Retail sector in Switzerland: Growth potential in online retail

Sales in retailing are stagnating. Online retail presents opportunities.

Stagnating sales continue to afflict the retail sector in Switzerland. The situation for brick-and-mortar stores is particularly serious. The outlook is better for companies that are strongly investing in e-commerce. Online retail continues to present good opportunities for growth in 2020.

Swiss retail stagnated in 2019

The Swiss retail sector had a mixed year in 2019. Competition from online retailers as well as the increased attractiveness of shopping tourism burdened businesses. In addition, the purchasing power of Swiss consumers remained roughly the same as the previous year despite a stable labor market. Brick-and-mortar retail was bolstered only by population growth.

While the food and near-food sectors were able to grow by 0.5% last year, sales in the non-food sector fell by 0.3%. The fashion industry in particular is suffering under these difficult market conditions. Brick-and-mortar apparel retailers lost significant market share to online retailers, primarily Zalando, and had to accept a 4.5% drop in sales. They are currently suffering greatly from the ongoing structural changes to the retail sector. Ultimately, this has resulted in stagnating nominal sales for the entire sector.

swiss retail sector suffering from stagnation

Swiss retail sales did not grow in 2019

Source: GfK, Credit Suisse

2019: Credit Suisse estimate

Online retail continues to grow in Switzerland

In contrast, online retail is performing well. Sales continue to grow in this sector. In 2018, online retailers generated CHF 9.5 billion, almost twice as much as in 2010. Approximately 80% of that was generated by Swiss retailers. And the upward trend for sales generated by online retail looks set to continue.

The reason? A growing percentage of the Swiss population uses the internet on a daily basis. Growth in the number of users aged 60 and older is particularly strong. Accordingly, the percentage of the population who shop online is also growing. In 2017, 72% of the Swiss population said they had made at least one online purchase in the last three months. This means Switzerland has the second-highest percentage of online shoppers in Europe.

Future potential for e-commerce in Switzerland

Despite the trend toward online shopping, many Swiss consumers still abstain from shopping online. According to a survey by Eurostat, 17% of Swiss consumers prefer to shop at brick-and-mortar stores. There are also other factors, such as long delivery times or concerns about the security of the payment process, that continue to deter some consumers from making online purchases. This means there is still room for growth for online retailers, provided these disruptive factors are made more client friendly.

The Swiss retail sector once again set for slight growth

The outlook for the Swiss retail sector in 2020 is better. According to Credit Suisse experts, population growth and a slight increase in purchasing power are likely to bolster sales. However, we do not anticipate above-average growth for the retail sector. Weaknesses in manufacturing and the strong exchange rate against the euro continue to limit the sector's potential.

In particular, brick-and-mortar clothing and footwear retailers are under severe pressure. They will face an additional 0.5% decline in nominal sales. Therefore, we anticipate a 0.2% drop in nominal sales for the non-food sector as a whole. Retailers in the food and near-food sectors have reason to be more optimistic. Sales in this sector are likely to grow by 0.8%. In summary, we anticipate growth in both nominal sales and prices of 0.4% and 0.3%, respectively, for the Swiss retail sector.

non food segment with negative sales 2020

Negative sales for non-food sectors weighing down the Swiss retail sector

Source: GfK, Swiss Federal Statistical Office, Credit Suisse

2019/2020: Credit Suisse estimate/forecast