Germany: Sluggish Christmas trade awaits final rush

The German retail sector is navigating a challenging festive period, with many companies resorting to aggressive discounting to stimulate demand. German fashion chain Peek & Cloppenburg (P&C) launched a significant advertising campaign during the final weekend of Advent, offering price reductions of up to 50 percent on coats, jackets and jumpers. Other major players, including German e-commerce giant Otto and department store group Galeria, have similarly implemented deep discounts to salvage seasonal performance.

According to a survey of 300 companies by the German Retail Federation (HDE), only one in six retailers expressed satisfaction with performance by the fourth Sunday of Advent. Two-thirds of respondents reported dissatisfaction, noting that even the traditionally high-turnover week preceding the final Advent Sunday fell short of expectations. HDE chief executive officer Stefan Genth stated that the results have been uncharacteristically weak, noting that the industry has not experienced such a downturn in recent years.

Falling consumer demand

Willingness to spend has been hampered by economic uncertainty. A YouGov poll conducted on December 22, 2024, indicated that 30 percent of consumers spent less on gifts, food and seasonal items compared to 2024. While 44 percent maintained their spending levels, only 16 percent increased their budgets.

Rolf Bürkl, a consumer expert at the Nuremberg Institute for Market Decisions (NIM), noted that the propensity to save reached its highest level since the 2008 financial crisis. This trend is largely driven by fears of inflation. Despite widespread promotions, two-thirds of consumers perceived the overall cost of Christmas to be higher than in the previous year. This price sensitivity was evident in the confectionery sector, where the volume of units sold dropped by approximately 15 percent by early December.

Competition from Temu and Shein

While footfall in German city centres increased by more than 10 percent to 507 million visitors across 283 locations, this did not translate into retail sales. Genth observed that high frequency in city centres, often driven by Christmas markets, did not guarantee buoyant trade for shops.

Furthermore, the rise of Chinese shopping platforms Temu, Shein and AliExpress has diverted significant revenue away from traditional domestic retailers. A YouGov survey revealed that one in five German consumers purchased Christmas gifts through these platforms. The HDE estimates that Temu and Shein alone will generate up to one billion euros in sales within Germany during November and December.

Sector-specific performance

The fashion industry has been particularly hard hit. Axel Augustin, managing director of the German Federal Association of German Textile Retailers (BTE), noted that figures are currently below the previous year. Augustin attributed this partly to the absence of a ‘weather effect’, as a milder winter reduced the necessity for high-ticket outerwear purchases compared to November 2024.

German beauty retailer Douglas also reported consumer restraint, citing high discount pressure and price-conscious shopping habits during the crucial final quarter. Conversely, some categories showed resilience:

Retailers are now looking toward the post-holiday period. According to the HDE, 14 percent of retailers identify the days between Christmas and New Year as the highest-grossing phase of the season, as customers redeem vouchers and spend gift money. The HDE expects total revenues of 126.2 billion euros for November and December, representing a modest increase of 1.5 percent over the previous year. A final assessment of the season is expected in January.