DGermany’s hardware stores are showing interest in the department store locations of the insolvent chain Galeria Karstadt Kaufhof that are becoming vacant. “That can become an issue,” says Peter Wüst, the general manager of the trade association for DIY, building and gardening (BHB), compared to WELT. “To do this, however, rents have to drop significantly.”
In principle, however, such inner-city locations are exciting for the industry and there is already a lot of movement. “A lot has been tested in recent years,” reports Wüst.
And apparently also recognized a corresponding need. In any case, Hagebau now has more than 100 small city DIY stores with a kind of local supply range, mainly in middle and sub-centres. While the branches were initially called “Werkers Welt”, they now operate under the “Hagebau compact” label.
Obi, on the other hand, is currently represented in large cities such as Berlin, Munich, Cologne and Stuttgart with nine small city center shops or showrooms. Sales Director Franz-Peter Tepass does not rule out other locations. “That’s not our focus at the moment. But we’re looking at it,” says the manager, who is also spokesman for the BHB.
When it comes to the Karstadt and Kaufhof properties, Obi would at most consider parts of the mostly very large buildings, the rent level had to match, as did the access options for suppliers.
With the inner-city formats, the DIY stores want to be local suppliers and appeal to both occasional shoppers strolling through the city and the residents of the respective centers. “Then you don’t have to drive to the outskirts for every part,” explains industry representative Wüst.
Strong sales growth in 2022
For example, it is about small green assortments, but also about hardware, tools, paints, lights and lamps or the topic of handicrafts – and thus about product groups that also work well with other retailers in the city centers. In the meantime, Obi also offers building materials such as cement in its city shops, but then in smaller pack sizes with, for example, five kilograms instead of 25.
It is clear, however, that in the end only a fraction of the usual depth of range can be kept in the city centres. After all, according to the BHB, a large hardware store in the classic outskirts offers up to 150,000 items that are available locally.
And they were in high demand in 2022. The turnover of the hardware store industry with its currently 2067 locations across the country and the corresponding online shops added up to almost 22 billion euros. Revenues have increased by almost eight percent.
However, most of this increase is price-related. Adjusted for inflation, growth is just under one percent. Nevertheless, the industry is satisfied, as sales are almost back to the level of the record year 2020, when there was an unexpected boom in DIY stores due to the corona.
Source: Infographic WORLD
But not every range has done equally well. Because consumer sentiment is clearly influenced by the effects of the Ukraine war with inflation and fears of recession and concerns about an energy shortage. The main winners were fuels and energy sources, plus power generators and fan heaters, but also the areas of heating and sanitation as well as building materials and construction chemicals for, for example, energetic renovation.
On the other hand, seasonal classics such as barbecues or pools, as well as garden equipment, garden furniture and awnings, have not been sold. “When it comes to purchases in areas that are not absolutely necessary, people are cautious to reluctant,” reports the BHB.
Seasonal classics are getting cheaper this year
Nevertheless, the DIY stores had stocked up particularly well because this category had done very well in previous years. “These areas collapsed in 2022 like no one thought possible,” said Tepass, head of the association, when presenting the DIY stores’ annual balance sheet. “Customers have rearranged their spending.”
Accordingly, the warehouses of the DIY store operators are currently full of the items left over from the previous year. Tepass therefore expects a fierce price war in these product ranges: “Customers will love it.”
In other segments, however, the industry is not ruling out further price increases. “We still have regular price discussions and negotiations with the suppliers,” reports the expert and urges restraint. Because a corresponding balance is important in order not to provoke even more reluctance to buy.
Inflation in Germany reaches its highest level in almost 50 years
Strong price increases for energy and food have driven the inflation rate in Germany to its highest level for almost 50 years. In May, consumer prices were 7.9 percent higher than in the same month last year. For consumers, this is particularly evident in everyday life.
Source: WELT/ Svende Homburg
The BHB does not dare to make a forecast for 2023 for the time being. “That doesn’t seem advisable in view of the extremely volatile situation,” says CEO Tepass. It will depend heavily on global developments in energy prices and a stabilization of the supply chains as to how cost structures and, above all, consumer sentiment will develop.
“But we are confident that we can achieve nominal growth in line with the inflation rate,” says Tepass. According to him, the first two months are at the same level as last year, while March is extremely difficult to assess due to the bad and fluctuating weather.
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