For years, the German retail trade has been leading itself into a catastrophe. A few exceptions confirm the rule.

For more than 10 years the German retail trade has produced in quick succession one existential crisis after another, accompanied by cries for help and more and more bad news. Let’s recollect: after the German Unification a futile and unaccountable build-up of sales areas in the ‘New Laender’ began, followed by huge losses because the purchasing power did not allow for good enough sales figures and profits which would have justified the investments. At first, the battle cry was “we want to be the first”, yet soon after they already spoke of ‘closing down’.

After the lost battle for market share in the ‘New Laender’, the ‘big ones’ looked for new playing fields. From joining a discount travel business to dedicating themselves to sports on TV, every chance to lose money was welcomed. Not to speak of the increasingly tough price cuts.

Then came the introduction of the Euro. Instead of converting fairly, the prices were manipulated shamelessly. A bar of Milka chocolate cost during DM-times 85 Pfennig, since the introduction of the Euro, the consumer has to pay 65 Cents or, converted into the original currency, DM 1,30.

The consumers are seeing right through it. Disgusted with the awareness to be considered stupid and lately also “geil” for rebate battles, the consumer is massively practicing shifting of personal expenditures. Ten years ago, consumers were spending fifty percent of their income on consumption, nowadays they are spending barely thirty percent. The change of values is more and more affecting the spending habits of people.

The new attempt of retail to compensate for declining sales volume by using more highly calculated trademarks is going to fail. The consumer will quickly detect the difference between a brand and a trademark. Brands offer more for their money, because their margin is oriented on the product benefit/performance/-leistung.

Consumption is going to decline further. If for no other reason, then because the government has to collect the debt of living for forty years beyond our means. The social security provided so far by the government is going to rest more and more in the hands of each private citizen.

Retail is going to have to change its politics radically if it does not want to crash. How? Rigorous reduction of submarginal sales areas, return to solid pricing calculations where deductions and pre-calculated special offer prices won’t fit; care of quality and service; well-structured marketing concepts and one’s own clear positioning. Our model, the Waisted Rectangle© could be the force behind this change.

To the industry we suggest this: Focus on strong brands which allow for a stringent selective distribution due to their character. This is how you can avoid being pulled into a crisis by retail and at the same time you serve the customer. This is how customer orientation is developed and sales volume and profit.