Primark, H&M and Zara are closing branches: what’s behind their withdrawal from the cities

In the crown pandemic, many famous companies had to close branches. Whether it’s Zara, H&M or Galeria Karstadt Kaufhof, hardly any chain has stopped dying out. The Galeria Karstadt Kaufhof withdraws completely from Halle an der Saale. Are our inner cities deserted?

Anyone who wants to buy cookware, clothes or video games in Halle an der Saale will no longer be able to do so at Galeria Karstadt Kaufhof. As reported by the “Mitteldeutsche Zeitung” (MZ), the company completely withdraws from the metropolis of Saxony-Anhalt. The closing of the last two branches is scheduled for the beginning of 2023, affecting 120 employees.

The passage is not just “A shock to Halle”, as the headline “MZ”. It also shows how the retail chain is doing. In recent years, Galeria Karstadt Kaufhof has shrunk by a total of 60 branches and the group could only be saved with government support. No other branches were planned to be closed. Yet now the sobering scenario occurs.

Not only the Galeria Karstadt Kaufhof retires

Galeria Karstadt Kaufhof is not the only known company that is increasingly disappearing from German urban centers. As per a “HNA” report
shows that fashion giant H&M had to close eight branches in 2021. Several Zara branches have closed in recent months and Primark will give up branches in Germany for the first time in 2023.

And electronics retailer Conrad recently announced that it will completely retire from the offline business by the end of the year. Only the branch in Wernberg-Köblitz next to the company headquarters should remain.

A mass exodus, mainly due to two factors. “The pandemic has put many retail companies, especially in the non-food sector, into an economic emergency,” said Stefan Genth, managing director of the German Retail Association HDE, in an interview with CHIP. “The months of lockdown and subsequent 2G and 3G restrictions have caused the frequency and customer sales to plummet.” Furthermore, online commerce has grown strongly.

“The stationary fashion trade has more than halved since 2019”

Those who need trousers, a blouse or a smartphone today no longer necessarily go to a clothing or technology store. It only takes a few clicks to buy. Economist Gerrit Heinemann talks to CHIP about a “channel doesn’t matter” mentality: Customers often find an article on the Internet before thinking about where to buy it.

Heinemann has been a professor of business administration, management and commerce at the Niederrhein University of Applied Sciences in Mönchengladbach since 2005 and has specialized in e-commerce, online commerce, multi-channel commerce and the future of commerce. “According to my calculations, online commerce already accounts for 26.7% of non-food items and even more than 50% of clothing,” says the expert.

Figures that show how bad the stationary apparel retail sector is. An area that the Crown crisis has hit particularly hard. “After a decline of around 30% in 2020, there was another less than 20% in 2021,” says Heinemann. “That means stationary fashion retail has more than halved since 2019.”

“The first retailers have announced the total withdrawal from their stores”

According to HDE’s Genth, neither customer frequency nor sales have recovered from the crisis. “In many locations, customers have not yet returned to stationary trading in sufficient numbers,” he says. It is therefore not surprising that chains such as Zara, H & M, Primark or Galeria Karstadt Kaufhof withdraw from urban centers.

For Heinemann, the pressure towards digital transformation is growing with their exodus. “The first retailers, such as Ex-Libris in Switzerland and now Conrad Electronics, which has grown into the stationary sector, have already announced a total withdrawal from their stores,” he says. Online commerce is therefore playing an increasingly important role in the non-food sector. If you want to survive in the long run, you need to create a digital foothold.

Ultimately, it could be the start of a new era, this is what current data suggest.
“In the first quarter of 2022 – despite the shops constantly open – we had only about 50 percent of the frequencies in the city center in 2019. A highly regarded study by Accenture already speaks of a decade of home,” says economist Heinemann.

Are our inner cities dying out?

Only: Does this mean that our inner cities are deserting? That soon there will be no more shopping centers as we know them? “In the long run, I assume a 50% online share in all non-food product groups, so that about two-thirds of the former non-food stationary trade will still exist,” he says.

According to the expert, commercial galleries will still exist for many years to come, albeit in a different form
.
Other areas such as the food or furniture trade may be more strongly represented in German pedestrian zones in the future. Areas “that have been pushed green over the past 30 years,” says Heinemann.

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