Another round of shop closings: Unwelcome news for Swiss retailers
The pandemic was a major factor for Swiss retailers once again in 2021, especially during the first quarter. For instance, the non-food segment posted a loss in the first quarter because of the required shop closings. Thanks to a rebound in consumption, however, revenues still managed to exceed pre-crisis levels in the first half of the year. Meanwhile, food retailers benefited for months, as competition from shopping tourism and hospitality was essentially eliminated.
Rebound in consumption gives a boost to Swiss retailers
The non-food segments of leisure, as well as household essentials/home, posted revenue growth after shops reopened. This was thanks in no small part to rebound consumption following the end of lockdowns. Household essentials/home benefited in particular, with revenues in March 2021 growing by some 33 percent compared with pre-crisis levels from 2019.
The segments of home electronics and DIY/garden/automotive, meanwhile, were not as affected by the closures, so they generated sales growth in January and February 2021 as well. In the first half of 2021, revenues in these segments rose by 22 percent year-on-year. The entire non-food segment, meanwhile, achieved 6 percent revenue growth versus pre-crisis levels despite the challenging environment.
Restrictions on shopping tourism good for Swiss retailers
Food retail benefited in the first quarter of 2021 from lower competition: Bars and restaurants were closed, as was the Swiss/German border. Non-food retailers are likely to have profited from the reopening of retail as well because rebound consumption was almost entirely limited to Switzerland. Once the borders and restaurants reopened in the second quarter of 2021, competition was up for Swiss food retail while revenues were down.
Pandemic resulted in less short-time working for Swiss retailers
As non-essential businesses were ordered to shut down, some retail employees were faced with difficulty once again. In February 2021, the number of persons registered as unemployed reached its highest level since the crisis began, with some 12,000 people. At the same time, the number of retail employees on short-time working skyrocketed.
However, because restrictions were lower than in 2020, so was the number of retail employees affected by short-time working. Once brick-and-mortar shops got back to business and the COVID numbers declined, the number of unemployed persons on file and short-time working dropped as well.
Swiss retailers divided by special sales campaigns
Special sales campaigns are becoming more popular in Switzerland and are now a familiar concept to many consumers. However, they draw only a minority of people to the shops, mostly younger consumers. Still, a comparison with 2018 shows that in 2020 and 2021, consumers took advantage of special sales or promotions during these campaigns much more than they did before the crisis. The rising popularity of these special deals in the last two years is likely related in part to the pandemic.
Although there are many factors behind the rise in the special price campaigns, there has recently been some pushback against them as well. The opposition is in favor of more sustainable consumption. Surveys indicate that many retailers feel obligated to take part in these special sales for the sake of revenues, market share, and customer retention. Some in the industry doubt that the loss of margin due to special prices can be compensated for by higher sales volume. Furthermore, there is a risk of cannibalization to the Christmas shopping season if consumers fill their carts well in advance.
2022: Sales likely to remain above pre-crisis levels for Swiss retailers
Swiss GDP reached its pre-crisis level in Q3 2021, according to the weekly economic indicator from the State Secretariat for Economic Affairs SECO. The economic recovery is expected to continue in the months ahead, and the employment market should continue to improve as well. Even if the COVID pandemic is not likely to end soon, some effects that boosted retail last year will probably fade in 2022.
In light thereof, retailers must focus again on consumers, including what they intend to buy and/or need to buy. According to the survey by Fuhrer & Hotz conducted each year among decision-makers in retail, companies are planning to respond with a wide range of appropriate marketing activities.
After all, companies have set ambitious targets for 2022 and two thirds expect to see revenue growth compared with the prior year. However, experts believe that sales will shift further from physical to virtual locations. More than 80 percent of retailers surveyed will (have to) adapt their shop space in 2022. In the food/near-food segment, the focus is on expansion through opening additional locations, while the non-food segment hopes to improve their profitability by closing or reducing the size of existing locations.