Long lockdowns, fewer customers: The Corona crisis has forced many stores in Germany to close. And the number could soon rise, according to the trade association – because of high energy prices.
In the retail sector, significantly more retailers had to abandon their stores than usual during the corona pandemic. “Compared to 2019, we have lost around 41,000 stores. Chain stores have in some cases abandoned 30 percent of their locations,” said the president of the German Retail Association (HDE), Alexander von Preen, the newspapers of the Funke Mediengruppe (Wednesday editions) according to a preliminary report.
By comparison, in pre-Corona times, only about 5,000 stores nationwide gave up their businesses each year. Currently, according to the data, there are still about 312,000 stores nationwide.
Currently, high energy prices are “putting an existential strain on the entire retail sector in some cases,” von Preen said. “Energy costs in retail are about 1.5 percent to two percent of sales. At the same time, returns on sales are only 1.5 percent to three percent. If energy prices double or even increase tenfold, then profits shrink to zero in many places.”
Then there are the consequences of inflation. Germans are spending significantly less on everyday consumption. Retail sales in October were 1.7 percent lower than in the previous month, according to the Federal Statistical Office at the beginning of December. Adjusted for inflation (real), sales fell even more sharply by 2.8 percent. Economists had expected a drop of only 0.6 percent here. Compared with October 2021, real sales actually fell by 5.0 percent.
One reason for the reluctance to spend is likely to be high inflation, which in October climbed to its highest level since 1951 at 10.4 percent. This is eating away at consumers’ purchasing power. In the summer quarter, real wages already fell at a record pace of 5.7 percent.
According to von Preen, head of the trade association, some retailers are even having to look at their equity capital, which has already been severely affected by the Coronalockdowns. The grocery trade with large refrigerated counters is suffering in particular. Basically, government aid for electricity and gas price brakes are helping, von Preen said.
Reserves depleted – stores disappearing
“A problem for the calculation is for us the reference period 2021. Here, at least the lockdown periods should be calculated out,” said the HDE president. The hardship regulation is also important – “if the price brakes work well, however, we will hopefully hardly have to make use of them.”
Most stores “are quietly disappearing from the market – without insolvency proceedings,” von Preen told newspapers. “In the corona crisis, many companies have depleted their reserves. This can hit larger businesses even faster than smaller ones.” Nevertheless, the HDE president does not expect a large wave of insolvencies. “Rather, there will be a shift to new ideas and offerings.”