Heavy losses in Swiss retailing to continue

Heavy losses in Swiss retailing to continue

Consumers increasingly prefer to buy online instead of in shops. This has consequences for retail spaces. The supply of vacant shops remains high, even though few new retail spaces are being built. 

The retail sector is benefiting from the good economic situation

Revenue in Swiss retailing increased by 0.5 percent in 2018. This is largely thanks to the good economy, since consumer appetite for spending has not increased significantly. Overall inflation, combined with relatively low wage growth, has led to a slight loss of spending power for the second time in a row. Geopolitical events have also had a negative influence on consumer sentiment.

On the other hand, purchasing outside of the national borders became less appealing in 2018. The devaluation of the franc is beneficial to Swiss retail trade. So is the fact that prices for consumer goods have risen faster abroad than in Switzerland. However, the Swiss franc could increase in value again in the second half of the year, and economic growth is also set to cool down in 2019.

Segments developed differently

Depending on the segment, turnover in retail trade developed very differently. For example, the leisure and DIY segment benefited from the pleasant spring and hot summer. Sales in home electronics, household and living products, as well as personal care and health segments, also increased.

In contrast, the unusual weather conditions melted away sales in fashion retailing. The minus nine percent led to a lower overall turnover in the non-food sector than in the previous year. The food sector, on the other hand, gained 1.6 percent.

Turnover in Swiss retailing 2016-2018

Major discrepancies in retail trade turnovers 

Nominal turnovers in retail trade, growth compared to previous year

Source: GfK, Credit Suisse 

Buying online is more appealing than in the shops

But it wasn't just the weather that troubled the clothing industry. At the same time, there is a shift in sales from brick-and-mortar to digital shops. Foreign providers like Zalando in particular benefit from this. Asian online retailers are also gaining ground: AliExpress and Wish have established themselves among the top 12 of the online retailers with the highest turnovers in Switzerland.

This trend is likely to continue, because online shopping is convenient, you pay with one click, and the online store is always open. Once people have discovered shopping online, they hardly go back to stationary retail. And demographic aging contributes to online retail continually gaining new shares of the market.

Buying online instead of in shops

Further growth of online retail is inevitable 

Percentage share of the total population that shops online

Source: Swiss Federal Statistical Office, Credit Suisse 

The supply of retail space remains high

This development is taking its toll: Restructuring, shop closures, and job losses are taking place in stationary retailing, especially in the clothing and shoe sectors. The list of victims is growing: Bata, Blackout, Charles Vögele, OVS, Schild, Switcher, and Yendi – to name but a few. At the end of last year, just under 234,000 people worked in retail trade. That is 16,000 fewer than even ten years ago.

When shops close, there are obviously repercussions on the demand for retail space. It is shrinking in the fashion industry in particular, whereas providers of services, jewelry, optics, hairdressing, and cosmetics are able to expand. In some places, this leads to adjustments in the tenant mix. But not every retail space that becomes vacant can be easily rented out again. This is apparent from the advertised offers, which remain at a high level, despite few new retail spaces being built.