European retail landscape in 2016

Retail growth is anticipated for 2016, though political and economic uncertainties and differences between European regions could slow down the process.

GfK’s Geomarketing division has carried out a comprehensive analysis of the European retail scene in 33 European countries. The European Union economy grew nominally by 4.7% and unemployment fell in most countries. Private consumption increased significantly; low interest rates made traditional saving less attractive, encouraging many consumers to choose spending their money, which benefited retail. Offline retail also experienced robust growth and generated 3.0% more turnover by the end of 2015.

Overall, 2015 was a good year for European consumers.

Here’s a look at our key findings

Purchasing power in 2015: The economy grew and unemployment fell in most European countries in 2015. This development is reflected in the nominal purchasing power figures, which increased in the European Union by an average of 3.7% compared to the previous year. This gave each EU citizen an average of EUR 15,948 for consumption, rent, savings and retirement contributions.

2016 turnover prognosis: The solid store retail business from last year will continue in 2016. For the EU-28 countries, GfK forecasts somewhat decelerated progress, with a growth of 1.1% (based on nominal euro values). There will be especially positive developments in Romania (+7.2%) as well as continued progress in the Baltic States (+3.8 % to +4.9 %), which are gradually catching up with the more mature markets. We expect a robust dynamic in store retail in Sweden (+4.8 %) and Spain (+3.7 %).

Retail share of private consumption: In 2015 consumers enjoyed both low energy and fuel costs as well as a good economic situation and an increase in private wealth in many European countries. Even so, the main beneficiaries of these positive conditions were areas other than retail. Consequently, the trend of retail’s declining share of private consumption also continued in 2015. The average quota for the EU2-8 is 30.4 %. While consumers have more money for purchases, they predominantly spend these funds on services, traveling and recreational activities rather than on retail. These expenditures translate to less money available for retail consumption.

Inflation: Consumer prices remained constant (+0.0 %) in 2015. This is a rare situation for industry and retail, as well as consumers. In February 2016, the European Commission forecasted a 2016 price increase of 0.5 %, driven by a more expansive central bank policy and an economic upswing. But the inflation expectations are dampened by the low prices for crude materials. A price deflation actually occurred in many European countries in 2015. But for 2016, the European Commission forecasts declining consumer prices only in Slovenia (-0.3 %), Romania (-0.2 %), Lithuania (-0.1 %) and Bulgaria (-0.1 %).

Sales area productivity: Over the past year, sales area productivity in the EU-28 increased by 2.7 % to just under EUR 4,200 per m² of sales area. This is good news for stationary retail, which was able to make gains for two years in a row after a period of declining performance. The online dynamic slowed in more mature markets, and store retail is gradually adjusting to the new conditions. Unprofitable shops were closed as part of retailers’ digitization of their offering and pursuit of omnichannel solutions. The highest sales area productivity values are traditionally in Northern Europe, Switzerland and Luxembourg, while the lowest are in Eastern and Southeastern Europe. But the latter countries are continually gaining ground.

Understanding consumer preferences and site quality is key to success

As the study shows, no two markets – or even two locations – are the same. When choosing potential retail sites, retailers must get clarity on the market potential of the location – both now and over the long term. In order to gauge the potential accurately, it is important to understand the shopper types, profiles and trends that influence the consumer behaviour and thus turnover potential for a particular product group at a particular location. Understanding your regional clients and target groups is a major success factor in any sales channel, whether online or offline.

The full study can be read at www.gfk-geomarketing.com/european-retail.

About Gerold Doplbauer

Dr. Gerold Doplbauer is product management team lead at GfK’s Geomarketing division and is responsible for steering geomarketing products and services throughout their life cycle. He joined GfK in 2013 and draws on ten years of experience in real estate analysis and consultancy. He holds a master’s in business administration and a doctorate in retailing & marketing from Vienna University.

About GfK

GfK is a trusted source of relevant market and consumer information that enables its clients to make smarter decisions. More than 13,000 market research experts combine their passion with GfK’s long-standing data science experience. This allows GfK to deliver vital global insights matched with local market intelligence from more than 100 countries. By using innovative technologies and data sciences, GfK turns big data into smart data, enabling its clients to improve their competitive edge and enrich consumers experiences and choices.