No value added – retail price increases cost us billions this year

The difference with last year – an average of 760 euros per household – is due to the enormous inflation, Andreas Kreutzer, head of Brancheradar.com, said Tuesday. These are still costs without energy, rent, fuel. Overall, trade turnover is likely to rise in nominal terms this year, but contract slightly in real terms.

Retail still struggling with sales
According to a study by Kreutzer on behalf of the trade association, trade achieved around 70 billion euros in turnover in 2021, but in real terms the level of 2019, before the Corona crisis, was not reached. That will not be the case this year either. How many retailers can pass on the rising prices strongly depends on the sector.

Not all products are more expensive
For example, fashion items are hardly more expensive this year than last year because people have become very price sensitive. Sales are soaring this year as people with lockdowns catch up on what they’ve missed in two years. However, according to Kreutzer, sales should only just reach the level of 2019.

On the other hand, 2022 should bring a return to stationary trading: here sales will increase by more than five percent, while online sales will only increase by two percent.

Are inner cities dying out?
Rainer Will, director of the trade association, warned in the joint press conference that according to a survey, 6,000 merchants could close this year — many of them silently and without bankruptcy. In some inner-city locations, this will have a negative effect on the cityscape, Will warns and calls for more support from retailers. In particular, he criticizes the government’s previously announced support package for energy-intensive companies.

Companies whose energy costs represent more than three percent of production costs should therefore be supported. Contrary to the government’s announcements, ‘virtually no’ trading companies would be covered by this scheme, Will says angrily. This is not the only way to help companies under EU law.

People only buy what they need
The food trade, the largest retail sector with a turnover of around 27 billion euros, is having a hard time. Since 19 percent of people now reduce their spending to the most necessary, according to a survey by the industry association, three quarters rely on cheap groceries. This has accelerated the trend from branded products to private labels. Organic products, which are usually cheaper than conventional ones, are often sold under private label, Kreutzer emphasizes.

“Every economic sector is picking up something”
Kreutzer, for his part, pointed out that many sectors of the economy are currently using the general expectation, also fueled by the media, that prices will rise anyway, to raise prices unnecessarily. For example, flight prices have risen by 26 percent, although only kerosene has become more expensive and by less than 26 percent.

The high inflation is not only related to higher prices at the beginning of the value chain, but “every economic sector adds something to that,” Kreutzer says. That’s not an accusation, that’s a fact. Market researcher’s conclusion: “The world is not good.”

Concerned about the Christmas sale
How the year as a whole should be judged will only become clear after the Christmas business. And that is especially difficult this year because, on the one hand, the high energy prices will only really affect many companies towards the end of the year and, on the other hand, households will increasingly feel the increase in energy costs and rents, says Norbert Scheele, vice president of the trade association and head from C&A Austria and CEE: “Then we will see what people can or want to afford.”