Red numbers at H&M and Zara parent company Intidex, insolvency proceedings at Galeria Karstadt Kaufhof, Esprit and Gina Tricot: difficult times are ahead for fashion retailers. Credit insurer Euler Hermes expects further insolvency proceedings in the coming months, as the “Manager Magazin” reports.
In the first nine months of this year, Euler Hermes already had eight major insolvencies in fashion retail. Compared to the previous year, this is an increase of around 166 percent, the credit insurer emphasized to the “Manager Magazin”. And that at a time when the bankruptcy rate in Germany was falling. Above all, the coming “sour cucumber time” from January to March will be an acid test for some companies, said Ron van het Hof, managing director at Euler Hermes Germany, to the German press agency. “Only those who can put on a little cushion at least in the Christmas business will be able to stay afloat until the spring business.”
The corona pandemic has hit many businesses hard, in addition to fashion retailers, goods retailers such as Depot and Galeria Karstadt Kaufhof are also affected. However, it is not just the pandemic that is responsible. “The city centers are dealing with a threefold tsunami: structural change in retail, digitization and the corona pandemic. Together, this is a challenge for retailers like they have perhaps never experienced before, “said Boris Hedde from the Cologne Institute for Retail Research from the” Research Network Germany (RND) “.
Empty city centers during the Christmas season
For many retailers in the pedestrian zones of the inner cities, the Christmas business this year will be almost impossible. Because in the wake of the pandemic and the partial lockdown imposed for November, the inner cities are empty. This development was already evident in the last weeks of October. Because the number of visitors in the shopping streets has dropped significantly again. This is shown by data from Hystreet, a company that specializes in measuring customer footfall in city centers.
The closure of pubs, restaurants, cinemas, theaters and fitness studios at the beginning of November caused the number of visitors to drop even further. In the first days of the tightened rules, stores reported a drop in sales of up to 80 percent, reported Steffen Jost, President of the Textile Trade Association, in “Manager Magazin”.
Online trade is the winner of the crisis
Euler Hermes estimates that textile retailers will lose sales due to the pandemic at around twelve billion euros – almost a fifth of annual sales. Online retail is the main winner of the crisis. And its prospects are also good in 2021, according to Euler Hermes. A strong online presence is therefore currently particularly important for retailers. “Those who had prepared and invested well for structural change before the pandemic could benefit from the online boom in times of Covid,” emphasized Van het Hof.
An online presence is therefore a must. After all, a study carried out in 2018 showed that German city centers only achieved a grade of 2.6 in terms of attractiveness. So there was room for improvement even before the Corona crisis.