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"Dare more optimism!" -  6 key trends for 2021

2020: year in review: In contrast to the rest of the broadly embattled German economy, the country’s food retail sector saw its strongest year ever, with sales and earnings up by around 10% in Corona-year 2020.

Alone from the shift in consumer spending away from the depressed gastronomy sector, food retailers gained what will likely end up in the billions in sales. On the strength of non-food promotional products, they also joined online retailers (which grew by 22.7%) in benefitting from the lockdown of smaller specialty stores and department stores. 

Despite lower visitor frequency, many food retailers benefited from higher shopping totals (+6 - 12%) and more brand purchases. 

And we must take a moment to praise the retail workers in the food sector, who have given their utmost during this crisis. For the first time, citizens are beginning to recognise the essential role played by these “everyday heroes” – though they hardly receive just compensation for their efforts.

2021: the year ahead: Though the uncertain course of the Corona crisis makes precise forecasts difficult, we have been in dialogue with key stakeholders and are prepared to “dare more optimism!” Here are some of the topics that will command the attention of retailers, manufacturers and service providers (and thus the real estate industry) this year.

1.Food online becoming a competitor

E-food has long been a niche business in Germany (1% of the total food market). Buoyed by the lockdowns, the shift to home offices and consumers' reluctance to shop at brick-and-mortar locations during the pandemic, grocery deliveries are seeing significant double-digit gains. In the first three quarters of 2020 alone, e-food retail took in revenue of €1.77 billion (excluding drugstore products and pet food), compared to total revenue of €1.6 billion in all of 2019, not only for Amazon or Rewe Online. However, this still represents only about 1.5% of total sales.

2.Multichannel expansion by brick-and-mortar retailers

Established large and medium-sized grocery and drugstore operators are working to add online as well as click & collect services, linked to their brick-and-mortar offerings (while online retailers are opening physical stores). One consumer trend is to use online channels for purchases of basic supplies, and to combine in-store shopping as a spontaneous purchasing opportunity with a bit of social interaction. For now, however, the profitability of the online market remains limited.

3.City locations won’t guarantee success 

The longer the Corona crisis lasts, the harder the struggle for survival of non-food retailers in the inner cities will become, with more and more shopkeepers having to give up and pedestrian malls becoming deserted. This has opened up further opportunities for the food retail sector, which is increasingly showing interest in prime spaces becoming available in the cities. Food retailers are coming in with location-specific concepts, which will fall short if frequency remains subdued (as demonstrated by the experience, e.g. of drugstore giant dm, 1% Plus, Rossmann 8%). In order for cities to remain meeting places and for the mix of retail, gastronomy, work and experience to be balanced once again, parallel revitalisation concepts must be implemented; this will require engagement by all players – public and private sector.

4.Sustainability remains a consumer trend 

Sustainability is increasingly becoming a primary consumption theme among consumers. People are reaching for familiar items from nearby farms and preferring to carry their bulk produce home in canvas rather than plastic bags. Demand for regional products has increased significantly, and the higher prices have not been a hurdle – though this may not yet be true for the mass market, the share of quality-oriented buying continues to grow. 

5.The big winners so far: supermarkets/hypermarkets

Supermarkets and hypermarkets have been the main beneficiaries of the lockdowns. Revenues of the market-leaders have grown in the double digits, stronger than the revenues of the discounters, large-scale retailers and drugstore operators. Full-range retailers will seek to further expand their market share – but it won’t be easy.
Many consumers are having to watch every penny, which means supermarkets must be very convincing in their quality and price profiling. In many cases, this will require assortment streamlining: premium and low-cost will grow; the mid-price segment will shrink.

6.Innovations in retail through digitalisation

The Corona crisis has highlighted the issue of digitalisation. Retailers need to digitally upgrade their processes. For consumers, the new 5G mobile standard will also bring new, contactless technologies to the supermarket: e.g. biometric check-in, automated contactless payment and personalised marketing offers direct to consumers' smartphones. However, not everyone will be quick to adopt these innovations.

The outlook is brightening! 

Vaccinations have begun. By later this year, Corona could be on the way out – a heartening prospect. While a return to 2019-like normality is not likely in 2021, consumers and businesses alike are looking forward to a gradual opening of theatres, cinemas, museums, stadiums, beer gardens, normal shopping, restaurants, vacation travel etc. Even as the economy recovers, there is not likely to be a headlong relapse into unbridled consumerism, and spending will remain restrained due to ongoing economic uncertainty. 

In the retail sector, business development will remain divided over the coming months. Food retailers will take the lion’s share of business from the closed gastronomy sector and continue to offer non-food promotions, while non-food stores (especially those with the strongest focus on customer contact) will continue to face hard times due to reduced buying frequency and spending. Consumers will remain frugal – but this could be called a “luxury problem”.

Demand for investment in the safe haven of real estate – both residential (with its different set of rules and players) and food retail (incl. drugstores, pharmacies, pet food) – will tend to increase. Moreover, given the lag in supply, prices will continue to rise.

There is no time to waste. All signals are pointing upwards. If you don’t want to miss your chance for a successful investment, now is the time for a speedy assessment and decisive action.

The same procedure as last year? No, a better one!

Are you interested commercial property investment?
Handelsimmobilien Schubert is your competent partner!

Handelsimmobilien Schubert

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