As coronavirus takes its toll on economies and businesses across the globe, Retail Week brings you regular dispatches from international retailers and experts who provide their insights into how they are coping with the pandemic.

In today’s edition, Mirko Hackmann, editor-in-chief of Handelsjournal, reveals how German consumers are shopping locally to help their country’s economy bounce back from the coronavirus crisis. 

This article first appeared in issue six of World Retail Congress’ report, The Retail World 2020: Retailing in a time of crisis

Despite some new regional pockets of Covid-19 infection, shopping in Germany continued to recover at a low level in July. 

However, there are still signs that Germany’s consumers are far from being in a confident mood to spend. It is also uncertain what will happen if there is either a second wave of infections across Germany or if the recession reaches consumers more extensively than before with further increases in unemployment.

For retailers, this is leading to very different trends. Retail sales figures rose by an impressive 14% in May compared with April, adjusted for inflation. However, that growth was distributed very differently across the sector. 

“Shopping in Germany continued to recover at a low level in July. However, there are still signs that consumers are far from being in a confident mood to spend”

Online and mail-order recorded an increase of 29% compared with the same month in 2019. On the other hand, the trade in textiles, shoes and leather goods, which is particularly relevant for city centres, suffered severe losses, with sales down 23% in May. In the first five months of this year, these retailers have suffered a 33% slump in revenues.

The hopes of many retailers are now based on the VAT cut that came into force on July 1. The German federal government have cut the rate by 3% to 16% until December 31. Signs of price wars can already be seen as retailers pass reductions on to customers.

According to a study by the consumer research company GfK, almost every third consumer in Germany wants to use the reduction in VAT for new purchases – but many are only doing so on a smaller scale. Young people are more likely to go on a spending spree than older people.

“Due to the economic uncertainty, consumers are likely to plan their purchases very deliberately and only buy what is needed – especially for more expensive purchases,” states GfK.

Local focus

The study found that many Germans preferred to shop with local retailers during the coronavirus-related contact restrictions. 

Although shopping continued in large stores on a regular basis, small and medium-sized retailers in the immediate vicinity were the first point of contact for consumers during this time.

This is shown in a survey commissioned by payment service provider PayPal from market research company Ipsos. More than half (57%) of the 2,000 respondents say they shopped in local stores during contact restrictions, compared with 41% who shopped in larger out-of-town stores.

“Support for local retailers looks set to continue after the pandemic, with 61% of Germans wanting to buy more local and regional products in the future in order to support local businesses”

This support for local retailers looks set to continue after the pandemic, with 61% of Germans wanting to buy more local and regional products in the future in order to support local businesses. 

Support for the local economy was named as one of the most important reasons for this decision by 70% of respondents. 

Those over the age of 65, in particular, believe that this is the key to overcoming the crisis.

The Retail World 2020: Retailing in a time of crisis

WRC issue 6

Retailers across the globe are facing their greatest-ever challenge as the pandemic grips every country.

How are retailers coping with and responding to the needs of their customers, communities and the business itself?

Hear from retailers and experts from around the world in the monthly report from World Retail Congress. The sixth issue is available to download in full here.