10:20 | 09/01/2018 Global Economy
Low unemployment, rising wages and growing online sales have enabled German retailers to achieve record growth in 2017, preliminary figures published last Friday by the Federal Statistical Office suggest.
According to the Wiesbaden-based government statisticians, nominal revenue grew by between 4.5 percent and 4.9 percent in 2017 compared to the previous year.
"This marks the biggest gain since the beginning of measurements in 1994", a statement by the Federal Statistical Office read. Germany last witnessed a reduction in retail revenue in 2009 at the height of the global financial and economic crisis.
Price-adjusted real revenue grew by between 2.7 percent and 3.1 percent in 2017. The estimates were based on data gathered in the period from January until November. In November, the last month assessed by the Federal Statistical Office, the pace of revenue growth quickened again to 4.4 percent on a real price-adjusted basis and 6.2 percent on a nominal basis compared to October.
Michael Holstein, economist at DZ bank, pointed to the "positive development of the labor market with a strong increase in employment" and a resulting "greater spending power" as having contributed to a bumper year of retailers in 2017. Recently published official data showed that the number of Germans in employment has risen to a record total of 44.3 million, while unemployment has fallen to lows not seen since re-unification.
Rolf Buerkl, expert at the market research company Gesellschaft fuer Konsumforschung (GfK), also noted that fears of job losses were relatively subdued in Germany as a consequence of the booming economy.
"This provides consumers with planning security, who are hence more willing to assume bigger expenses", Buerkl added.
The GfK expert further highlighted that retail firms were benefiting from a larger pool of potential customers. Due to high immigration by European Union (EU) citizens and refugees in recent years, the German population has increased to its highest ever level of 83 million inhabitants. Additionally, employees' agreed earnings rose faster than inflation at 2.3 percent in 2017, while a persistent low interest rate environment continued to dis-incentivize saving.
Given this virtuous combination of factors, Buerkl argued that the structural environment for retail would "remain good and even improve" in the near future.
Nevertheless, not all retailers are benefiting equally from growth in the sector. The Association of German Retailers (HDE) has forecast that up to 50,000 shops could close until 2020 across the country.
HDE spokesperson Stefan Hertel said that this would be the result of "demographic trends in some regions" as large numbers of young people moved from the countryside to urban centers such as Berlin, Hamburg and Munich.
Hertel singled out e-commerce as another major game-changer and challenge faced by retailers. Many firms in the sector have responded by attempting to develop their own online sales channels alongside their physical locations.
In 2017, internet- and mail order business once again took the crown of the fastest-growing (plus 9.6 percent) sub-category of retailers. The Berlin-based online fashion retailer Zalando is exemplary of this development and has grown into one of Europe's largest e-Commerce firms with revenue growing by nearly 25 percent to 3.2 billion euros during the first three quarters of the year.