many do not believe that the financial situation will improve any time soon. The dealers feel this. One in two people reported falling sales in the first half of the year; in the furniture trade, three out of four companies reported this.

While Asian shopping portals like Temu are experiencing strong growth, the situation of many established companies is difficult and sometimes even existential. The consequences can be seen in the pedestrian zones. The Galeria department store chain closed locations again in the summer. The fashion brand Scotch & Soda closed all branches, the cosmetics retailer Body Shop closed around half. At Esprit, the last items are being sold off these days before the stores finally close at the end of the month. It is unclear what will happen next for the insolvent decorative retailer Depot.

Retailers of sporting goods and toys are more optimistic

Positive trends? There is little. The HDE consumption barometer and the consumer climate index from market researcher GfK recently increased slightly. The retail sector recently recorded an increase for three months in a row compared to the previous year, adjusted for inflation. The industry is still cautious about the Christmas business. According to a retailer survey by the HDE, 80 percent expect that many customers will be cautious about shopping. Only 30 percent assume that buying gifts will not suffer from the bad mood.

The differences are sometimes large depending on the industry. According to the HDE, companies in the consumer electronics, sporting goods, toys, watches and jewelry sectors are more optimistic. When it comes to household goods, furniture, shoes and leather goods, clothing and food, many fear that the Christmas business will be worse than in 2023. No significant upward trend has recently been observed in the city centers. The frequency of passers-by on German shopping streets in recent months has hardly been higher than in the previous year, as analyzes by the data portal Hystreet show.

Customers pay a lot of attention to prices and special offers

“Not much is expected to happen between now and the end of the year,” said the head of the economists, Monika Schnitzer, to “Wirtschaftswoche”. The unsettled consumers put their money aside. The managing director of the retail research institute IFH, Kai Hudetz, can imagine that Christmas business will at least be a little better than in 2023. “Our study results indicate this.” However, consumer sentiment is only slowly improving.

Customers continue to pay close attention to prices and special offers when shopping. This is why promotional days like Black Friday are particularly popular. However, this also has a downside for retailers: they sell more, but often earn less because of the high discounts.