Germany Rising

Germany Rising "The German retail economy is still in the process of coming out of a recession that started late in the 1990s," says Louise French, associate vice president at licensing agency The Beanstalk Group. By

April 6, 2018

Germany Rising

Germany Rising

"The German retail economy is still in the process of coming out of a recession that started late in the 1990s," says Louise French, associate vice president at licensing agency The Beanstalk Group. By way of illustrating how severe the downturn was, French points out that in 1998, the average per-capita spend on licensed products in Germany was US$64 per annum. "By 2004," she says, "that figure had fallen to US$48 per capita."

Further illustration of the severity of the downturn from which Germany is now just emerging can be gleaned from the fact that in 1998 retail sales of licensed product in German-speaking Europe were US$5.85 billion, but by 2004 had fallen to US$4.75 billion. However, even at that figure, Germany still represented a hefty 19 percent of total retail sales of licensed product for the whole of Western Europe.

Nor should it be forgotten that Germany, for all its recent troubles, remains the world's fifth largest economy with an OECD figure for 2005 GDP per capita of US$30,777.

And even in 2004, the latest year for which figures are available, German spending on retail licensing was, in absolute terms, still very significant as shown by Table 1 below.

As Germany puts its recent economic woes behind it, several clear trends are emerging and point the way to the likely shape of the future.

Like most of the Western World, the average German consumer is getting older, and several key trends flow from this. The first, as reported by Euromonitor in its September 2007 report, "Retailing In Germany," is "a growing trend toward health and wellness products." While agreeing that health and wellness is definitely a growing sector in Germany, Beanstalk's French also identifies another trend stemming from the aging nature of the population. "There are growing opportunities for corporate and trademark brands," she says, "including opportunities for trusted brands to move into areas such as health and wellness, with product ranges with which they have never previously been associated."

Jean-Phillipe Randisi, senior vice president and managing director Nickelodeon and Viacom International Consumer Products, points out that the aging population is also in part a reflection of a falling birth rate and that this means the preschool sector is proportionately not as strong in Germany as in a number of other European markets.

Randisi also highlights another difference in the German kids' market. "Up to the age of about six or seven," says Randisi, "the kids' market is very traditional, with parents a much more important part of the buying decision than almost anywhere else in Europe, and with a consequent heavier emphasis on education than is apparent in other developed countries. Although after that they catch up quickly." Randisi attributes this difference in the German market in part to the fact that "until fairly recently, the discounters were not in the licensing business. They are now, and that may well lead to a gradual change."

The importance of the discounters in particular and price in general should not be underestimated in the German market. "The German consumer," says French, "is very value-conscious, and there is no social stigma in buying your food at Aldi or Lidl, and more upmarket items from say Kardstadt. That is only seen as being prudent." The Euromonitor report adds, "German discounters have managed to establish a reputation not just for being cheap, but also for delivering high-quality groceries with excellent one-off promotions on non-grocery lines."

In addition to being price-sensitive, the German consumer is also culturally sensitive. "In the areas—art, for example—where there has not been such strong competition from overseas, this has always been true," says Randisi. "But, increasingly local film, television, and music are generating very decent numbers."

Online, Not on Line

Another emerging feature of the German retail market as it climbs out of the doldrums is the growing popularity of Internet shopping. Germany has a high Internet penetration, with Nielsen Net Ratings estimating that in May 2007 61.1 percent of the German population had Internet access.

This combination of economic turnaround and growing popularity of the Internet is vividly illustrated by the recent figures for

www.buch.de

, one of Germany's largest online retailers of books and CDs, which recently reported Q3 2007 sales of 17.2 million euros (US$25 million), representing a 23 percent rise from the 2006 figure for the same quarter of 14 million euros (US$20.4 million).

Of non-store retailing in Germany, the Internet accounts for around 43 percent of the total spend, with 50 percent being grabbed by home shopping, especially teleshopping, and the remaining 7 percent accounted for by direct sales, according to Euromonitor, which predicts that "teleshopping has a bright future in Germany due to the growth of an aging, housebound population with significant spending power. Currently, the report names the most popular product categories in this form of retailing as being jewelry, followed by DIY, home electronics, car items, home textiles, and beauty and wellness products.

The Euromonitor report also predicts "non-store retailing will grow much faster over this period, primarily driven by Internet retailing, and cautions, "Department stores are struggling to reposition themselves in the newly emerging market. So far, there is no sign that they have found a convincing concept, and their decline is likely to continue."

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