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Every second retailer sees itself in existential difficulties

Every second retailer in Germany sees their very existence threatened by high energy prices.

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Every second retailer sees itself in existential difficulties

Every second retailer in Germany sees their very existence threatened by high energy prices. This is shown by a current survey by the German Retail Association (HDE), in which around 900 companies from different locations, sectors and sizes took part.

An impressive 22 percent of those surveyed fear for their future even in the short term. "After the two corona years, which were hard for many retailers, there is a lack of financial reserves in many places to be able to absorb the energy price development," reports HDE General Manager Stefan Genth.

According to the companies in the survey, energy costs in retail have risen by an average of 150 percent since the beginning of the year. "This turns all calculations upside down and puts many retailers in situations that they cannot solve on their own," says Genth, according to which the average return on sales in retail is 1.5 to two percent.

As a result, an increasing number of companies are already on the edge of profitability. According to the HDE, it is hardly possible to pass on all of the costs to customers in view of the tough competition in Germany. In addition, retailers fear losing a large number of customers due to noticeable price increases.

Especially since there is already a clear reluctance to buy, as the association reports. Because consumers are now also feeling the energy price shock, as letters from utilities announcing tariff increases are currently arriving in households. "The consumer mood is in the basement," says Genth. For the second half of the year, the HDE is therefore anticipating a real average decline in sales of five percent compared to the same period last year.

The HDE is now calling for the government's announced economic aid to be extended to retail companies as quickly as possible. "With a total of 35 terawatt hours per year, retail is one of the largest energy users in Germany, but is not classified as energy-intensive," criticizes Genth.

With the previous aid programs, the industry has so far fallen through the cracks. "Neither with the relief package III nor with the energy cost containment program does the retail trade get a chance." The tense situation will probably get worse again, Genth fears and refers to the association survey.

According to this, 24 percent of those surveyed report problems with the extension of existing or the conclusion of new energy contracts. And at least 46 percent of the supply agreements would expire in the third or fourth quarter of 2022. “The state has to give the retail trade a helping hand,” Genth demands. Existing funding instruments would have to be opened up in such a way that all companies whose livelihoods are affected by rising energy costs can benefit from them.

However, it is not just the sharp increase in energy prices that is causing fears and worries in the retail sector in this country. At the same time, companies are also struggling with delivery problems before Christmas. This is shown by a current study by the Ifo Institute for Economic Research.

According to this, in August 77.5 percent of retailers reported difficulties with the supply of goods. "At the moment it doesn't look like the problems will ease up in the run-up to Christmas," comments Klaus Wohlrabe, head of Ifo surveys.

According to the Ifo survey, the situation is particularly tense for bicycle dealers and in the household appliances and consumer electronics sectors. The problems are also above average in hardware stores, furniture, toys and food and beverages.

According to experts, one important reason is the faltering world trade, which is primarily suffering from the recurring corona lockdowns in China. According to a study by the Kiel Institute for the World Economy (IfW), around eleven percent of all shipped goods are currently stuck.

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 7 a.m. with our financial journalists. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.

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