Credit Suisse Study on the Outlook for Swiss Retailing
Zurich, January 10, 2012Credit Suisse today published the annual study "Retail Outlook 2012" together with the consultancy firm Fuhrer & Hotz. Swiss retailing will continue to be hit by the adverse effects of the strength of the Swiss franc and price erosion in 2012 though to a lesser extent than in 2011. Credit Suisse economists forecast a slight decline in nominal retail sales for 2012. The study estimates that between 4 and 5 billion Swiss francs in purchasing power flowed abroad in 2011 as a result of cross-border shopping. Through the key topic of city centers, the study also reveals that the city centers of Zurich, Geneva and Berne are particularly attractive from a consumer perspective. The share of chain stores in the Swiss city centers is constantly increasing but Credit Suisse experts have nevertheless found no evidence of a general deterioration in the sector mix.
In terms of the general economic climate, the outlook for retail in 2012 is mixed: As long as uncertainty about the outcome of the euro crisis persists and unemployment climbs, retail sales performance will be held back by poor consumer sentiment. However, immigration, which should drop slightly but still remain at a high level in 2012, will continue to have a positive impact. Falling retail prices will also counteract a loss of purchasing power. Credit Suisse economists therefore anticipate moderate growth in real retail sales in 2012. As in 2011, the forecast nominal decline in sales will primarily be due to falling prices.
Fundamental Outlook in the Sector Less Optimistic for
2012
The survey conducted by the consultancy firm Fuhrer &
Hotz among 200 decision-makers in Swiss retailing and
their supply partners reveals a less optimistic
fundamental outlook in the sector than a year ago. 38% of
those surveyed are expecting sales to stagnate or decline
in 2012 versus the previous year, while as many as 51% of
respondents anticipate stagnating or declining profits.
Despite the gloomy economic prospects, 55% of retailers
plan to increase their sales area by over 5% on average
in 2012. Productivity per area unit will consequently
remain under pressure. In 2012, the retail trade will
mainly focus on leveraging labor productivity and cutting
jobs in net terms, as in 2011. The strength of the Swiss
franc caught retailing and supply partners by surprise in
2011. Those surveyed budgeted for an average euro-Swiss
franc exchange rate of 1.34 in the 2011 financial year.
The franc's strength was one of the reasons why 58%
missed their sales targets and 43% their profit targets.
Only 11% of those surveyed reported that the strength of
the Swiss franc had had predominantly positive effects.
It therefore comes as no surprise that half of the
companies consider the Swiss National Bank's current
exchange rate lower limit of CHF 1.20 to be too low.
Greatest Fall in Prices Since 1969 - Soaring Rise in
Cross-border Shopping
Retail trade prices dropped by over 2% in 2011 - the
greatest fall since records began in 1969. Price erosion
added to the decline in nominal retail sales. The key
clothing retailing segment made the most significant
contribution to the slowdown in the sector's economic
activity in 2011 with a 3% decline in sales. However,
various retail trade segments, such as food retailing and
electronic goods, sold more goods than in the previous
year in real terms. Despite the stabilization of the
exchange rate situation, Credit Suisse economists
anticipate a continued fall in retailing prices in 2012
albeit to a lesser extent than in 2011. Cross-border
shopping soared in 2011 by an estimated 20% to 30%,
having an adverse impact on Swiss retail trade in border
areas in particular. Credit Suisse economists estimate
the total outflow of purchasing power in 2011 at 4 to 5
billion Swiss francs. Cross-border shopping should
continue to affect Swiss retailers in 2012 but is not
expected to increase further after massive rises in 2010
and 2011.
Above-Average Presence of Chain Stores in the City
Centers
The main topic addressed by the latest study is retail
trade in the city center with one in seven retail trade
employees working in one of the city centers of the ten
largest Swiss cities. Despite the great attractiveness of
city center locations, they are also being hit by store
closures. One in nine city center stores closed between
1998 and 2008 in net terms, while employment fell by 3.3%
overall during this period. These figures reflect the
trend towards larger stores and the increase in labor
productivity in retailing. 69% of those employed in city
center retailing work in chain stores, far exceeding the
Swiss average of 55%. Chain stores have significantly
gained in importance in almost all city centers in recent
years. Credit Suisse experts found no evidence from a
Switzerland-wide perspective to bear out the frequently
expressed premise that the sector mix in city centers is
becoming increasingly one-sided owing to the expansion of
clothing and watch stores. Employment in the clothing
segment and department stores, both significantly
overrepresented in the city centers, declined overall by
9% and 8% respectively between 1998 and 2008.
Contrastingly, less well represented segments, such as
sport and electronic goods, gained in importance in the
city centers. The deterioration of the sector mix
generally concerns individual main shopping streets but
in many cases not the city center as a whole.
Zurich, Geneva and Berne with Extremely Attractive City
Centers
The study systematically assessed the strengths and
weaknesses of the city centers of the ten largest Swiss
cities to evaluate their attractiveness from a consumer
perspective. The following main indicators were included
in the city comparison: range of offerings, sector mix,
extent of chain store presence and employment
concentration, pedestrian friendliness, reachability by
public and private transport, and store opening times.
The city centers of Zurich, Geneva and Berne performed
best in the comparison. Their strong ratings were based
not just on their extensive range of offerings but also
on solid performance in terms of the other indicators.
Zurich, in particular, offers the longest opening times
of all the cities and has a relatively low employment
concentration. Geneva has a comparatively high proportion
of stores that are not part of a chain, and Berne
performed exceptionally well with its balanced sector mix
and the compactness of its city center which is
attractive to pedestrians. In Berne, it is possible to
reach a further 110 stores from an average store within a
walking radius of 200 meters. But smaller city centers
also scored well. Winterthur has a relatively limited
offering but excelled thanks to its pedestrian
friendliness and good sector mix. Lausanne is the most
easily reachable city center. It is relatively well
served by public transport and has the largest number of
parking spaces in relation to the retail trade offering
of all city centers by some margin. Basel city center is
relatively pedestrian-friendly but did not perform
particularly well or poorly in any of the indicators. The
smaller cities generally compensate for their more
limited offering compared to the other city centers with
good reachability by transport and an often well balanced
sector mix.
- Media Relations Credit Suisse AG, Tel. +41 (0)844 33 88 44, media.relations@credit-suisse.com
- Martin Hotz, Fuhrer & Hotz Excellence in Retailing, Tel. +41 (0)41 766 14 00, hotz@fuhrer-hotz.ch
Disclaimer
This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.
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