Unit 10: Changing structures of German retailing

(Ulrike Gerhard)

In western societies, the tertiary economic sector is becoming more and more important. One major component is the retailing system. With a total of DM 791,619,000 retail sales [1] in 1996 and a share of 10 percent of all employees [2] it is one of the biggest economic fields in Germany (Kulke 1996: 4). It has a strong impact on the structure of cities, also because shopping has become a symbolic sign for modern urban lifestyles. The different retail companies and their representatives (e.g. the Hauptverband des Deutschen Einzelhandels HDE [3]) possess strong economic and political power.

The development of the German retailing system in the course of the 20th century can be characterised by a deep transformation process that has been caused by changing supply forms and a new consumer behaviour. This is obvious when one looks at the life cycles of retail formats. Especially successful are large retail facilities that offer a huge amount of goods on a low price base. They account for an increasing proportion of retail sales. In contrary, the number of small retailers [4] is declining constantly. The only exceptions are highly specialised retailers who serve a very small market demand that cannot be addressed by the big companies. The consequences of the ongoing concentration of retailers [5], that is striking especially in the food market, is a growing decentralization of the retail system. Chain stores account for an increasing market share and the homogeneity of the supply side is growing. Single retailers such as Aldi [6], account for 10.6 percent of all retail sales in Germany. The biggest retail companies in Germany, however, are Metro-Holding [7] and Rewe [8].

The average provision of store space (gross leasable area, GLA) per capita is 1 sqm. However, there are strong regional differences regarding the purchasing power of the population, the provision of store space and retail sales. The leading market area is Berlin, with a total of 51 billion purchasing power, however, also some smaller towns serve as retail centres for large areas [9]. Therefore, one can speak of some islands of wealth [10], in which the average income and retail sales are remarkably higher than in the rest of the country. Also, among the European countries [11] can the strong regional differences be detected.

Also striking is the diverse retail structure between East and West Germany. The shortage of retail space in East Germany during socialism (in 1989, the GLA per capita was only 0.3 sqm in the East compared to 1 sqm per capita in the West) was followed by a boom of new retail facilities after unification. Sometimes, this lead to an ‘overstoring’ especially in the surrounding of large cities (eg., Halle/Leipzig, Erfurt and others). The inner-city centres could not catch up with this development since many of the old centres were struck by serious deterioration and unsettled property questions. Only slowly did companies invest in central locations and city centres start to become attractive shopping destinations again. A typical factor of this development is a change from a supply of short-term consumer goods such as groceries to more durable goods like clothing, books or jewellery (cf. Ilmenau).

Shopping centres that account for more than 50 per cent of all retail sales in North America, are also well-known in Germany. However, the expansion took place much more slowly. After a first boom-period in the 60s, the development slowed down due to strict planning laws. Since the end of the 80s, a second upswing occurred with strong parallels to the expansion of retail facilities in East Germany (out-of-town locations, huge floor area). In the course of the expansion, functions and types of centres have changed, adapting more and more to the North American centre concept. The most recent and famous shopping centre is CentrO [12] in Oberhausen/Ruhr District which was opened in 1996. It is now the biggest shopping centre in Europe. However, also small-scale, inner-city projects, such as the Goethegalerie in Jena [13], are prototypes of the new development. The most important German developer is ECE [14], based in Hamburg, that owns and manages several shopping centres in Germany. The German Council of Shopping Centres [15] organises the marketing and consulting of the centres, just like the International Council of Shopping Centres [16] for North America.

Another recent trend is the so-called factory outlet centre [17]. There, the producers themselves open up outlet stores within loose store agglomeration. Even though factory outlet centres are common in the United States, they are new to the German market. However, numerous are being planned [18]. Since they might change the retailing landscape profoundly, many traditional retailers are quite apprehensive. A controversial, highly emotional debate can be followed in the German media [19] in which the fear of the ‘death of German downtowns’ is expressed.

Changes of the retailing system also influence urban structures. Especially the traditional downtown – the ‘favourite child’ of German urbanists – has to compete with out-of-down locations where costs are lower and the accessibility is quite good. Therefore, they try to develop a special downtown profile. Already the comparison of webpages of different towns shows that shopping facilities are an important marketing tool for the attractivity of cities (cf. Oberhausen [20], Regensburg [21]). By investing into up-scale gallerias, politics, urban planners and investors try to rise the inner-city pedestrian areas. Examples are the Zeilgalerie in Frankfurt [22] as well as the Maedlerpassage in Leipzig [23]. Sometimes, train stations and other public facilities include huge and attractive retail spaces. The department store Horten developed a new store concept (Galleria) [24] that tries to address the special needs of metropolitan inner-city cores. High rents in central locations, however, are the biggest obstacles for downtown development. Even though they climaxed in 1992, rents are still much higher there than in suburban locations. Therefore, only big retail chains can afford city centre locations. Thus, more and more chain stores displace smaller downtown stores. On average, 40 to 50 percent of all stores in German city centres are chain outlets (Hatzfeld 1994: 187). Furthermore, the controversy about opening hours in Germany affects the downtown retailers because they cannot agree on common store hours. This is one reason for the lower attractiveness of evening shopping in the downtown than in shopping centres that are ruled under one management.

For the consumers, however, the changes in the retailing system are mainly positive. Due to strong competition, prices are low, the variety is big and the leisure component of shopping increases constantly. This cannot only be observed in North American regional shopping malls with a huge entertainment complex and calendar of events [25] but also in German retail facilities [26]. Sometimes the composition of stores already suggests a strong fun and leisure aspect, since they focus on clothing, gift and souvenir stores. The trend of leisure and lifestyle shopping [27] has to be seen within the context of a changing post-modern entertainment society [28]. Due to this trend, cities gain a new function which is expressed by the term ‘creative metropolis’ [29]. On the same time, however, city centres become less diverse and public. Former public places such as the market square have become privatized within a controlled shopping mall. Thus, urban flair in the city is diminished or artificially re-built by developers. As a result, researchers try to develop new strategies for the urbanity of the downtown.

Last but not least, developments such as tele- or online-shopping need to be analysed. Will virtual shopping malls [30] replace regional malls? What kind of product is an appropriate online shopping item? The value of North American success stories have to be observed carefully. New retail formats as well as a changing consumer behaviour will continue to change the German retailing system. Even though Germany follows a special development path the increasing similarity among western societies is striking.