Germany’s retail sector in upheaval

BERLIN - Agence France-Presse

With a string of high-profile bankruptcies and thousands of layoffs, the German retail sector is in upheaval as it struggles with the challenges of changing customer trends and online shopping.

The sector was prospering until just a few years ago, but over the last two years some of its oldest players have been forced to close or undergo deep restructuring in order to survive. Last week, the iconic mail-order chain Neckermann, set up in 1950 and employing 2,500 people, filed for insolvency. At the end of June, Schlecker, a family-run chain of drugstores present in almost every high street across the country, shut its doors for good with the loss of nearly 25,000 jobs. The employees, mostly women with few or no qualifications, had already agreed to accept painful cuts in pay and conditions when Schlecker applied for protection from its creditors at the beginning of the year.

Failure in cost optimization

But even that was not enough and the employees now find themselves without a job and rapidly diminishing hopes of finding a new one. “Over the past decade, a number of retailers groups have sought to remain competitive solely by slashing costs. But they have failed to optimize their range of products and services,” said Joerg Funder, director of the IIHD institute for commerce and retail in Worms, western Germany.

The Karstadt chain of department stores also recently announced plans to axe 2,000 jobs, while there are rumours that 900 jobs are to be cut at another group, Metro. While politicians have been up in arms over the fate of ailing German carmaker Opel at the hands of its U.S. parent company General Motors, much less has been said about the massive layoffs and problems facing key retail groups.