Online retailers conquer the city

In view of rising infection rates and tougher lockdowns, consumer sentiment among German consumers has worsened again. The market research company GfK now predicts a negative 8.8 points for May, 2.7 points lower than in April. “The third wave will ensure that the recovery of the German domestic economy will continue to be a long time coming,” explains GfK expert Rolf Bürkl. And “consumption will not be a pillar of the economy this year – as it already was in 2020,” Bürkl adds. By contrast, in the years before the Corona crisis, private consumer spending had still made an important contribution to the growth of the German economy.

The Corona lockdown hit the textile trade particularly hard. But furniture retailers and do-it-yourself stores also recorded a significant decline in sales. Online and mail-order retailers, on the other hand, benefited from the shop closures; e-commerce grew by almost 30 percent in the first quarter this year.

While many shops have to close by the end of the pandemic, Felicity Pietsch, boss of the Rostock-based leather goods manufacturer Gusti, has recently become the tenant of a 50-square-metre shop on Rosenthaler Straße in Berlin, a one-a-city location. “In the past, we would never have been able to afford a shop like this,” Pietsch told the news magazine Spiegel. The rent was far too expensive, her turnover and profit far too low in comparison. She and her husband Christian had therefore decided to sell their products almost exclusively online – in their own shop, at Zalando, About You, Amazon – and to try out shops only occasionally. But now, in the middle of the pandemic that will cost tens of thousands of retailers their existence, that is changing.

Not only Gusti is expanding. Other online providers are also seizing the opportunity and venturing into the expensive addresses, the A-locations, those streets with the highest customer frequency. The falling commercial rents due to the death of the shops make it possible. The German Retail Association (HDE) predicts that 120,000 shops will close by the end of the pandemic. “For a long time, A-locations were purely a rental market,” says Marco Atzberger of the EHI Retail Institute. “Since the seventies, prices have been rising, owners could call up any price they wanted.” Inner cities have thus become investment objects for international investors. Now rents are plummeting, in some cases by 30 per cent.

The bicycle dealer Rose Bikes from Bocholt also does most of its business online; for a long time there were only three shops at all. The retailer is now planning up to twelve new locations: Garmisch-Partenkirchen, Basel, Bern, Frankfurt, Hamburg and a second shop in Berlin – always in the centre.

What many old retailers never really succeeded in doing, the new ones are now trying: real shops and the online world are to merge. For multichannel retailers, flexible logistics and a complete overview of inventory in the stationary and online business are crucial.

The emptying city centres also come in handy for the eyewear start-up Mr. Spex. Mr. Spex wants to take over branches of the perfumery chain Douglas. While the fragrance chain is radically shrinking its stationary business and expanding its online offering, net optician Spex has planned its ‘expansion strategy’ primarily in the city centre. It has opened more than 20 shops since the beginning of last year, in Germany, Austria and Sweden. Sales manager Jens Peter Klatt observes “overdue, in some cases significant rent reductions”. For him, this means “attractive additional growth opportunities”.

The HDE is observing the development with interest. It is understandable that internet retailers want to tap into new target groups in the city instead of just spending their money on search engine optimisation and online advertising, says Michael Reink, expert for retail real estate. “But in a year’s time, rents will be even lower.” He therefore advises everyone to wait for a few months.