Bouncing Bach
Having just returned from Germany, I thought it pertinent to share how the country's retail and leisure sectors have been affected by Covid.
First, the travel experience: passenger numbers are of course much lower than one might expect in August, but about half the airport shops and restaurants at Stansted, Hamburg and Gatwick were open. Noticeably, social distancing on the planes was entirely absent and after wearing a face mask for six hours it is also apparent that the discomfort of travelling is going to be a further deterrent for travellers.
Germany is often cited as a country which has tackled the virus successfully and mortality rates have been significantly lower than the UK. The economic impact has also been softer: German GDP in Q2 2020 was down 10%, with the UK expected to be down 15%. Also, employment measures similar to the UK’s newly introduced furlough scheme have long been in place in Germany (`Kurzarbeit', helping to compensate for reduction in working hours), making the transition easier.
Retail
While retail has also been strongly impacted in Germany, there are signs of recovery. Interestingly, non-food stores that have done well during Covid restrictions (Germany was never under `full lockdown’) were often the best-loved neighbourhood stores that were able to leverage their digital reach through social media to stay in touch with customers and create true advocacy. Knowing your customer and being relevant to them is now more important than ever, with those hyper localised stores doing well. In contrast, the pandemic has accelerated the erosion of legacy retailers such as Karstadt in favour of e-commerce (which grew 12% in 2019), with the pandemic given as a reason to close 62 of its 172 stores, although many believe they have been struggling for a long time.
F&B
Weekly F&B spend halved from €1.6bn in pre-Covid times, leading to bankruptcies of chain restaurants like Maredo and Vapiano. Local independents have been adjusting opening hours and menus to allow simpler high-volume operations, selling out of their shop windows or through the delivery services such as Lieferando (owned by Dutch takeaway.com). The recent VAT reduction until June 2021 is designed to entice consumers back into restaurants, yet larger chains are also preparing with structural changes that include automation and reduction of staff in the kitchen and investment in digitalisation and delivery options to maintain viability in the future.
Entertainment
Whilst concerts and events are permitted again as long as they are below 1,000 visitors and sufficient space is available, in reality very few events fall within the category and the sector is severely impacted. Generous state funding for the culture and creative industries is available from government, and the solidarity spirit has also led grassroots movements to protect the best loved music and performing art venues who do not benefit from state intervention as people realise the importance of protecting the vulnerable in extraordinary circumstances. As the sector is struggling however, drive-in cinema and concerts are emerging as a retro trend, with Cruise Inn in Hamburg putting on events since early June.
Despite the overall cautiously positive picture, Covid cases are beginning to rise again, sparking fears of a second wave. Furthermore, Covid led to a suspension of the mandatory filing for bankruptcy until the end of September, with the number of insolvencies in non-food business expected to reach 10,000 due to an expected €40bn reduction in sales, equivalent to a 4% reduction in retail sales and impacting up to 50,000 stores. As such, the true impact of Covid is yet to be felt across Europe, but understanding customers, ensuring relevance to their needs and creating true advocacy will help consumer businesses navigate the crisis.
Christina Roseler