As Covid-19 spreads, causing more countries to take counter-measures, Central and Southeast Europe is no exception. ING’s latest report said that collectively it is downgrading the 2020 GDP outlook on the back of virus fears.
(Artem Beliaikin, CC BY 2.0)
Clothing and footwear retailers have been developing online sales channels for quite some time, but this task is much more difficult than in the case of stores specializing in more standardized products, such as chemical products, electronics or food. Customers searching for higher quality apparel always prefer to try clothes on, to touch and feel the material, and to check the quality of the workmanship before making the purchase, to say nothing of the simple pleasure of hunting for bargains. Although online commercial outlets allow customers to return their purchases, this is a somewhat inconvenient option in the era of the coronavirus pandemic.
And this is why the pandemic has hurt the clothing industry the most. This is indicated by the data from the Eurostat’s flash estimate published at the beginning of May. The report shows the situation in the European retail sector in March 2020, i.e. during the first month of the lockdown introduced in most member states of the European Union. However, the lockdown was not introduced in all countries at the same time.
The Eurostat data, which are adjusted for price changes, show that sales in the retail sector of the European Union member states dropped sharply in March 2020. The overall volume of retail sales was 8.2 per cent lower than in March 2019. Retail sales decreased the most (by 18.3 per cent y/y) in Italy, which was affected by the pandemic earlier than the other European countries. Slightly smaller decreases were recorded in France (a 16.0 per cent fall in retail trade volume compared with March 2019), Slovenia (a fall of 15.1 per cent), Bulgaria (a fall of 14.6 per cent), even though these last two countries are rarely mentioned in the context of the coronavirus, and in Spain (a 13.1 per cent decrease in sales volume).
According to Eurostat, in Poland the overall retail sales volume decreased by 6.8 per cent y/y. It is worth noting that in spite of the pandemic, several countries of the European Union managed to achieve an increase in the volume of retail sales. They grew by 3.5 per cent y/y in Hungary, by 3.1 per cent in Romania, and by 3.0 per cent in Ireland. In Montenegro, which remains outside the European Union, the volume of retail trade was 6.3 per cent higher in March 2020 than a year ago.
The slump in European trade is more clearly visible in the statistics illustrating the changes taking place m/m rather than y/y. When comparing March 2020 to February 2020 it’s visible that retail sales in the EU member states decreased by 10.4 per cent (Eurostat’s comparison includes a calendar and seasonal adjustment, i.e. it takes into account the differences in the number of days in a month and the number of working days). The largest falls in retail sales volumes were recorded in Italy (19.5 per cent), Bulgaria (18.1 per cent), France (17.4 per cent) and Luxembourg (16.4 per cent). In Poland retail sales in March were 9.1 per cent lower than in February. Meanwhile, in Ireland and Montenegro retail sales volumes even recorded a slight increase during this time (0.1 per cent).
Changes in the sales structure
However, the overall retail sales volumes do not fully illustrate the rapid changes occurring in the structure of sales. Food sales increased significantly in all EU member states during the analysed period. In March 2020, they were 4.7 per cent higher than in February (in Luxembourg they increased by more than 20 per cent, in Ireland by 13.8 per cent, and in Belgium by 13.3 per cent). In Poland food sales increased by 2.6 per cent during this period (after accounting for inflation). An even greater increase (by 5.0 per cent) was recorded in the sales of medical goods, cosmetics, and toilet products. In this area the highest growth was recorded in Hungary (an increase of 37.6 per cent compared with February), Estonia (27.2 per cent) and Croatia (27.1 per cent). According to Eurostat data, in Poland sales in this sector only increased by 0.8 per cent in March.
The most dramatic change was recorded in the sales of clothes. Across the EU they decreased by as much as 40 per cent compared with the previous month. According to partial data the strongest decrease occurred in Bulgaria (by 66.4 per cent), Spain (by 62.6 per cent) and the Czech Republic (by 60.6 per cent). In Poland, the decrease in the sales of clothing was only slightly smaller – 56.6 per cent. This drop is all the more painful given the fact that – according to Eurostat data – as recently as in February Poland was among the European countries with the fastest growth of sales in this product group (with an increase of 4.1 per cent compared with January 2020, and an increase of as much as 19.5 per cent compared with February 2019).
On a broader note, the coronavirus pandemic will most likely accelerate the previously observed changes in the structure of retail sales channels. The virus and the resulting lockdown measures have negatively affected European shopping malls and department stores (across the EU trade volumes in such establishments decreased by 17.8 per cent in March compared with February), but during that time online sales – which allow customers to avoid any possible shopping difficulties – only increased by 2.2 per cent.
It should be pointed out, however, that these online sales figures are not complete, as they only include information obtained from companies whose main activity is eCommerce. Unfortunately, it is still too early for a broader evaluation of the changes occurring in the structure of retail sales, and for a full assessment of the coronavirus pandemic’s consequences.