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Private consumption: none

People have less in their pockets and are saving. The providers of so-called consumer goods in particular are feeling the effects of this. For example, Zalando – the online retailer has reported sales declines for the second quarter in a row. Sales fell by four percent to 2.62 billion euros, the Internet retailer announced in Berlin. The minus was even greater than at the start of the year, when Zalando had to accept the first decline since the company was founded 14 years ago. "Life is becoming more expensive and consumers are reluctant to consume. We feel that," said Zalando co-boss Robert Gentz when presenting the quarterly figures.

No longer used to inflation

Zalando fits into the picture that currently defines the German economy. Because across all industries, companies are noticing a strong reluctance among their customers. Consumers are currently experiencing something that only older people have actively noticed: inflation – and with it the experience of getting less for their money. Or as economists say: loss of purchasing power. "We are not used to such crises in Germany," says Kai Hudetz from the market research company Institute for Retail Research in Cologne (IFH KÖLN).

At regular intervals, Hudetz and his colleagues ask people about their shopping behavior. "The markets in which we operate live on optimism – and that's gone." That is why customers are now shelving their purchasing decisions – i.e. forgoing major purchases and doing without everyday consumption. That was already indicated in the spring, but now the effect is fully apparent.

No spontaneous purchases, no branded goods

Furniture, for example: 49 percent state that they will postpone the purchase of new furniture for the time being – that is, every second person. In April it was just under 30 percent. The effect on computers, TV sets and consumer electronics is similar. After all, the industry was able to make good sales during the pandemic years, unlike the fashion retailers. After lockdown and working from home, they had expected a post-corona boom for this year – instead, continued crisis mode. This number shows how dramatic the drop in sales is here: Compared to the pre-Corona period, sales have fallen by 18 percent.

"People save, refrain from impulse purchases and avoid branded products," explains Hudetz. Two-thirds now say they compare prices again, and almost every second person buys from a discounter instead of from a branded retailer. In the spring, the value was still 36 percent.

An "unfavorable market mix"

Germany's largest manufacturer of sporting goods, Adidas, also found that the hoped-for post-pandemic effect did not materialize. The company from Herzogenaurach reported a half-yearly result at "previous year's level" – the global sports group is still benefiting from a strong American market. However, the company is clearly feeling the rising costs and the "unfavorable market mix", as stated in an initial statement.

Consumer researcher Rolf Bürkl from the Nuremberg analysis company GfK has observed similar developments. "Before the pandemic, quality played a big role in purchasing decisions, now it's price again." According to Bürkl, this is because people have had a previously unknown pessimistic view of their own future. "Last year, people still assumed that they would have the same or more money in their pockets. This year, the vast majority believe that it will be less." Bürkl says his company has never measured values as bad as they are now.

Only losers?

After two Corona crisis years, the economy is sliding into the next crisis. During the pandemic, some industries suffered heavy losses, while others benefited from the changes in the market. Online retailers, DIY stores, the electronics industry and furniture manufacturers in particular were the winners of these difficult years, while stationary retail had major problems.

Some still have strong sales, but these are more likely to be orders from the past that are still generating sales. Trade expert Hudetz speculates that some bicycle dealers will still be making good money with e-bikes: "The order backlog of recent years is being worked off – but this special boom will not last in these sectors either."

"The Danger of a Negative Spiral"

Consumer expectations for the future are bleak and consumers are holding onto their money. "This situation is still being stabilized by a relatively good labor market," explains consumer researcher Bürkl. "But the growing fear of unemployment leads to the prospect of falling incomes – and therefore less is then spent. The danger of getting into a negative spiral is definitely there."

However, the tide could turn again quickly, says market researcher Hudetz. "We're afraid now, but if people see that they can cope with higher energy prices, then this fear can go away again." In the pandemic, concerns would have predominated at the beginning, but the social security system – such as short-time work benefits – would have meant that purchasing power was largely retained. If something like this were to succeed again, consumers and retailers could do well.

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