Is every tenth shop really dying? – Thoughts on an alarming study
It may have simply been a bad summer for news or a consequence of the core message itself, but the recent re- port „City, District, Commerce 2020“ („Stadt, Land, Handel 2020“) by the renowned Cologne Institute for Business Research (IBR) certainly echoed loudly through the entire economy news world.
According to the report, there will not be a single town or district across the whole nation over the next five years that can demonstrate positive sales development in terms of over-the-counter retail trade. (Source: ifhkoeln.de > news/press)
The decline in sales by 2020 levels off at only minus 3-5 % or at more than minus 30 % is only a question of region. It is worth noting that there cease to be any clear dividing walls when it comes to retail-specific „trend online scenarios“ between the former East and West German states. The corresponding IBR map of Germany also identifies larger regions in the west of the republic with particularly negative sales scenarios. One such area is a supra-regional federal area that extends quadrilaterally between Rhön, Siegerland, Münsterland and Helmstedt/Wolfenbüttel.
There is just as little optimism in over-the-counter retail trade forecasts for a strip of land between the Baltic Sea coast in Schleswig and the Wesermarsch south of Bremen and for a large part of the Saarland, an area that extends high into the Vulcanic Eifel palatinate.
Even some districts in the otherwise economically prosperous federal states Baden-Württemberg (2) and Ba- varia (17) have apparently had to adapt to particularly high declines of more than 30 % in over-the-counter retail trade. Ending with a look into the future, the study concludes that the closure of 45,000 shops in areas from Flensburg to Füssen and from Aachen to Zwickau is a realistic expectation in line with the downward trend and that small and medium-sized towns are most likely to be affected first, with larger towns and cities benefiting from current rural migration trends in terms of the attraction they generate. The smaller the town, the more intensely the local residents search for offers in larger (neighbouring) towns and cities.
Meanwhile, groups of students plan regular Saturday „shopping events“ and take advantage of the very favourably discounted weekend tickets to travel by train, sometimes more than 200 km to the next, newly-opened Primark in Cologne, Hamburg or Stuttgart.
The rapid expansion of this inexpensive Irish fashion chain, which is relatively new to this country, should continue to accelerate, according to the company‘s own reports, with each German town of more than 200,000 inhabitants re- presenting a potential location. The gloomy trading forecasts apply therefore to all communities whose population levels fall below this limit. The reasons for this are well known: In addition to the demographic developments, the success of online trading can be blamed, above all, for the loss of sales in over-the-counter retail trade.
According to surveys, a good third of the population already makes „very extensive“ use of the multi-channel offerings. If small and medium-sized towns still continue to regularly open retail parks in their suburbs or add another new shopping centre to their town centres in order to further draw in customers, significant cannibalizing effects are inevitable with stag- nating or even declining numbers of consumers. Similar effects have been caused by factory outlet centres (FOC) – and not just in terms of towns in the immediate neighbourhood.
This particular form of distribution gathers most of its purchasing power from rural green fields, but it also works on more distant commercial locations like a slow poison, which, in the higher-priced fashion sector, is often recognized too late. The FOCs recently opened in Bad Münstereifel and Montabaur or other planned or hotly disputed projects, such as those in Werl or Remscheid, will also certainly not generate additional purchasing power, but will simply draw existing consumer potential in new directions and out of the inner cities.
It is no wonder then that many of the formerly expansive branch enterprises have greatly reduced their rate of expansion. Because of declining sales, the managers responsible for expansion in many of these companies, in order to reduce costs, need to concern themselves with the renegotiation of old contracts at existing sites instead of looking for new locations. The question of whether these efforts to reduce costs are actually justified each time as part of the economic cycle, or whether one sees the general lamentations of retailing only as an opportunity for a welcomed reduction in rent, cannot be definitively answered. In particular, highly-aggregated study results at the district level such as those obtained in the IBR survey mentioned in the introduction are not precise enough for this purpose. There are too many location factors to take into consideration in a district-level aggregated study.
There are still many communities with fewer than 200,000 inhabitants whose prime locations are in greater than average demand. At the same time, it must clearly be the case that towns with employer structures, which are largely indepen- dent of economic fluctuations, are able to set themselves apart in a positive sense from the generally gloomy retail trade forecasts.
As soon as universities, ecclesiastical administration centres, bishops’ diocese and federal offices or institutes exert their influence on urban economic life, the traditional pedestrian zones will still be classed as optimal locations by the majority of chain stores, even when the whole of the surrounding region is among those that are predicted to experience declining sales. It has also been increasingly observed that towns that are associated with tourism are frequently able to take advantage of their special position on a year-round basis, rather than just seasonally. The continually growing and travel-loving 60-plus generation is clearly not bound to the mere six-week-long school vacation season.
There are actually some further soft location factors that can lead to quite different development in terms of retail trade structure in apparently similar towns with comparable economic forecasts. Why the retail space in the Gießen town centre on Seltersweg remains markedly more robust, despite the gallery in the Neustädter Tor with at least 28,000 m2 of retail space, than the somewhat smaller Wetzlar, also in Upper Hesse, which has “only” 24,000 m2 to attract customers and has had such a negative effect on the traditional pedestrian zone in Bahnhofstraße, is difficult to say.
And how long will the cross-border shopping tourism continue, which today literally inundates Swiss towns from Konstanz to Weil am Rhein and where, according to reports, the Karstadt department store in Lörrach, which has fewer than 50,000 inhabitants, is the leading branch in the whole republic in terms of sales results?
It becomes evident then that large-scale studies about the future development of retail trade in Germany can provide a rough description, at best,of any discernible “Mega-Trends“. But what concrete effects such trends can have on individual towns or their retail outlets in prime locations can scarcely, if at all, be accurately predicted. In this regard, there are, in practice, simply far too many and conflicting urban development or micro-economic individual parame- ters, which will always be subject to volatile or cyclical changes.
Whether in these unpredictable times, the rental level has to actually correct itself downwards in cases of new lettings in traditional pedestrian zones and the fulfilment of daily needs, above all in small towns, promises an opportunity for retail trade, or whether retail space in certain prime locations will continue to yield good sales results will have to be determined by looking at individual cases. It is often then the case that it is not general trend forecasts but current supply and demand relationships that ultimately determine how negotiations proceed in the case of new lettings.
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