Germany’s population structure is changing. The resulting demographic change creates a double effect: The population is shrinking and, on average, getting older. People born today will, to a large extent, be able to celebrate their 100th birthday. By the year 2030, some 50 % of all German nationals will be at least 50 years of age and older. The ageing is attributable to the shrinking. All of this also affects the city centres and the retail industry in prime city locations. Only, the question is what are these effects?
Germany’s regions are affected differently by the demographic change. While above all in parts of eastern Germany, in the Ruhr region and rural areas of Hesse or Lower Saxony the number of residents is on the decline, most of the local authorities in Bavaria and Baden-Wuerttemberg are currently still planning for population growth. But the south is also already seeing the fi rst rural districts that have been unable to escape the shrinking trend. Following a population increase from 12.2 million to 13 million residents, the German Council of Municipalities in Bavaria forecasts a drop to 11.5 million people even for the Alpine foreland by 2050. The fact that contrary to the “love of country life” still portrayed throughout the media, people are reconsidering life in the city stands out in the small-scale consideration. New urban living is the talk of the town with a desire for amusement, culture and variety, which is most likely assumed to be in city-centre proximity. The German Sunday newspaper Welt am Sonntag recently even observed that the exodus from the countryside had now already “assumed a dimension that undermines all forecasts about future developments.
The society geared towards singles, senior citizen state and one child family have completely different residential and lifestyle ideas compared with the ones the social state aims to provide for them”. This is also associated with a signifi cant change in consumer behaviour that impacts all segments of retail trade. In that respect the greatest role will be played by the single growing consumer group: the new, young-at-heart oldies with their above-average high disposable household income as the so-called Best Buyers.
Almost all economic studies assume that in view of the emerging age poverty, in the future probably no older generation will enjoy such good economic times as the current one. The population that grew up after World War II has considerable means to make the third phase of their lives as attractive as possible. In addition, in terms of physical fi tness today’s fi fty year-olds could easily keep pace with the 40 year-olds from the previous century. Fitness and wellness are key topics for this target group. The German advertising slogan “Greed is good” (“Geiz ist geil”) is being displaced by the demand for lasting consumer options. The Best Buyers are not interested in mass products, but rather look for quality in every respect. Those who can afford it prefer fi rst-class food or biological products. Foods such as Basic, Alnatura and Tegut are witnessing an expansionary trend. While the pedestrian zones in the last few years saw the advance of the Young Fashion concepts with few personnel and self-service, increasing numbers of fashion outlets are opening today such as Gerry Weber, Brax, Walbusch, Ulla Popken, Seidensticker and the like in the best areas of the pedestrian zones. Shoe shops such as Tamaris, Ara, Geox, Ecco or Bär are increasingly realising their own store areas to show their target group outside the major shoe shops a better range of products in a corresponding setting.
Outdoor suppliers have experienced a special boom since hiking was rediscovered by the “Young oldies” as a favourite pastime. Suppliers such as Jack Wolfskin, Salewa, Northface, Mammut, Camel Active or Timberland are just a few examples of this sector characterised by strong growth that is successfully reaching out to customers not altogether in the low price segment. A noticeable feature of all these new openings is that they are usually characterised by high quality store furnishings coupled with well-trained personnel providing unobtrusive but professional advice. Are the inner-city specialist stores about to experience a renaissance?
According to the observations of DOMINO, the Best Buyer target group by far prefers a well-maintained pedestrian zone with an attractive mix of retail stores and culinary concepts than shopping centres that are more the choice of the younger members of the public. However, up-market business formats normally only open in real estate properties that correspond with the current basic construction standards. While steps in the sales or entrance areas were acceptable in the past, they are a knock out criterion for the renting practices of most branch operations. Likewise, in the meantime an adequate exposed brick ceiling height of at least 3 m is an absolute must in salesrooms. That is not only a prerequisite for the current air-conditioning, ventilation and lighting technology, but also key to the subjective room feeling when entering the store. The overall outside appearance of the real estate is also important. No concept worth its salt opens in a building in which the plaster is already coming off in the upper fl oors. This is where building owners need to pre-fi nance, more than in the previous years. In the meantime, the successful branch operations have become a lot more uncompromising, and have already wandered off to centres or other locations on occasion. Throughout Germany there are enough examples where the fl ight of up-market suppliers has subsequently lead to a creeping desolation of erstwhile prime locations. Best Buyers no longer buy for the sake of buying. Above all, buying presents a good opportunity to establish and maintain social contacts – and in an attractive setting. For this group, buying is a “social event” and this is where the stationary retail industry can really make its mark against the sharp increase in online trade if it identifi es and correctly implements this development.
However, for retail traders this is normally associated with higher costs. Almost all companies that serve the target group of young oldies have signifi cantly higher store construction and personnel costs for example than most of the Young Fashion branch operations. In its favour, the Best Buyer is normally brand loyal once he has found “his” supplier, and feels he is being appropriately treated and served there. However, higher real estate and personnel investment costs ultimately have an effect on rents. The highest rents in the prime locations are currently paid by companies that invest little in the store construction and frequently only employ 1 to 2 sales staff members on a 300 m² sales area. The target group of these companies is often not certain suppliers but rather, by contrast, is geared towards the fast-moving zeitgeist and price awareness to which the online trade can react quicker where necessary. Those who go exclusively above the price can be quickly exchanged at the click of a mouse. Incidentally, in particular the cheap baking chains are feeling the effects of this development, and are now experiencing problems because of the baking machines at Lidl and Aldi after having themselves displaced the traditional artisan bakers from the city centres. The motto “Trade is change” has always applied to a considerable extent to the sales areas in Germany’s prime locations. While in the last few years initially the large shopping centres and specialist market centres, then the factory outlets and lastly e-commerce have been seen as a major threat to the traditional shopping locations in the city, the demographic change has developed quietly and secretly as the actual driving force for change for entire swathes of the country.
By way of the selection of their tenants, building owners largely have the power to decide whether or not the city centre overall retains its attractiveness, or can even improve in terms of quality, which ultimately favours the development of the sustainability of their own real estate. The slowly emerging trend away from “cheap” growth at any price to more sustainable and valuable concepts again is something the pedestrian zones richly deserve.