The world of online retail has even been speculating about the return of Amazon founder Jeff Bezos in recent weeks. It would be hard to imagine a clearer sign of how much e-commerce is currently being shaken up. The reason: the stock market value of the mail order company halved within a year, while the number of redundancies shot up to 18,000.
On the other hand, Amazon almost has to be grateful. The rapid ups and downs in online retailing can hardly be described more concisely. The boom as a result of corona lockdowns was followed by a crash caused by the Ukraine war, inflation and the reopening of brick-and-mortar stores. Note: However, sales are still above pre-Corona levels.But still: In Germany, online retail sales actually shrank for the first time - according to the industry association BEVH. It fell by 8.8 percent from 99 billion euros in 2021 to 90.4 billion euros in 2022. "Online retail has arrived in a new reality," said BEVH CEO Christoph Wenk-Fischer. But what does it consist of?
How has shopping behavior changed?
"We are currently observing that some customers initially look for somewhat more expensive items that promise greater value and longevity when shopping," says an Amazon spokesperson in Germany. "But then, in many cases, they end up reaching for cheaper products." This trend holds true in general, for apparel, food, online and offline. Consumers are looking for special offers, and they are increasingly buying so-called no-name products, especially for everyday necessities.
Who saves the most?
Families. If you look at the development of average spending per purchase according to age groups, you can see: younger and older people, usually without family members at home, spend only slightly less than in previous years, according to a BEVH study. The 60-plus generation has discovered online retailing for itself in the pandemic and apparently doesn't want to let go of it. The middle-aged groups, on the other hand, have to pay the most attention to money. This is where the majority of households are made up of families. They usually have a larger spending budget than the others, school supplies, clothing, food, vacations when everyone else is also traveling. But now they are saving. Because they can only spend the money once: on heating or on vacation. This is consistent with studies that show that families are particularly affected by inflation.
What products are purchased now as opposed to pre-Corona?
Many people now order medicines and food on the Internet more frequently than before Corona. In addition, there are purchases that are difficult to postpone: toys for children's birthday parties or dog food. In contrast, fewer people booked flights and tickets for concerts, for example, online in 2022 than in 2019, which was probably due to the Corona restrictions and can change quickly. Overall, Germans did not buy as much clothing as in the past, perhaps because of home offices, but purchases are tending to shift online, albeit slowly. It is striking that younger people were particularly interested in ecologically controversial low-cost suppliers from China, some of which are based in Turkey, such as Shein or Trendyol, because they produce disposable fashion.
Is secondhand booming because of environmental concerns?
No, most consumers buy or sell used items to save or make money, a cross-border study by Cross-Border Commerce Europe found. The desire to get a circular economy going in this way was secondary. Either way, so-called re-commerce has been flourishing of late; according to the study, marketplaces for good-quality or refurbished consumer goods are growing 20 times faster than the overall retail sector, including providers such as Ebay classifieds, Momox, Rebuy and Vinted.
Are free returns now under scrutiny?
Yes, because according to the Cologne-based retail research institute EHI, they are a "profit killer." What's more: Germany holds a sad record here. There is hardly any other country where so many parcels are returned. In addition, many more online retailers offer free returns than in the rest of the EU. However, due to higher cost pressures, more retailers in this country are now starting to either charge a minimum order amount for "free" delivery or to price returns, for example well-known brands like H&M, Zara or Uniqlo. However, the online market leaders in Germany, Amazon, Otto and Zalando, reject a general returns fee. Instead, they are increasing the fees for sellers on their marketplaces.
If online is weakening, do the brick-and-mortar stores benefit?
Not really. According to preliminary figures from the German Retail Association, the overall retail market is doing slightly better than online-only retail: the association expects nominal sales to increase by 7.5 percent to 633.4 billion euros in 2022, with a real, inflation-adjusted decline of 0.1 percent. But there are huge gaps between groceries and apparel. "Stationary retailers are coming back," says a BEVH spokesperson, "but not so much at the expense of online-only retailers, but at the expense of their own online sales, which kept them alive in the early Corona years." It was more like this, he said: Online retail sales continue to remain well above pre-pandemic levels, while brick-and-mortar retailers are having a hard time getting back to their old sales levels. "When people think twice about every purchase, the Internet is the channel of choice because of the high comparability of offers and prices." E-commerce expert Alexander Graf also says: "The fundamental shift from offline to online continues. The current lean period will make e-commerce even stronger in the medium term." This is because companies are being forced to become more efficient, right down to smaller and less packaging, he says. "Stationary retail, on the other hand, has long since exhausted its optimization possibilities."
What does this mean for the economy as a whole?
Consumer sentiment is brightening again, inflation is falling, and the economic outlook is improving. Nevertheless, the HDE's "mood barometer" remains at a low level. Uncertainties remain, above all due to the Ukraine war. The willingness to make major purchases, such as cars and furniture, is not yet apparent. The market researchers at GfK therefore estimate that "private consumption will not be able to make a positive contribution to overall economic development this year. One of the reasons for this, they say, is the persistently high inflation, which is leading to a fall in households' real disposable income, which is dampening private consumption. The BEVH nevertheless expects sales to increase by just under five percent to then 94.7 billion euros - a figure below that of 2021.
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