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Results of the 2018 IFH Study: Online shopping the driving force of the trade in the future, too

Jun 25, 2018

Where do consumers shop today and where will they do so in the future? How can the conventional retail trade take advantage of the opportunities of digitalisation to be successful tomorrow? ‘Status Quo – the retail trade in Germany’, a study conducted by IFH Cologne on behalf of Messe Frankfurt reveals that the dynamism and mobilisation of the internet will continue to exert a modifying influence on shopping processes and customer interests.

German consumers are in a shopping mood. In 2017, domestic consumption totalled € 595 billion, the eighth time in a row that the turnover of the German retail trade has risen from one year to the next. In comparison to the previous year, this represents growth of 4.2 percent. And the clear winner of this dynamic process is the online trade, which accounted for € 58 billion of total consumption (9.7 percent). In comparison to 2016, online sales rose by 5.5 billion (11.5 percent). However, the growth of online sales is leading to cannibalisation effects in the trade. Previously successful in product categories, such as clothing, books and small electrical appliances, the online trade is set to expand into other product segments in the coming years. Particularly hard hit by this will be specialist retailers who, although they accounted for the bulk of consumer purchases with 47 percent in 2017, are likely to suffer a further loss of the overall share. “In view of this, it is only to be expected, says Detlef Braun, Member of the Executive Board of Messe Frankfurt, “that, with our complementary programme of events at this year’s Tendence, we offer our partners in the retail trade a variety of multi-faceted strategies and assistance, to enable them to act more effectively and, therefore, to hold their own in the market.”

Process of change in the German retail-trade landscape in full swing

This is particularly evident in the small and medium-sized retail trade where increasing substitution by larger chains and specialist markets is reflected by figures published by the German Statistical Office (Statistisches Bundesamt) showing a fall from 409,760 retail businesses in 2000 to just 298,657 in 2017, a decline of 27.1 percent. In other words, the process of change from small retail shops to chain stores, specialist markets and online retailers is in full swing. This is because, on the one hand, smaller outlets are increasingly unable to compete in terms of price and assortment. On the other hand, they frequently have insufficient financial resources and expertise to set up their own specialist online shops. Moreover, the opportunities offered by digitalisation are difficult to implement, particularly for retailers in rural areas, especially given the patchy nature of the high-speed digital infrastructure in such regions.

A similar development can also be seen in shopping centres in fringe areas of cities or greenfield sites: in the nineties and noughties, the strongest competitors of the conventional retail trade, the process of structural change in the trade has also led to a noticeable decline in shoppers and sales there. And to shop closures and empty retail units. Consumers are moving to more attractive downtown locations in cities and metropolises where own-run shops and specialist retailers offer not only individuality, service and ambience but also a more positive shopping experience.

The main challenges facing the trade

The challenges facing the sector at present are big and varied: not only demographic change and new patterns of consumption caused by changing customer needs but also the use of mobile technologies. In the future, the retail trade will have to adapt its assortment, product presentation and format to take account of evolving customer demand.

“No time for strolling!”

Changing patterns of consumer behaviour are also driving the process of structural change in the trade. The result is fewer customers in the shops, especially small to medium-sized shops, and in rural areas. The decline in the latter case is due to migration to the cities and an aging population. The loss of customers and purchasing power represents a large threat to the retail-trade landscape of such regions. Entitled ‘Vibrant City Centres’ (Vitale Innenstädte), a study of around 60,000 consumers in 121 towns and cities conducted by IFH in September 2017, showed that 18.6 percent of online shoppers prefer visiting the internet to the city centre. However, this proportion rises in towns with up to 25,000 inhabitants (19.4 percent). People living in smaller towns and cities tend to buy more online, primarily to make up for deficits on the supply side. Also higher is the proportion in towns and cities with 100,000 or more inhabitants (21 percent). In this case, it is mainly younger, more internet-orientated groups of consumers for whom the reasons are to be found, so to say, ‘at their fingertips’. The whole product world is available everywhere and at any time on their personalised smartphone, which not only offers a good overview of the available spectrum but also permits targeted purchases and saves valuable time.

The internet set to be the showroom of the bricks-and-mortar trade

That a risky change in the trade can be successful is shown by the growing trend towards new business concepts in downtown sites, primarily in bigger cities or locations with sufficiently large catchment areas. There, the bricks-and-mortar trade makes presentations distinguished not only by surprising ideas and great creativity but also by individual multi-channel approaches and specialist approaches. They include concept or pop-up stores with carefully chosen assortments, innovative business fitments and furnishings and top service. Likely to play a leading role in the coming years are multi-channel concepts combining the advantages of the conventional trade with those of the online world. Thus, the online turnover of bricks-and-mortar retailers has grown from 2010 by 257 percent to € 18 billion in 2017. Innovative retailers have recognised the positive interplay between the offline and online worlds and also present their products in a digital shop window with the aim of increasing not only online sales but also the number of visitors to their shop. Moreover, online retailers who used only to offer goods on the internet have also discovered the advantages of a multi-channel concept. For example, Amazon and Zalando have supplemented their online platforms with bricks-and-mortar outlets.

Ideas for solutions represent value added at Tendence

More and more customers are seeking an emotional shopping experience at the point of sale. Shoppers like conventional retailers for the inspiration they give, the personal service and the chance to actually handle the product. With the aid of sophisticated store designs and shop fittings, these retailers succeed in awakening demand and stimulating the propensity to buy. Tendence caters for these exigencies with new and innovative concepts aimed at providing a fascinating and interactive shopping experience. Visitors can obtain practical tips and insights into multi-channel strategies at the Tendence Academy in Hall 9.1 and at Tendence.Impulse in Hall 11.0. The impulse.tool online platform helps registered retailers implement innovative concepts at the point of sale and thus to master the transformation to a business model with experiential character. These tips and instructions are available all year round. The Concept Stores Inspirations special exhibition in Hall 9.0 shows retailers how they can turn their businesses into a concept or experiential store step by step, using simple means. This year also sees the first ‘Pioneers of Lifestyle’ conference in the ‘Forum’ of Frankfurt Fair and Exhibition Centre. In lectures and workshops, renowned speakers will provide information about best-practice models and the latest trends in the lifestyle industry. Additional value added and purchasing synergies will be offered for the first time by a collaboration with the concurrent Gardiente show in nearby Wallau, which presents the latest trends from the garden furniture, sunshade, umbrella stand and BBQ segments.

On the internet

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Tendence – international trade fair for consumer goods

Tendence (30 June to 3 July 2018) is Germany’s most international order venue for the second half of the year. The wide-ranging product portfolio covers fields of the home, furnishing, decorating, gifts, jewellery, fashion accessories, tableware, kitchenware, home textiles and outdoor living. Special shows and a wide-ranging complementary programme of events are multi-faceted sources of sales-boosting impulses for retailers. Strong brands and key communicators use this new-products platform to present their trends for the winter and Christmas season. At the same time, they give bulk buyers from the international trade the chance to place orders in good time for their spring and summer collections.

Background information on Messe Frankfurt

Messe Frankfurt is the world’s largest trade fair, congress and event organiser with its own exhibition grounds. With over 2,400 employees at 30 locations, the company generates annual sales of around €669 million. Thanks to its far-reaching ties with the relevant sectors and to its international sales network, the Group looks after the business interests of its customers effectively. A comprehensive range of services – both onsite and online – ensures that customers worldwide enjoy consistently high quality and flexibility when planning, organising and running their events. The wide range of services includes renting exhibition grounds, trade fair construction and marketing, personnel and food services.
With its headquarters in Frankfurt am Main, the company is owned by the City of Frankfurt (60 percent) and the State of Hesse (40 percent).

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