Retail: A Comparative Analysis
After experiencing, researching, and speaking to a number of Germans and Italians I have found that the retail industries of Italy and Germany are very different. Through a number of interviews and observations, I have discovered that both of these countries retail industries are influenced by a number of different sectors. A couple of these sectors include discount retail, family owned businesses, and tourism. In this comparative culture analysis I will examine various consumer habits, structural differences, and the overall economic importance that the retail market has within each of these two cultures.
There are a number of structural factors that make Germany both a leading and lagging market when it comes to the retail industry. A couple of the channels Germany currently leads in are discount retail and non store retailing. Even though Germany is often regarded as Europe’s economic heartland, it actually flourishes on low-paid employment. Additionally, the in-existence of a minimum wage law until 2015, has recently created a boom for low-wage jobs and relatively low incomes across Germany (Weinsig, 2016). Both of these factors, in return, created a demand for discount retail. Discount retail might seem most obvious in the grocery sector, but it also exists in non food areas such as apparel and drugstores. During my time in Germany, I noticed and even shopped in a number of discount stores including Aldi, Tk Maxx, and the New Yorker. In 2015, Euromonitor estimated that in Germany discounters accounted for 40% of grocery sales. This number is quite significant when you compare it to the 9.6% in the UK, 9.4% in France, or 2% in the U.S.(Euromonitor, 2016). I also shopped in H&M in a number of cities, including Berlin, Germany. H&M is considered a low-price retailers, rather than a discount retailer, which have also begun to find a niche within the apparel sector. Even though it may seem like the cheaper option, there are downfalls to shopping exclusively at discount retailers. Discount retail has essentially eliminated one-stop shopping in Germany and other similar countries (Newswire, 2106). Since discounters offer limited products, a demand for secondary locations has essentially been created. In turn, this boosts traffic at smaller superstores and drugstores. The one stop shop that is traditional in the U.S. has been split between multiple channels in Germany. Even though one stop shopping may be more convenient, Germans will continue to shop at multiple retailers in order to save money.
Germany also features one of the lowest levels of home ownership across the entire European Union. In 2016, 48% of Germans rented their home, as compared to a 30% average among the 28 countries within the EU (Weinsig). Since the rental rate is so high, most people do not have to pay large mortgage payment which results in a relatively stable personal income and thus retail sector. Instead, they pay relatively small monthly payments that still leave room for money to be spent elsewhere. In addition to this, Germany also features one of the strongest online presences among European nations. Successful brick and mortar retailers that also feature an online shopping channel typically find even more success. According to ReportBuyer, over 75% of Germans use the Internet regularly, making it the second largest online market behind the U.K. (Newswire, 2016). It’s no secret that German retail markets have found their various niches, and it will be interesting to see how they transforms moving forward.
Even with all of the retailer demand and fashionable shopping in Italy, it is actually one of the slowest economies in Europe. Italy has run into its fair share of economic turmoil and bailouts, but they seem to be kept afloat by foreign tourism (Agovino, 2017). Cities like Venice, Florence, and Rome are some of the most toured cities in the world. With the number of international tourists continuing to grow, Italy’s tourism sector continues to drive up retail prices in other cities all across Europe. A large amount of street purchases in Italy come from foreign tourists, which booms retail sales in popular districts. However, retailers pay the price for their success. The cost of retail space within larger cities such as Venice, Florence, and Rome has soared within the past couple of years. In Rome, some retail spaces rent for over $1,100 per square foot (Agovino, 2017). This may seem like a pretty steep price to pay, but with the consistent rise in GDP and foreign tourism, Italian retailers will continue to surge.
Another large component of Italy’s economy are family owned businesses. It is estimated that there are 784,000 total family owned and operated businesses in Italy, making up 70% of employment (Aidaf, 2017). Even with a heavy family emphasis, it is 80% in France, 90% in Germany, and 80% in the UK. However, 60% of family owned business in Italy are fully managed by family members, as compared to 26% in France, and just 10% in the UK (Aidaf, 2017). Italian businesses are also unique in their longevity. Of the 100 oldest businesses in the world, Italian businesses make up 15 of them. It is estimated that there are about 4,000 family owned businesses in Italy, which employ about 3,000,000 workers. For the most part, the sectors of these types of businesses are concentrated in manufacturing (43%) and commerce (28%) (Aidaf, 2017). From what I observed of family owned businesses in Italy, I saw anything from gelato shops, to restaurants, to clothing stores. It is very interesting to see families so invested in these businesses that often their time, effort, and money go back generations.
As we begin to compare these two cultures, it is important to understand that the retail industries of Germany and Italy are very different because they are driven by a number of different factors. Beyond the concept of retail, German and Italian cultures are also very different. First and foremost, Italians tend to spend more of their disposable income, compared to Germans and other nationalities who are bigger savers. I found this interesting with regards to what Hofstede concludes about Italian culture. Hofstede ranks Italy fairly high (75) on the uncertainty avoidance scale (Hofstede, 2017). Hofstede says, “In Italy, high uncertainty avoidance results in large amounts of detailed planning.” In my opinion a large amount of detailed planning would also include financial budgeting, which isn’t necessarily apparent in Italian spending habits. The cost of living in Italy is much higher, especially in cities like Venice, Florence, and Rome. As mentioned earlier, the lower-pay in Germany plays a large part in their shopping choices. Germans are not frugal by choice, but because they have to be. Lower disposable incomes draw them towards channels in which they can save money, rather than time. With regards to German culture, Hofstede says, “They show an ability to adapt traditions easily to changed conditions, a strong propensity to save and invest, thriftiness, and perseverance in achieving results” (Hofstede, 2017). Many Western European countries tend not to prioritize their time, which reinforces much of what we saw after visiting Austria and Germany. As an outsider, it is very interesting to see the obvious distinctions between cultures that are so different than mine.
Even though German and Italy may be relatively close geographically, they are very different when it comes to retail culture. As mentioned, they are driven by a number of different sectors, interests, and economic influences. As economies change and industries shift, it will be interesting to see if two very different retail cultures attempt to bridge the gap at some point in the future.
Agovino, T. (2017, January 31). Demand for 'High Street' Retail Space in Italy Surging Despite Sluggish Economy; Rome, Florence and Venice hold spots as the most-expensive retail locations in Europe. Wall Street Journal. Retrieved September 7, 2017, from https://search-proquest-com.ezproxy.bethel.edu
Consumer Attitudes and Online Retail Dynamics in Germany, 2014-2019. (2016). PR Newswire. Retrieved September 7, 2017, from http://www.prnewswire.com
Family Business In Italy. (n.d.). Retrieved September 7, 2017, from Aidaf.it
Hofstede Insights. (2017). Retrieved November 28, 2017, from https://www.hofstede-insights.com
Retailing In Germany. (2016, December 13). Retrieved November 27, 2017, from Euromonitor.com
Weinsig, D. (2016). Germany Retail Overview: Characteristics, Developments, and Prospects. Fung Global Research & Technology. Retrieved September 6, 2017, from Deborahweinsig.com.