Germany's retail sector set to take a hit

Without successful retail, city centers have hardly any prospects for future, says business leader

Salman Ahmed  | 11.05.2023 - Update : 16.05.2023
 Germany's retail sector set to take a hit


Germany's retail sector is set to shrink with 9,000 shops and small businesses expected to close in 2023, according to the Handlesverband Deutschland, the national retail association of Germany.

According to figures from 2021, the country's retail sector is Germany’s third-largest – accounting for 17% of its gross domestic product.

The group’s head, Alexander von Preen, said in a statement: "In view of the figures from recent years, all the alarm bells must be ringing in all inner cities and in politics. Because without successful retail, the city centers have hardly any prospects for the future."

He added: “If trade dies, the city dies. Trade is not only the supplier of the population, but is also characterized by its diverse social commitment on site and is also the caretaker of the cultural area of the inner city. These achievements are in danger."

The situation in the capital Berlin is far worse, according to Nils Busch-Petersen, head of the Handlesverband Berlin, Berlin's retail association.

Busch-Petersen told Anadolu that so far 2,500-3,000 businesses have closed and he expects the number to rise.

"The situation is complicated because the retail industry is still suffering, beginning with the (February 2022) war in Ukraine. Even all the other branches have problems because the behavior of the customer changed totally,” he said.

“They are looking very very sharply at their budgets so they select out, for example, organic foods, regional products which some politicians think is deeply ingrained in the customer,” he added, saying this view of consumers is a misconception.

Customers “are changing everything, so we think we will lose more and more retailers,” he said.

The thousands of empty storefronts in Berlin and its surroundings are “not the end,” he added.

Retail associations and businesses point to the Ukraine war and the consequent energy price inflation for the change in customer preferences.

‘Rules of the game changed’

With mixed forecasts for the German economy, some forecasters suggest the economy will grow by just 0.2%, while others suggest it will contract, leading the country into a technical recession.

Year-on-year inflation in the country, as of March 2023, according to federal statistics, is 7.8%.

On just one major street in the popular Berlin district of Kreuzberg, Anadolu saw several restaurants and shops that had permanently closed their doors.

Sing Jong Han, owner of a Korean food restaurant in Berlin, told Anadolu: "The situation looks so bad that we’re going to sell our restaurant. Because we no longer see any way forward."

Business owners like Sing Jong are wary of the future.

He added: "Things in the near future probably won’t be better than today, I mean the whole situation. We’re simply in a new period since 2022, since the beginning of the war in Ukraine.

“Before, everything was quite fine, our accounts, we also had enough customers. But immediately after the war, everything changed drastically. Some of these problems started already after the pandemic, but the effects of the war pushed them even further. Everything has changed, the rules of the game simply changed."

"Let’s begin with the prices. Everything has gotten more expensive. Everything a restaurant needs, materials, gas, energy, and also personnel costs," he said.

Germany's national retail association forecasts suggest that there are 311,000 shops left nationwide.

They suggest higher costs in particular are putting pressure on sales and profits for companies. In addition, high inflation leads to a loss of purchasing power among consumers.

"It looks certain that our restaurant would not survive this winter under these conditions," says a low-spirited Sing Jong.

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