UniCredit Bank Austria industry report on the retail sector:
Austria's retail sector is showing minimal growth in 2019
- Nominal sales growth in the retail sector is expected to remain below 1.8% year-on-year in 2019
- In 2018, food retailers, pharmacies and DIY shops made the highest contributions to the industry's growth
- Consumer spending in the retail sector is becoming less important in the long term
- Foreign online competitors are increasing market shares
- The retail sector remains a key employer
The retail sector is seeing little benefit from favourable economic conditions
Austria's retail sector barely benefited from the sharp rise in household consumer spending in 2018. Nominal sales figures for the industry have increased by 1.8% to EUR 64.2 billion. As UniCredit Bank Austria's latest report on the retail sector shows, there was only a 0.2% increase in sales when adjusted for inflation, with some major sectors—such as clothing, footwear and furniture—actually seeing a 2% decline in sales.
The highest growth contributions in 2018 came from the food retail sector — specifically from chain stores. Although growth was only slightly above the average, a sales increase of 2.3% for a sales figure of EUR 22.2 billion meant that chain stores made the highest contribution to overall growth in this sector. This was followed by pharmacies, with a nominal sales growth of 3.9% to EUR 4.8 billion, and DIY shops, with an increase of 5% to EUR 4.1 billion.
In 2019, the economic conditions for the retail sector will remain favourable. Above all, consumer demand continues to grow at a high rate, driven by rising employment and wage increases. Households can also expect to see an increase in real income thanks to the relatively moderate price increase. By April 2019, nominal sales growth in the retail sector had also increased slightly to 2%, with real sales growth at 1%. However, the marked decline in consumer confidence in the first half of the year already signals a reduced willingness to buy in Austria. In addition, retailers' business expectations have been reduced slightly for the second quarter, so a lack of growth in retail sales is expected in the short term. Sales growth in the retail sector is expected to be slightly weaker in 2019 than in the previous year.
"As we saw in 2018 and expect to see in 2019, the retail sector's weak growth in the context of the broader economy is a long-term phenomenon. Above all, the increasing saturation of households that comes from greater wealth within society is causing the decline in spending on retail goods. This development is present in all European countries", Günter Wolf, economist at UniCredit Bank Austria, observes. The proportion of retail-related goods in overall consumer spending is gradually decreasing — in 2017 it was 34%, whereas 20 years before it was 39%. The growing number of consumers expected with the rising population in Austria will slow this decline, but it will not reverse it.
Foreign online competitors are increasing market shares
Austria's retail trade has also lost customers to online competition from abroad. Compared to the rest of Europe, the industry has a relatively low online presence in Austria. In 2018, only 22% of Austrian retailers with more than ten employees—totalling around 1000 companies—sold products to consumers via their own online shop and/or an online marketplace. The EU average was 26%, with the highest online presence in the Netherlands and Denmark at more than 50%.
The relatively low level of online engagement within the Austrian retail sector is even more evident by the proportion of online revenue in overall sales of 3%, compared with the European average of 8%. Including companies with fewer than ten employees, the number of online shops in the retail sector totals more than 9000, according to a survey by the Austrian Institute for SME Research. However, this is only around 5% of the total sales in the retail sector, or EUR 3 billion. This means that less than half of the total online spending in Austria, which is estimated at around EUR 7.5 billion, actually goes to domestic suppliers.
The retail sector remains a key employer
According to Wolf, "Despite extensive restructuring measures and weak growth in the industry, the retail sector remains the most important link between consumer goods manufacturers and consumers and is, above all, a key employer in Austria". The retail sector employs 335,000 people — just under 9% of the country's entire workforce. This number has actually risen slightly over the last ten years, albeit somewhat more slowly than in the economy as a whole. The proportion of total employment has fallen by just 0.3%.
Most of the 20,000 new jobs created in the retail sector since 2008 are part-time jobs. More than half of all employees in the industry work less than 36 hours a week, compared with 28% in the economy as a whole. In addition, at least one fifth of part-time workers are in marginal employment, which means they work less than 12 hours a week. Due to the high proportion of part-time workers and the relatively low standard wages in retail, wages per employee in the retail sector are approximately one third below the overall economic level (average gross annual income per worker reached EUR 21,200 in the retail sector in 2017 and EUR 32,300 in the economy as a whole). Nevertheless, labour force surveys have shown that around three quarters of part-time workers have no desire to increase their working hours.
UniCredit Bank Austria Economics & Market Analysis Austria
Günter Wolf, tel. +43 (0) 50505 - 41954;