March 27, 2012
The NYT had a story about an uptick in confidence among German retailers, suggesting that German consumers will increase their spending. The piece noted that Germans save more than people in the U.S. then told readers:
“Germany’s economy has traditionally been driven by exports of cars and machinery, while domestic demand has been comparatively weak. In fact, the country has been something of a graveyard for retailers. Wal-Mart gave up trying to crack the German market in 2006. Karstadt, the nation’s largest chain of department stores, filed for insolvency in 2010, although it has since restructured and become profitable.”
In Germany consumption accounts for 57 percent of GDP compared to around 70 percent in the U.S.. This difference is not the reason that retailers fail in Germany, because the gap is not new.
Retailers fail in Germany for the same reason that K-Mart and Borders failed in the U.S.; they do a poor job of serving their customers. There are plenty of retail stores that are able to do just fine in Germany even with a smaller share of GDP going to consumption.
Addendum:
Andrew Watt at the European Trade Union Institute, offers a correction. He points out that the consumption share of GDP did in fact rise substantially in the United States from the mid-90s to the present. This would mean that the retail market had improved in the United States relative to Germany, where the consumption share remained pretty much constant over this period.
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