Retailers Cautiously Eye Christmas as Consumers Hold Back

Retail Outlook for the Holiday Season

As the crucial Christmas trading period approaches, many segments of Germanys retail sector are far from optimistic. The German Retail Association (HDE) warns that rising energy and personnel costs, along with growing bureaucracy and higher inflation, are weighing on both retailers and consumerseven as shoppers show up in a festive mood.

In a consumer survey commissioned by the HDE of 2,000 respondents, the planned average spending on Christmas gifts is €262, virtually unchanged from €263 the previous year. The distribution of intent, however, is mixed: 10% of respondents plan to spend more than last year, while 24% expect to spend less. Despite the modest headline number, broader sentiment indicators suggest caution: consumer sentiment gauges from NIM and the HDE remain at low levels, purchase propensity is subdued and the tendency to save is pronounced.

Retailers also point to non-macro risks. Alexander von Preen, president of the HDE, highlighted concern about demonstrations by young people that have occasionally escalated into riots. Those events, he said, make retailers nervous because they can deter shoppers from visiting city-centre stores on key shopping Saturdays, increasing the risk of footfall declines and sales shortfalls as Christmas draws nearer.

Sales Expectations and Channel Shifts

Among 300 retail companies surveyed, 29% expressed the upbeat view that customers will not let difficult times dampen their Christmas shopping. Nearly a quarter are confident that gift purchases will remain resilient. But almost four out of five retailers expect consumers to be more price-sensitive given the general rise in costs. The non-food retail segment is particularly cautious: 56% of non-food merchants anticipate a worse or much worse Christmas trading period than last year.

On the numbers, the HDE projects a nominal sales increase of 2% for November and December compared with the prior year. Adjusted for inflation, the expected real gain is 1.0%, implying combined sales of €129.2 billion for the two-month period (this figure includes routine daily purchases). For the full year, the HDE forecasts real growth of 1.0% to a total of €697.4 billion.

E-commerce remains the growth engine. The HDE expects online Christmas sales of €23.1 billion, a real increase of about 2.3% year-on-year. For the full year, online revenues are predicted to rise by 3.5% in real terms to €96.3 billion.

The seasonal importance of the last two months is clear: retailers typically earn 18.5% of annual sales in November and December. Some categories are even more concentratedtoys (26.2%), books (23.8%) and consumer electronics (23.7%) capture especially large holiday shares of annual revenue. When it comes to gifts, vouchers top the list: 30% of consumers plan to give them, while 19% intend to give cash as a safe option.

Bottom Line

The picture for the holiday season is therefore mixed. Measured at headline level, consumers plan to spend about as much as last year, and total retail sales are expected to increase slightly in nominal and real terms. But the weak consumer sentiment, greater price sensitivity, higher operating costs for retailers and the risk of disruptions from public disorder all point to a more uncertain trading environment than the topline figures suggest. For retailers, navigating tighter household budgets and protecting footfall in city centres will be critical to avoiding downside surprises as the season progresses.