Economy

Corona sales: Up to 90 percent discount expected in fashion retail

Jens Büttner / picture alliance via Getty Images

The stationary fashion trade was badly shaken by the crisis year. With the tightening of the lockdown on December 16, the shops had to close and will remain closed until February 14 after the recent extension of the measures. What comes next is uncertain. The textile trade association (BTE) calculated a fifty percent drop in sales for December due to the failure of the Christmas business alone and is also assuming a drop of a whopping 30 percent for 2020 as a whole. In addition, there is a goods problem, because the sales difficulties in the Corona year pile up about half a billion unsold fashion items in the warehouses, according to the trade association.

Now the winter sales, which traditionally start next Monday, will also be canceled. According to a report by the Redaktionsnetzwerk Deutschland (RND), experts expect strong discounts when retailers reopen. Kai Hudetz, managing director of the Institute for Retail Research in Cologne, told the RND that there would be a real “discount battle” beforehand – namely online. Many fashion stores are now represented there, while others sell their goods via portals such as Amazon or Zalando. Due to the fact that the warehouse was filled to the brim with goods from the previous year, there was strong competition in sales. “The pressure is enormous, the dealers can no longer do anything with the goods,” Hudetz told the RND. So if one dealer lowers prices, the others would have to react. Hudetz therefore expects discounts of up to 90 percent in some cases. “That is of course business madness,” said the expert.

Many fashion chains have problems – online retail is exploding

The situation is of course comfortable for consumers. You could compare the prices in peace and wait for cheap offers, especially since certain items such as suits are of course much less needed in the home office, says Hudetz at RND. For the fashion stores, however, the discounts meant further financial setbacks.

This also applies to many of the big fashion chains. Last year, industry giants such as H&M and Zara parent company Intidex were in the red, while Galeria Karstadt Kaufhof, Esprit and Gina Tricot even went into self-administered bankruptcy via protective shield proceedings. Most recently, the Adler fashion chain also joined the company. As early as November last year, the managing director of Euler Hermes Germany, Ron van het Hof, told the German Press Agency that the low-turnover phase from January to March could be an acid test for many companies.

On the other hand, online retail profited greatly from the crisis. According to estimates by the Cologne Institute for Retail Research, between 80 and 88 billion euros will be traded online in 2020 in German retail. This means that the division’s growth has at least doubled compared to the previous year. The institute predicts that the trend will continue, with a turnover of 120 billion euros in online retail by 2024 – perhaps even 141 billion if the surge from the corona pandemic continues.

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