Online trade shrinks for the first time in Germany – economy

The world of online retail has even speculated about the return of Amazon founder Jeff Bezos in recent weeks. It’s hard to imagine a clearer sign of just how badly e-commerce is being shaken up. The reason: the stock market value of the mail-order company has halved within a year, while the number of layoffs has shot up to 18,000. Only the return of the Messiah will help, right?

On the other hand, Amazon almost has to be thankful. The rapid ups and downs in online trading can hardly be described more concisely. The boom as a result of corona lockdowns was followed by the crash caused by the Ukraine war, inflation and the reopening of stationary shops. Attention: However, sales are still above the pre-corona level.

But still: In Germany, sales in online retail even shrank for the first time – according to the industry association BEVH. It fell by 8.8 percent from 99 billion euros in 2021 to 90.4 billion euros in 2022. “Online trading has arrived in a new reality,” said BEVH Managing Director Christoph Wenk-Fischer. But what is it?

How has shopping behavior changed?

“We are currently observing that some customers are initially looking for slightly more expensive items that promise higher quality and durability when they make their purchases,” says an Amazon spokesman in Germany. “But then in many cases they turn to cheaper products.” This trend applies in general, in clothing, food, online and offline. Consumers are looking for special offers and they are increasingly buying so-called no-name products, particularly when it comes to everyday necessities.

Who saves the most?

Familys. If you look at the development of the average expenditure per purchase depending on the age group, you can see that younger and older people, usually without family members at home, only spend slightly less than in previous years, according to a BEVH study. The 60+ generation discovered online trading during the pandemic and apparently doesn’t want to let go of it anymore. The middle age groups, on the other hand, have to pay the greatest attention to money. Households in which families live are predominantly to be found here. As a rule, they have a larger spending budget than the others, school supplies, clothes, food, holidays when everyone else is also away. But now they save. Because they can only spend the money once: for heating or for vacation. This coincides with studies according to which families are particularly affected by inflation.

Which products are being bought now in contrast to the pre-Corona period?

Many people now order medicines and groceries more frequently on the Internet than before Corona. There are also purchases that are difficult to put off: toys for children’s birthday parties or dog food. On the other hand, fewer people booked flights and tickets for concerts online in 2022 than in 2019, which was probably due to the corona restrictions and can change quickly. Overall, Germans are not buying as much clothing as they used to, perhaps because they are working from home, but buying is tending to shift to the internet, albeit slowly. Striking: Among younger people, low-cost suppliers from China, some with locations in Turkey, such as Shein or Trendyol, which are ecologically controversial because they produce disposable fashion, were particularly well received.

Is second-hand booming because of environmental concerns?

No, most consumers buy or sell used items to save or make money, found a cross-border study by Cross-Border Commerce Europe. The desire to get such a circular economy going was secondary. Either way, the so-called re-commerce has been flourishing recently. According to the study, marketplaces for well-preserved or remanufactured consumer goods are growing 20 times faster than the entire retail trade, including providers such as eBay classifieds, Momox, Rebuy and Vinted.

Are free returns now under scrutiny?

Yes, because they are according to that Cologne trade research institute EHI a “profit destroyer”. In addition, Germany holds a sad record here. In hardly any other country are so many packages returned. Also, returns are free with many more online retailers here than in the rest of the EU. However, due to higher cost pressure, more retailers are now starting to either demand a minimum order amount for “free” delivery or to price returns, for example well-known brands such as H&M, Zara or Uniqlo. However, the online market leaders in Germany, Amazon, Otto and Zalando, reject a general return fee. In return, they are increasing the fees for sellers on their marketplaces.

If online is weakening, will the brick-and-mortars benefit?

Not really. According to preliminary figures from the German Retail Association, the retail market as a whole is doing slightly better than pure online trading: the association expects a nominal increase in sales of 7.5 percent to 633.4 billion euros in 2022 and a real, inflation-adjusted decline of 0.1 percent . But there are huge differences between food and clothing. “Stationary retailers are coming back,” says a BEVH spokesman, “but not so much at the expense of pure online retailers, but rather at the expense of their own online sales, which they used to keep themselves alive in the first few years of Corona.” It was more like this: In online retail, sales remained well above the pre-pandemic level, while stationary retail was finding it difficult to build on the old sales again. “If people think carefully about every purchase, the Internet is the channel of choice because of the high degree of comparability of offers and prices.” E-commerce expert Alexander Graf also says: “The fundamental shift from offline to online is ongoing. The current dry spell will make e-commerce even stronger in the medium term.” Because companies are being forced to become more efficient, down to smaller and less packaging. “The stationary trade, on the other hand, has long since exhausted its optimization possibilities.”

What does this mean for the economy as a whole?

Consumer sentiment is improving, inflation is falling and the economic outlook is improving. The HDE’s “mood barometer” nevertheless remains at a low level. The uncertainties remain, mainly because of the Ukraine war. The willingness to make larger purchases, such as cars and furniture, is not yet apparent. the market researcher at GfK therefore estimate that “private consumption will not be able to make a positive contribution to overall economic development this year. One of the reasons for this is the persistently high inflation, which is leading to falling real disposable income in households, which is dampening private consumption. The BEVH expects nevertheless an increase in sales of almost five percent to 94.7 billion euros – a value below that of 2021.

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