Roller-coaster ride for Swiss retailing. Online sales are booming.

The lockdown imposed by the Federal Council in the spring brought the Swiss economy to a virtual standstill. Where are things likely to go from here? Retail Outlook 2021 shows what impact the COVID-19 crisis is having on the Swiss retail trade and the extent to which online business is benefiting.

Swiss retail trade experiences historic slump in sales

2020 was akin to a roller-coaster ride for Switzerland's retail sector. Retail sales across the various segments developed in different ways following the outbreak of the COVID-19 pandemic, as highlighted by the Credit Suisse Retail Outlook study. Thus the food sector in particular benefited from the temporary absence of competition from bars, restaurants, and shopping tourism during the lockdown.

While food retailing saw year-on-year growth in sales in March, April, and May, most non-food segments were badly affected by the temporary standstill in public life. The mandatory closures resulted in a historic slump in sales in non-food retailing in March (minus 20%) and April (minus 40%).

Umsatzentwicklung im Schweizer Detailhandel während der Corona-Krise

Sales collapsed completely during lockdown

Nominal retail sales, indexed (Jan 2012 = 100) and seasonally adjusted

Sources: GfK, Credit Suisse

Last data point: September 2020

Lockdown is changing people's mobility behavior

Changes in the mobility behavior of the Swiss population in the spring proved challenging not only for non-food retailers but also affected food retailers, depending on their location. The growth in working from home and the temporary closure of education facilities resulted in a drop in footfall of up to 80% in urban areas. In rural areas too, mobility declined by nearly 60%.

Working from home is likely to remain widespread in the future too, and will continue to affect consumers' mobility behavior. In broad terms, footfall is likely to decline by between 5% and 30% over the long term. This general behavioral shift among consumers mainly afflicts bricks-and-mortar retailing. Fact is, regular trips to the supermarket closest to the office, or to the non-food retailer on the way home from work, are no longer being made.

Swiss retailers go online

Bricks-and-mortar retailers took various measures in response to declining footfall during the COVID-19 lockdown of 2020. Thus retailers focused their attention on service delivery and the launch of contactless pick-up solutions, with contactless payment facilities also becoming more important than ever. In addition, retailers ramped up their online and omnichannel offers in order to guide consumers through in-house online stores and foster brand loyalty.

The growth of e-commerce illustrates just how important it is to have a strong online presence during the pandemic. The sector has benefited hugely from the COVID-19 crisis, recording an estimated 55% jump in sales. The trend is driven not only by the closure of bricks-and-mortar non-food outlets but also by the fact that many of the new customers seen in the spring found online shopping to be a positive experience.

Online retailing is experiencing another upswing

Major boom in online sales

Growth of e-commerce in the last ten years
Sources: GfK, Credit Suisse

Lockdown produces major pent-up demand from consumers

Two key effects of the lockdown can be identified: While the food segment can increase its sales due to an absence of competition, the non-food segment has to contend with a fall in business. And if the online trade continues to make inroads, bricks-and-mortar retailers suffer.

Despite this dichotomy, a look at the overall development nevertheless shows a positive overall picture for Swiss retail sales this year as a result of the increased focus on online and pent-up consumption caused by the lockdown. Pent-up demand following the lifting of the lockdown in May triggered a boom, with record sales increases in the non-food segment in particular. A revival in domestic tourism during the summer and autumn also played a part.

Comparison of sales across various sectors

DIY/garden and leisure saw record sales increases in May

Nominal retail sales, seasonally adjusted versus previous year
Sources: GfK, Credit Suisse
Last data point: September 2020 

Long-term consequences likely to affect Swiss retail trade

A return to positive values nevertheless seems unlikely in 2021 under normal circumstances. According to the Fuhrer & Hotz survey, nearly half of those surveyed do not expect sales to grow. The reality is that the long-term consequences of the COVID-19-pandemic risk damaging the retail trade due to factors including the labor-market situation, purchasing power, and immigration. Thus a normalization of the COVID-19-induced situation is not expected in the near future.