E-Commerce in Germany still growing, but stationary shops still remain relevant!

In 2019, e-commerce sales are growing at double-digit rates in Germany, with particularly pure online merchants growing disproportionately. The stationary shop, however, remains still important, as a recent KANTRAS study predicts.

Online trade grew by 12.3 % in Germany in the past quarter, and the major consumer study by the German E-Commerce and Mail Order Association (Bevh) calculated 11.6 % for the year as a whole. This is expected to exceed the 70 billion mark by the end of the year. The Bevh is sticking to its forecast of 10.5 % for 2019 as a whole.

• E-commerce turnover grows by up to 20 %

• Pure online retailers: growth of 20 %

• Online marketplaces: Growth of 11.2 %

• Multichannel provider (online shop and branch): growth of 11.1 %

• Online retailers increased sales to around 2.69 billion euros (third quarter of 2018: 2.22 billion euros including sales tax), marketplaces to around 7.97 billion euros (third quarter of 2018: around 7.39 billion euros including sales tax), multichannel providers to 5,869 million euros (third quarter of 2018: 5.28 billion euros including sales tax).

• E-Commerce revenue 2019: decline from quarter 2 to quarter 3 2019

• From July to September 2019, the online retail industry recorded revenues of EUR 17 billion, including VAT, compared with around EUR 15 billion in the third quarter of 2018.

However, according to the study, marketplaces and multichannel providers sold around EUR 621 million and EUR 934 million respectively less in the third quarter than in the second quarter of 2019. According to the association, this is "the sharpest decline between the third and second quarters in the last five years". "However, we are starting the Christmas business optimistically and are sticking to our annual forecast of total e-commerce growth of 10.5 percent," said bevh Managing Director Christoph Wenk-Fischer.

In the central inner-city locations, the past 100 years have seen everything revolve around the retail trade. Now the destinations have to reinvent themselves in order to remain attractive. The stationary shop, however, remains important, as a recent KANTRAS study predicts.

Current figures from the real estate company Savills forecast an annual increase in European online retail sales of 11.5 % with an average share of 13.1 % by 2023. Great Britain will continue to be at the top of the Internet trade with just under 25 %, followed by the Netherlands with 18 % and Germany just behind with 16 %. This is the conclusion of the current Savills Report "The Evolution of Retail Destinations". The result, however, is not the end of the physical store. On the contrary, the store is more relevant than ever as access to brand, service and entertainment. In fact, according to the forecast, the supply in the physical retail sector will change permanently. But what impact will this have on the European retail market in general and on owners and investors in particular?

Symbiosis between online shop and classic store

The retail trade in Europe is facing new challenges: The question of location and supply are the top priorities. "Owners should focus more on experiences and service, both in terms of user profile and location. This will increase customer frequency and secure the location's existence," explains Marie Hickey, Director Savills Research at Savills in the UK. "As a result, first class, high traffic retail locations across Europe will find it easier to meet the industry's new requirements as they already have a high throughput rate. However, they are not immune to change in the retail sector either."

According to current estimates, 28.5 % of fashion sales in Western Europe will take place on the Internet by 2023. Compared to today, this is a growth rate of 87 %. Despite these quotas, however, online retailing has recognized the great advantage of a physical store. A US study by the ICSC in 2018 showed that the number of visitors to a website in a catchment area increases by 37 % when a brand opens a new shop.

"GlobalData estimates that 29 % of online sales in the UK come into contact with a store, either through the Click & Collect principle or when the customer has first viewed the product in the store - both with an upward trend," explains Eri Mitsostergiou, Director European Research at Savills.

Germany prepares for change

With a view to Europe-wide developments, the question inevitably arises as to whether we will experience a similar change in Germany. Jörg Krechky, Head of Retail Investment Germany at Savills, assesses the situation as follows: "It is only a matter of time before the German market develops similarly. Our online trading growth rate is rising steadily, but that's nothing new. More importantly, customer preferences, namely those of the core target groups Millenials and Babyboomers, are shifting very rapidly and strongly. We are facing the greatest challenge of the century in the strategic development of retail real estate," says Krechky. "Retailers are already restructuring their space concepts and portfolios. The demand for premium and/or food-driven locations is rising. At the same time, demand for secondary and tertiary locations is declining. They will be less lucrative in the future and may have to be revitalized with other uses."

In addition to the so-called millennials and baby boomers, it will also be important in the future to inspire Generation Z with the respective brand experience. Networking, environmental awareness, health and social responsibility play an overriding role in the "digital natives". These aspects also have to be taken into account on a large scale.

Synergies between industries can boost the market

It is therefore more important than ever for investors, owners and retailers to focus more on the wishes of the central user groups. An interface between online and offline as well as between shopping and experience must be created. In addition, the integration of co-working and co-living concepts, gastronomy and hotels in combination with retail can be a promising synergy.

Furthermore, schuhe.de, has just shown the industry how small, specialist shops can join forces by building a joined sales platform, where customers can experience the Online and Offline Shopping experience at the same time, while the schuhe.de platform is handling all the marketing and logistics.

"Retail is experiencing the greatest change within a generation. We don't see the end of the physical store, rather the industry is experiencing an evolution of its offering. The exciting task for investors, stockholders and operators is to anticipate the consequences of this change and implement the appropriate measures with investments," says Krechky.