Are retailers who are hoping to win a stake in Germany, Europe‘s largest economy, risking getting their fingers burnt?
Or does the 1.9 per cent monthly retail sales growth in Q1 this year suggest there are rich pickings to be had?
“The figures were much stronger than expected, a further signal for strong growth in the first quarter,” said economist Holger Sandte at Nordea. “Consumption should be a central pillar of support of growth this year.”
But behind the figures is a German market that is conservative in its tastes, has an undeveloped brand loyalty and expects a bargain.
Mylan Nguyen, retailing analyst at Euromonitor strikes a cautionary note.
“Most Germans are not prepared to buy a luxury product just for the sake of the brand and the associated image/status.”
Jesper Christensen, Hugo Boss, Head of Retail, Germany told Retail Gazette: “The German culture has been to buy cheap. The country has a lot of ‘high brands‘ but when you look at the German person and how they buy fashion and jewellery products it has not been normal for them to show off. This is an attitude that has started to grow over the last couple of years.”
Fast fashion powerhouse H&M posted strong sales figures this quarter in Germany with the retailer flourishing in the post-recession landscape across Europe. Primark also has a presence in several German cities.
Supermarket groups Edeka and Rewe operate around 22,000 stores across Germany between them. In the UK, Tesco operates 3,146. Marks and Spencer and Wal-Mart failed in Germany with the British retailer pulling the plug in 2011.
70 per cent of global retailers with European origins that took part in CBRE‘s How Active are Retailers Globally survey plan to open a store in Germany in 2014.
So with the economy gently picking up across Europe is there any chance of luxury retailers making their way into Germany for a slice of the pie? Or will the German consumer continue to practice frugality?
Targeting cities is vital as Hamburg, Munich and Berlin may hold more opportunity than Bremen, Dortmund and Leipzig. Also, it might be wise for luxury retailers to steer clear of cities with a higher than average density of discount stores.
Nguyen concludes: “Germans expect luxury goods to be of the highest quality and to offer unique benefits, while offering value for money and a reasonable absolute price level.”