MARKET INSIGHT GERMANY
Pandemic year continued. It is 28 June and a quick glance at the dashboard ITALY SWISS reveals: 29,403,338 AUSTRIA people, corresponding to SPAIN 35.4% of the population FRANCE in this country, are fully UK vaccinated. Approximately half of the population has already received the first shot. The 7-day incidence lies at 5.6 new infections per 100,000 inhabitants with a downward trend. Good omens. After a cooler than average and rainy May, summer is finally here and people are getting active outdoors. In line with this, the Covid restrictions on public life are much less severe than in the months before, thanks to the low incidence. Until well into May, the high number of new infections had resulted in drastic limitations. In a similar vein, the Federal Statistical Office reports a sluggish overall economic development at the beginning of 2021. After a brief recovery in Q3 and Q4 2020, the pandemic dynamics pretty much strangled the engine that had just started up again. GDP in Q1 2021 thus registered a drop of 1.8% compared to the previous quarter. After inflation adjustments, even the comparison with the same month of the previous year is negative (-3.4%). Germany’s economic performance is limping along. One reason for this is the significant decline in private consumption influenced by the Covid restrictions. A 9.1% drop compared to Q1 2020 is hard to swallow and the retail sector is once again bearing the brunt of it. The sector’s gross value added, combined with that of transport and hospitality, is one of the clear losers in the jungle of key figures, but almost all sectors of the economy are performing worse than in the previous year. But there is at least one silver lining: international trade has been picking up since the beginning of the year, with imports growing much more strongly than exports. And that’s all for now, as far as the bare figures are concerned (source: Destatis). The ifo Business Climate Index (as of 25 May) with its forward-looking assessment conveys a more optimistic picture overall. The indicators for all the sectors covered are positive, including that for trade, whose index showed a marked increase. In 26
general, the economy is in “recovery mode”, i.e. in a situation that is below average, but expected to improve. Nevertheless, the ifo business uncertainty index remains at a high level. Virus variants, looming bankruptcies, unemployment, global economic trends, etc. are simply too many question marks that work against any unconcerned sense of optimism. Local infection containment measures have a direct impact on the sales potential of the retail trade. In addition, procurement is emerging as a key issue. Various Covid outbreaks in the Far East severely disrupt the supply chain as far as both production and transport are concerned. At the end of June, for example, some 160,000 containers were stuck in Yantian, the world’s fourth-largest container port. With increased demand, this bottleneck problem makes transport costs skyrocket. Costs that then have to be reflected in the final price of the product. To put it bluntly, what this means for the trade in this country is: first the shop is closed, then the goods don’t arrive and now things become increasingly expensive. Well, thanks a lot for that! Nils Gebbers, GM at 24/7 Distribution in Münster, describes the situation from a wholesale perspective: “The dropship situation with Asia is not easy! Thanks to our broad portfolio, we have so far been lucky enough to always be able to offer customers alternative products in case of delayed delivery. Our ancillary costs have risen by around 30-50% in the last 18 months. This goes from the container in the import to the shipping to our customers. On top of that, production prices have risen sharply. Due to the massive workload, we have had to rent additional external warehouses. It now takes DHL 3-4 days to deliver a package instead of 1-2 days in the past.” Nevertheless, he remains optimistic, with currently very good sales figures for skateboard hardware (Indy, Santa Cruz, Toy Machine, ACE, Bones Wheels & Bearings) as well as TSG helmets and protection gear. The question of how much a brand grows in this category is currently more a question of how much it can deliver. What makes Nils very hopeful are the good sales figures for complete boards, as among the customers who buy these products are also the consumers of tomorrow and the day after.
