A combination of the 2007 VAT hike and the discounter boom that has spread like wildfire from grocery to other sectors is severely impacting Germany’s retailing landscape, reveals a new report. For the first time since 2002 the sector contracted, posting a decline of 0.9%. With a current value of €354bn, the overall retail market in Germany has receded back to what it was in 2005 meaning expenditure has been similar to that seen at the tail end of the last recession in the country. As a direct result of extremely tough trading conditions the wheels of the consolidation bandwagon have begun to turn and looking ahead Verdict Research expects more retailers to jump on.

“The price conscious nature of German consumers is reflected in every sector of the German retail universe”, says Daniel Lucht, Senior Analyst at Verdict Research and author of the report. “In DIY, Praktiker has embarked on a downsizing and price cutting exercise with its easy-to-shop concept. In electricals, Metro-owned Media Markt and Saturn, while strictly speaking not discounters, have both adopted an aggressive position on price and captured the public’s imagination with the now abandoned ‘stinginess is cool’ campaign. In furniture discounting has become endemic and there are a number of dedicated discount players such as Lutz Group’s Mömax or Roller. In clothing KIK and Takko are proving to be the best performers in the arena, while in homewares/general merchandise players such as Tedi and Kodi are beginning to flex their discounter muscles.”

The new report predicts that by 2012 one in every two Euros in German grocery retailing will be taken by the discounters. Retailers of big ticket items, primarily DIY and furniture, have borne the brunt of this, while sectors such as clothing, perfumeries and luxury proved to be quite insulated from its effects. With the exception of alcoholic drinks, grocers were largely unaffected as the VAT rate remained static for their key proposition.

Related research: Emerging Food and Drinks Markets