August 01, 2022

Consumer Retail - European Retail Trends

By Pascal Benazet
Western European retailers have expressed caution about consumer demand going into September because of inflationary pressures, but recent spending has benefited from pent-up demand in apparel and lifestyle footwear.
  • Accessories: Discretionary spending lackluster in most markets, except for high-priced items; higher energy prices, expiration of financial relief packages pressuring September outlook
  • Apparel: Sales of aspirational premium brands helped by pent-up demand, price hikes; outlook similar or slightly worse through late 2022
  • Footwear: Trends mixed, still positive for lifestyle top brands; outlook likely to deteriorate
Current Consumer Demand
(number of sources)
Consumer Demand Expectations for Next 3–6 Months
(number of sources)
 ApparelAccessoriesFootwear ApparelAccessoriesFootwear
    Don’t know--1

Quotes on Discretionary Products: Jewelry, Watches
“Spending is average. Like last year, the summer sale was already in June, and that went OK. At the moment, consumers still seem to have money to spend. I also have to say there are not any particularly super-exciting new Pandora [A/S] lines or products in the collection that could drive growth. It probably will get weaker as inflation continues. Maybe [Pandora] will manage to stimulate demand with new lines or also more promotions, but I think on the contrary, our prices will also have to go up more.” German Pandora store manager, July 11

“Traffic is down. Even during the sale, we had fewer customers in store than in previous sales, so it seems consumers certainly have started to spend less. If the current rate of price increases continues, I can’t see how we can avoid less spending on things like jewelry. Petrol prices will go up a lot in September once the petrol rebate expires, so this will impact spending.” German Pandora store manager, July 11

“Despite macroeconomic concerns and raging inflation, at present, customers are still happy to spend on brands like Pandora. They are enjoying full access — face to face — to our assortment and lifting of all restrictions on in-store shopping, so brick-and-mortar sales are finally catching up, most of which were channeled through online only recently. I think our sales are catching up with 2019 levels, though maybe not completely there yet, especially because traffic is not consistent, but we are up [yy]. So far, I haven’t noticed any trading down, and sales and demand are holding up, but that may change in the future as the full scale of autumn price hikes hit [and make] the public vulnerable after holiday spending. I suspect even more promotionally-driven purchases, hence earlier Christmas shopping and demand weakening toward the end of the year and 1Q23.” U.K. Pandora store manager, July 15

“I would describe current market conditions, as well as consumer demand, as average. Our actual sales are on par with pre-lockdown levels — so our 3Q22 sales are flat versus 3Q19. Neither our entry-level nor more expensive products have been affected by slowing sales so far. I think spending on essentials saw some trading down by some people more affected by inflationary pressure. Jewelry, on the other hand, is a non-essential product, and, ironically, most our clients are not affected by these choices and still determined to make purchases. We forecast stronger sales in 4Q22 because of Black Friday, a run up to Christmas and no restrictions on store openings expected, with additional influx of tourists we didn’t have last year. On the other hand, we are wary of possible slowdown in 1Q23 if the economy is hit by even higher fuel prices.” U.K. Pandora store manager, July 15

“It has been quieter this month [July], more so than we expected. I’m not sure if it’s to do with customers opting to spend on holidays, but it has been quite quiet these last four weeks. There’s not really been a change in what customers spend their money on or how much they’re spending. The main thing is that the store is quieter. I do think we are seeing some deterioration now, not in what people are spending, but who and how many are buying jewelry. It’s going to be very tough for the U.K. consumer going forward this year with increasing energy costs and rising inflation. This winter, we’ll be paying over double than the year before.” U.K. Pandora store manager, July 11

“Sales have been very strong for luxury jewelry, but weak for entry-level products, with traffic and sales down 10% [yy]. For the former, I think this is an extension of savings and financial market gains, but this could lose momentum. For affordable discretionary spending, this will depend a lot on government decisions and aid, but I expect it to remain weak.” French jewelry buyer for four stores, July 7

“Trends are still good for high-end jewelry but weak for Pandora and the like. Sales [are] down 15% [yy]. My store hardly ever has had so much excess of stock. I hope it will be unchanged or even better in July and August thanks to tourism, but I expect September to be tough.” French jewelry buyer for two stores, July 7

“Average ticket is similar, but we get less traffic than last year. It is quieter for sure. I think some customers are cautious and do not want to spend on jewelry ahead of vacation and holiday spending, which seems to be a big priority.” French jewelry buyer for one store, July 7

“Market conditions are weak due to war and inflation, with a major impact on energy prices. Second quarter has been better than the previous one, but overall sales are down around 15% [yy] with Pandora doing slightly better. Entry-level and [the] most expensive products outperformed, while mid-segment [€100–500] underperformed. Tourists are helping sales, and we are expecting this to continue through summer. For fall and sales to locals, it will depend a lot on government help and energy prices.” Italian jewelry buyer for one store, July 12

“Our [accessories] sales are not brilliant, of course, but we are happy enough with them, all considered. Sales in the last three months were down 5% [yy], so not a big loss. Pandora performance is in line with market. We are worried about possible negative evolution, but so far the market has been stable.” Italian jewelry buyer for one store, July 13

“For now, spending seems still OK, consumers bought more apparel as they go out more and have not spent so much on apparel the past two years. In men’s in particular, we see some catch-up demand, admittedly from a lower base compared to women. It is very likely it will get weaker as spending power certainly will be reduced. At the same time, there is still some catch-up demand, especially for autumn and winter items, after the COVID restrictions in the past two years. People will probably continue to go out more and into their offices more, unless there will be new restrictions this autumn.” German buyer for a regional mid- to high-end fashion department store chain, July 13

“Demand was weak, especially in late May and June. Now that more products are on sale, consumers are more interested. The failed start of the petrol price reduction probably was bad for psychology and spending behavior, though in the last one or two weeks this has improved, but that also coincided with more products being on sale already. It will stay weak, and most likely get weaker. The full impact of inflation and especially higher energy prices will be felt ever more the colder and darker it gets.” German buyer for a local fashion store, July 12

“Overall demand has been good. We’ve been pleased with traffic levels and the average spend. As of now, we’re not seeing any pullback as a result of inflation or resizing costs. The outlook is tricky, because (the United Kingdom) has another energy price rise in October. We know it’s likely to be 50%-plus, so there will be some nervousness for sure. My feeling is it will be January 2023 when we will see the full scale of where retail will be, but for now, business is really good, it’s positive.” U.K. mid-end clothing fashion clothing fashion buyer, July 20

“Sales have been above where we expected. A lot of people have purchased for their holidays. It’s been the first summer since the start of COVID that has seemed normal, really. I think the next six months will be just as strong. Our customer base is young, and they are more protected from the cost-of-living crisis. A lot of young people are still living at home because they can’t afford a mortgage, plus we got a lot of students as well.” U.K. mid-end clothing fashion clothing fashion buyer, July 15

“I made the same amount of sales as last year but with some better weather and deeper markdowns. I would say demand for premium and expensive, desirable brands of apparel is still there, but I am more worried about September.” French buyer for a mid-end fashion store, July 5

“We have less traffic but higher tickets for premium brands, following some price increases, so this is still OK. Men’s sales are stronger as they put up on some weight during COVID and need to replace the wardrobe. Women’s sales are more erratic and slower.” French buyer for a mid-end fashion store, July 13

“Strong, expensive, well-established and well-marketed brands, such as [Ralph Lauren Corp.’s] Ralph Lauren did well. Traffic is slightly down, but ASP is up, and price hikes are accepted so far. Sales really vary month to month, but overall we did well. Menswear is stronger than womenswear, as men are less price sensitive and bought less last year and we had strong catch-up demand for ceremonies like weddings. For my clientele, inflation is not a big issue. It is more driven by the general mood and it is average, but holding up as Ukraine war is more in the background now. Online is quite weak — weaker than expected — and sales to our partner [Zalando AG’s] Zalando are very bad. And they sound little confident for the next six months.” French buyer for a midsized mid- to high-end apparel chain, July 13

“For expensive clothing brands, it was quite good, and we also sold more because of lots of weddings this year — but I do not expect it to last, especially in late ’22 and early ’23.” French buyer for a high-end fashion store, July 5

“Traffic is down [yy], but for premium items and popular brands, such as Ralph Lauren, sell-through was good. It will probably be getting slightly worse in September and through the rest of the year. I think customers will start really saving after the summer break.” French buyer for a mid-end fashion store, July 5

“Purchases for most of our brands are still up [yy], though in part this was due to easy comparisons in the second quarter and stronger delivery issues last year than this year. Nevertheless, we are meeting plan for most brands, albeit only just. There is greater uncertainty and more down-trading, though in part this is also due to the allocation policies of many suppliers. It is difficult to tell and very uncertain. I think it is a given that consumers will have less expendable income to spend, but in the past athletic footwear was less affected than other sectors from issues like this. Plus, there is the World Cup, which could be a spending stimulus. Also after two years of more restrictions, we still expect a strong back-to school period in late August. This is also because some relief packages are still effective in August but will expire in September.” German buyer for a large chain of athletic footwear (lifestyle and performance), July 8

“Spending is weak overall. We don’t feel a big impact from the relief packages, though the additional child benefit will only be paid out in July. Even so, most of that money will probably either be saved or spent on travel, attractions or experiences during the holiday. We already reduced many of our orders. Consumers will think twice if they need a new pair of shoes and probably will wear their old ones a bit longer. Some may benefit from a down trading trend.” German buyer for a large chain of brown shoes, July 8

“Demand for lifestyle shoes has been good, and we’ve seen brick-and-mortar go from strength to strength. Demand is there, even for items £100 and above. For now, we’re not seeing any pullback. Although the United Kingdom has been strong in demand, there are headwinds coming, so we’re not really sure how much consumers will start to curb spending. It’s not anything we’re seeing now, but we are aware that rising costs for the U.K. consumer could well become a problem for them in the next three to six months.” U.K. buyer for a large athletic footwear and apparel chain (lifestyle and performance), July 15

“Customers are still happy to pay out for top brands. There’s still decent demand for sportswear, though we do have concerns with inflation and the direction of the economy.” U.K. buyer for a large athletic footwear and apparel chain (lifestyle and performance), June 15

“For now it’s OK, but there has been a deterioration since last year for sure. It’s not as strong as it was. Customers are starting to really think about what they’re buying now. They have to — the cost of living is spiraling out of control. We anticipate a 20% decrease in our business versus 2019 by the end of this year. As the cost of living crisis escalates, demand will become weaker and weaker. I think 2023 will be even worse, I don’t think anybody really realizes what’s ahead of us. In my opinion, we’re facing a huge recession in the United Kingdom.” U.K. brown footwear buyer, June 17

“Overall demand for lifestyle shoes remained strong, and I think the trends will remain quite strong going forward.” French buyer for a large lifestyle footwear chain, July 4

“Already, demand for running shoes is quiet with traffic down 10% and lower ticket average [yy]. We had good years during COVID, and now customers seem to keep their running shoes longer. The clearance sales are super weak.” French buyer for a small running product chain, July 1