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Europe ‘s retail industry struggles with shoppers staying close to home News and analysis

Regent Street, a major shopping street in London’s West End. Source: Shutterstock

London, United Kingdom – City center shops and malls may have lost their shine during the Covid-19 pandemic, but as locking becomes easier across Europe, many shops in and around residential areas will benefit as consumers hesitate to go far from home .

As retail sales appear to be increasing – rising 17.8 percent in the Eurozone in May and approaching pre-lockdown levels in Britain in June – shoppers are becoming more local, bringing Europe’s most renowned shopping streets from London’s West End to Berlin’s Kurfürstendamm struggle in the absence of office workers and tourists.

In Germany’s main shopping streets in Hamburg, Cologne and Berlin, the number of visitors in June was a whopping 50 percent lower than a year earlier, according to the German Retail Federation, while it fell 75 percent in London’s West End, according to the New West End Company, an association of retailers and landlords in the area.

Many consumers have switched to buying goods online, but they are also going to residential neighborhood stores, and 46 percent of consumers across Europe want to shop more locally in the long run than before the pandemic, Ernst & Young data show.

The trend could represent a significant shift in profit pattern for major European retail companies such as Unibail-Rodamco-Westfield, Klepierre and Carmila with their mix of city center and suburban shopping centers.

Germany’s ECE operates nearly 200 shopping centers across Europe, telling Reuters that centers in areas with a local customer base are approaching the number of visitors before closing – while city center locations were only two-thirds of their usual customer base.

In Britain, buyers buy locally not only for convenience items, but also for other items, such as clothes they would normally buy during a day out in the city center, said Jonathan de Mello of consultancy Harper Dennis Hobbes. “People are very careful about where and how often they shop,” he said.

Half of the British in a YouGov survey of 1,032 people said they would now feel uncomfortable visiting an enclosed retail space like a shopping center.

“What was once a great shopping experience in a central location is really just a place full of risks,” said Andrew Cosgrove, global analyst at Ernst & Young.

At retail locations in central London and larger British cities, visitors between June 14 and July 12 were between 69.2 percent and 75 percent lower than the same period last year, according to analysis agency Springboard.

Local high streets in smaller cities saw a 42.1 percent drop and London’s suburbs fell 40 percent – about a third better than central London, although it was still a significant loss from last year.

Online / local shift no compensation

The loss of business in the city center has already led to major cutbacks at major retailers, particularly in the UK, where Marks & Spencer and John Lewis, among others, have announced store closings and major layoffs.

Some smaller retail chains that struggled before the pandemic broke down, while shopping center operator Intu Properties, owner of the Trafford Center in Manchester and already struggling with high levels of debt, was forced to call in administrators.

In France, Denmark, Germany, Finland, Norway, Sweden and the UK, at least 40 percent of people visit fewer brick-and-mortar stores, according to Ernst & Young – and only 20-35 percent order more online, not enough to make up the shortage.

A recent recovery in sales, as lockdowns have eased, has also not been as robust as retailers had hoped.

Springboard estimates that in the week of July 6, overall visitor numbers in continental Europe were about a fifth lower than the same week a year ago, and 40 percent lower in the UK, according to data shared with Reuters.

Fashion and footwear are the hardest hit retailers, with spring and, in some countries, summer collections lost in lockdown. Clothing and footwear sales rose 70 percent in Britain from May onwards in June, but remained 35 percent below pre-pandemic levels, according to data released Friday.

In countries such as Spain and Portugal that are still experiencing partial or regional lockdowns, due to local coronavirus outbreaks, movements around retail and recreation spaces like malls, restaurants and cafes remain 20 percent below the pre-lockdown level, according to Google’s mobility data.

For retailers across the board, that suggests that there will be more pain.

In Germany, Europe’s largest economy, a third of the 400 physical stores surveyed feel their existence is threatened, according to a June survey by the German Retail Federation.

“When we consider that Germany is a relatively strong economy in Europe, it is a worrying indicator for the region,” said Neil McMillan, director of political affairs and trade at Eurocommerce, a retail lobby group.

By Victoria Waldersee with additional reporting by James Davey; editorial: Vanessa O’Connell and Susan Fenton