According to HDE forecasts, around 46,000 retailers in Germany will give up in the next four years. This year alone they could close 5,000 branches. “This is bad news for retail, but especially for city centres. For many people, the main reason for visiting a city center is to shop.
If the business disappears, the entire city center will be affected,” said HDE CEO Stefan Genth. The growing number of vacancies is dragging entire urban centers into a downward spiral. Although retail is the major industry with the greatest attraction in urban centers, it cannot solve this challenge alone.
However, according to HDE, the majority of closures are due to small specialized businesses: fashion boutiques, shoe stores and bakeries. “In many places this will have dramatic consequences for city centres.” Vacancies are increasing, city centers are becoming less attractive and are entering a downward spiral, according to the HDE. Retail trade therefore needs better framework conditions to be able to position itself for the future.
Many chains are withdrawing from city centers.
The death of branches is mainly due to high rental costs, as can be seen from an analysis published in the printed edition of the sector service “Textile Industry”. “Short delivery times and even opening cables if certain sales targets are not reached are in line with the market, which is much more dynamic and unpredictable than a few years ago.” Today it is much more difficult to determine where it will be positive in the long term,” says Jens Beining, CEO of the footwear company Wortmann.
Instead of investing in new branches, companies are hesitant to open new locations. Online commerce is booming. At the same time, retailers are battling a wave of bankruptcies. Insolvency practitioners often insist on massive cost-cutting measures, which also include branch closures. “Many retail companies are going through difficult times. First, the pandemic with lockdowns, business closures and measures that limited the number of customers, and now the consequences of the Russian war in Ukraine with high inflation and poor consumer sentiment,” says Gerth.
“Department stores have been losing importance for decades. And the coronavirus pandemic has dramatically accelerated developments again,” says Boris Hedde, CEO of the Cologne Business Research Institute (IFH). In the past, department stores would have impressed with the variety of products on offer, but that is now gone. “If you're looking for a wide range of products, nowadays you go online.”
Can you stop the decline of the stores?
Yes, but politicians, municipalities and retailers have to act.
The increase in free spaces on shopping streets causes a loss of attractiveness that cannot be stopped even with the creation of cheap shops, nail salons or hairdressers. A self-reinforcing negative dynamic emerges. Furthermore, the rise in inflation in recent months is putting considerable pressure on purchasing power, even threatening the existence of some of the remaining companies. This year alone Eilles, Arko, Hussel, Galeria Karstadt Kaufhof and Wormland declared bankruptcy.
According to the general director of the Leather Goods and Textile Footwear Trade Association (BTE), Rolf Pangels, there is little time left to change anything: “If the planning policy does not finally take clear and clear countermeasures, further deterioration of the centers of the cities it will cause. We will no longer be able to stop it.”
These are three measures against the fall in trade in Germany
1. Strengthen “local purchasing”
Local businesses play a central role in the community. It is important to raise consumer awareness that every local purchase contributes directly to quality of life and economic diversity. Campaigns that tell the stories behind the stores strengthen the connection between consumers and local retailers.
Loyalty programs and loyalty cards that offer benefits such as discounts, exclusive offers or events can encourage customers to shop locally. These incentives not only promote customer loyalty but also attract new customers.
Street festivals, local craft markets or seasonal festivals can attract people to city centres. These events offer local businesses a platform to present their products and services and get in direct contact with customers.
However, it is not possible to simply continue as before. Whoever comes to the city center today wants advice and a correct preselection among the avalanche of products; In short, a shopping experience. “But hardly any department store offers that,” says IFH CEO Hedde. In his opinion, trying to continue with the same business model in the old properties would be doomed to failure.
2. Multifunctional places in cities
Local suppliers can serve as multifunctional places that, in addition to making purchases, also offer various services to citizens. For example, post offices, parcel collection points, local information centers or even small corners of public libraries, cafes for the elderly or daycare centers could be integrated into existing stores.
This would provide citizens with an incentive to visit local stores while bringing greater frequency and sales potential to retailers.
3. Living in shopping centers should no longer be a taboo.
Given changes in retail and increasing vacancies, cities can create incentives to convert commercial space into residential space. This allows for flexible uses and promotes the conversion of commercial space into attractive living space. This can be facilitated by adjustments to urban planning and building legislation. These conversions can help make city centers more densely populated and also strengthen commerce.
“We need a central point of contact to coordinate funding programs and meaningfully implement short, medium and long-term measures. And we need an academy in the city center, like the one currently being created for the development of rural areas,” adds Genth, president of the professional association.