Well done Germany! 2017, record growth year for German retailers

Last year was a record one for retailers in Germany, as according to the national statistical office, the retail sector has marked the biggest gain since 1994.

"This marks the biggest gain since the beginning of measurements in 1994", a statement by the Federal Statistical Office read. Germany last witnessed a reduction in retail revenue in 2009 at the height of the global financial and economic crisis.

So, what lies behind such a great year for retailers? Michael Holstein, economist at DZ bank, pointed to the "positive development of the labor market with a strong increase in employment" and a resulting "greater spending power" as having contributed to a bumper year of retailers in 2017. Recently published official data gathered by Xinhua showed that the number of Germans in employment has risen to a record total of 44.3 million, while unemployment has fallen to lows not seen since re-unification.

Many economists agree to call out low unemployment, rising wages and growing online sales as the key pillars of this record growth.

Preliminary figures published on Friday by the Federal Statistical Office suggest that nominal revenue grew by between 4.5 percent and 4.9 percent in 2017 compared to the previous year.

Price-adjusted real revenue grew by between 2.7 percent and 3.1 percent in 2017. The estimates were based on data gathered in the period from January until November. In November, the last month assessed by the Federal Statistical Office, the pace of revenue growth quickened again to 4.4 percent on a real price-adjusted basis and 6.2 percent on a nominal basis compared to October.

Rolf Buerkl, expert at the market research company Gesellschaft fuer Konsumforschung (GfK) highlighted that retail firms were benefiting from a larger pool of potential customers. Due to high immigration by European Union (EU) citizens and refugees in recent years, the German population has increased to its highest ever level of 83 million inhabitants. Additionally, employees' agreed earnings rose faster than inflation at 2.3 percent in 2017, while a persistent low interest rate environment continued to dis-incentivize saving.

On a related note, the Association of German Retailers (HDE) spokesperson Stefan Hertel singled out e-commerce as another major game-changer and challenge faced by retailers.

In 2017, internet- and mail order business once again took the crown of the fastest-growing (plus 9.6 percent) sub-category of retailers. Berlin-based Zalando exemplifies this development, having grown into one of Europe's largest e-Commerce firms with revenue growing by nearly 25 percent to 3.2 billion euros during the first three quarters of the year.

Photo: Zalando Germany