2014 shows how strong an economic factor Christmas is. The German Retail Association (Handelsverband Deutschland – HDE), as the overarching association of the German retail sector, reported Christmas sales to have reached € 85.5 billion, a new high, of which ‘online Christmas’ accounted for € 10 billion. There was no stinting on present buying, but people did save on the decorative ‘trappings’. Notwithstanding, seasonal decoration at Christmas and other festive occasions is still an important need and expenditure on such decoration remains high. This is confirmed by the sectors of Christmasworld, the leading international trade fair for seasonal and festive decorations in Frankfurt am Main (30 January to 3 February 2015). According to figures projected on an annual basis by the IFH Retail Research Institute (IFH Retail Consultants) on behalf of Messe Frankfurt, consumers spent around € 2.78 billion on Christmas and festive goods, which is 0.1% more than in the previous year (and you could hardly get closer to a definition of stable, high sales than that).
The German Association for Tableware, Housewares and Home Decor (Bundesverband für den Gedeckten Tisch, Hausrat und Wohnkultur e.V.) confirms the same. Its members report that customer interest in decorative articles for Advent, Christmas and New Year festivities remains unstintingly high and, they find that in-store shopping still dominates compared to online sales.
You can break down the market for Christmas and seasonal goods into what are often small-sized segments in the double-digit million range. Against this background sales are comparatively stable, with changes ranging from a rate of -12.5 percent (electrical Christmas tree lighting at € 63 million) to -1.0 percent and -1.7 percent respectively for the segments with the highest turnover figures, plastic disposable tableware (€ 759 million) and candles (€ 773 million).
In Germany the candle market is a little bit down but still remains high overall. However, electrical Christmas tree lighting has taken a further slide with the double-digit decline linked to the trend towards battery-operated LEDs, which are not recorded in the IFH statistics. Thanks to miniaturisation and low battery consumption, power-saving LED technology has gained much greater recognition amongst consumers. In many cases these LED-based Christmas candles are of very good quality and can be used over many years. No doubt they will curb future sales growth. “All the same, if you appreciate the warm, comforting glow and the familiar smell of a burning candle, the electric light of a light-emitting diode is not really going to pass muster”, adds Stefan Thomann of ASBL, the European Candle Association.
Fluctuations are also apparent in other product areas: in 2014 Christmas articles made of glass achieved a sales volume of € 38 million – which is a drop of -2.6 percent, while Christmas articles made of other materials registered a decline of -9.7 percent at € 84 million. Artificial flower manufacturers had to cope with bigger losses, seeing sales drop to € 70 million (-12.5 percent). Germans spent € 352 million on paper serviettes and tablecloths, which is 2.5% less than in 2013. On the other hand, it is very pleasing to note that expenditure on articles for festive occasions other than Christmas was up 10.9 percent at € 132 million, while sales of disposable tableware made of paper or cardboard have significantly increased (+6.3 percent at € 255 million).
2014 was a difficult year not just for the wholesale trade for florists and decorative requisites, but also for the ‘green segment’ as a whole. “On the positive side, Advent and Christmas sales were largely pleasing,” reports Armin Strecker, executive chairman of the Wholesale Association for Florists and Decorative Requisites (Großhandelsverband für Floristen- und Dekorationsbedarf e.V.). This view is also supported by Dieter Uhlmann, managing director of the Association of Artisans and Toy Makers from the Ore Mountains (Verband Erzgebirgischer Kunsthandwerker und Spielzeughersteller e. V.): “Especially at Christmas we noted a trend in sales trend towards high quality, woodcraft products from the Ore Mountains. Customers appreciate that products from the Ore Mountains are hand-made and are prepared to pay prices commensurate with this”.
According to figures from the European Candle Association ASBL, candles are still very popular with European consumers. In the past year consumption per head in the European Union increased to around 1.2 kg with a total of 613,000 tonnes of candles being sold. It is expected that consumption will increase again slightly this year. Happily there was also an increase in the share of the market held by candles manufactured in Europe. However, manufacturers have been subject to extreme price pressures for many years. Increasing market consolidation has resulted in ever fewer companies having ever greater purchasing power. Whether prices are stable or even when they are going down, it is the manufacturers who have to bear an ever increasing share of the costs and risks with no commensurate loss of quality.
The increasing power of the large retail groups – with their risk avoidance strategy of guaranteed sales – leads to a greater ‘mainstream offering’. No one serves the more discerning clientele and this is precisely where new opportunities and potential lie for manufacturers and retailers to open up new markets. Home décor chains, florist shops, and garden centres along with online retailers play an ever more important role and contribute to maintaining creative diversity. “It is where you can also find large, intricate and ostentatiously designed candles, often used as a centrepiece in floral designs and arrangements. Consumers are looking quite specifically for candles that serve as accessories and fit perfectly in their own personal home decor and lifestyle,” says Stefan Thomann of the ASBL, European Candle Association.
Apart from the trend towards larger candles, the last few years have seen continuous growth in scented candles. In countries such as the USA scented candles have long been a way of life. Now, more and more Europeans are finding pleasure in the combination of flame and exotic scents.
In 2014 owner-run garden centres saw an increase in sales of around 4 percent. “This is disappointing, because due to the long winter the previous year was the worst in our history”, explains VDG managing director, Peter Botz. Nevertheless, seasonal sales at Easter and in particular at Christmas went well and could register good growth. In terms of product groups, hardware showed on average a 2 percent better sales result than plants. It was possible to increase slightly the number of customers and the turnover per customer. After two difficult years the appetite for investment amongst retailers in the garden sector is not great, but the need for such investment is apparent. With interest rates low, the VDG believes it should be easier to make the necessary investment in the future.
The green segment also uses online retailing as an enhancement to its in-store offering. According to Peter Botz, an increasing number of VDG members now recognise the benefit of having a shared online shop. “In the future this will be our customers’ most important source of information and it is an opportunity we have developed together. Bricks-and-mortar may lose out a little to online in terms of sales; however, online searches are bringing us a lot of new customers, who like to buy in-store. Any manufacturers seeking to support independent retailers should also get involved in www.olerum.de”.
The German DIY and home improvement market recorded an increase in sales of 6.4 percent in a simplified sales space (simplified due to the market exist of the Praktiker-MaxBahr Group). The sector is optimistic therefore about the coming year, 2015. In December 2014 result4retail market researchers forecast for the core DIY market in Germany growth of around 2.2 percent to approximately € 44.2 billion. “2015 and the years to come will see the do-it-yourself market continue to build on its strengths. The creation of its own online presence will be a beneficial and necessary addition to its core strengths – in-store sales dialogue with the customer. Key concepts will be the quality of the advice provided and the range of services offered. It will also be necessary to critically review current ideas about floor space and product offering. Customer satisfaction needs to be guaranteed on the basis of outstanding product quality, expert advice, reduced complexity in the sales process and attractive product display,” says Dr. Peter O. Wüst, chief executive of the BHB.
Readjusting to the changing demands of customers is essential and is a view shared by all market players. “Our customers react very positively to events such as the garden centre Christmas markets, for example. We are forecasting the potential for good sales growth in 2015”, comments Peter Botz, managing director of the Association of German Garden Centres (Verband Deutscher Gartencenter – VDG).
For the commercial property and shopping centre sector, Klaus Striebich is in agreement: “Firstly, successful bricks-and-mortar retailers are relentless in their creative efforts to run the classic business model as a multi-digital operation”, explains the chief executive of the board of the German Council of Shopping Centres and adds, “Secondly, it should at the same time not go unnoticed that some pure players are now offering their products and services in an in-store environment. Once again this shows how incomparably strong the classical market place is, in which people meet people.” Independent retailers must understand these strengths and likewise professionally exploit online opportunities. This will be the measure of success in the future.
You can also see how important commercial property and shopping centres are for the independent retail sector in the current numbers of new facilities being opened. 2015 will see a total of approximately 331,500 square metres of retail space created, which is just under (10,000 square metres) the figure for 2014. “From our perspective it is the unstinting focus on customers that is important for success. You need an experience-orientated environment to build and sustain an emotional link”, says Striebich.
Across all sectors the same rule applies: retail and industry must work more closely together. Whether bricks-and-mortar or online – the quality and availability of the goods must be guaranteed at all times.
Text: Messe Frankfurt
Photo: Messe Frankfurt