Hardly any desire to consume: retail is in crisis

Corona pandemic, supply chain problems, inflation, falling consumer sentiment, numerous bankruptcies: domestic retail has experienced more downs than ups in the past four years. And the way back is rocky.

That is the core message of a survey presented on Thursday by the Institute for Trade, Sales and Marketing (IHaM) at the Johannes Kepler University in Linz. 1,000 Austrians aged 18 and over were surveyed online; the analysis is prepared and published at regular intervals. Monthly data from the EU statistics office Eurostat is also included.

The IHaM consumer climate reached its lowest point in July 2022 at minus 34 percentage points. Since then it has always been in negative territory. With minus 13 percentage points in the current evaluation for April, the balance of positive and negative consumer evaluations is approaching the value before the inflation crisis in March 2022 (minus eight percentage points).

Less demand for furniture

Nevertheless, that is still no reason to burst into euphoria, says Ernst Gittenberger, who compiled the survey with institute director Christoph Teller. Consumers’ reluctance to buy is decreasing, but only slowly. “The crises of previous years are still in everyone’s bones, this is particularly evident in retail,” says Gittenberger in an interview with OÖNachrichten. This applies less to the food trade, which is essential to cover everyday purchases. Gittenberger refers to the non-food sector around furniture, electrical appliances and garden items. There was a lot of demand there at the height of the pandemic because people were at home and beautifying their homes. “Now we are seeing an increased desire for vacation and leisure time again. This is also at the expense of retail,” says Gittenberger.

The mood of consumers is also reflected in their shopping behavior. Two thirds specifically look for promotions, around half look for cheaper products such as own brands, and just over a fifth limit their purchases at all. The latter applies especially to low-income households, says Gittenberger.

The researcher suspects that the fact that compatriots are hesitant to consume despite rising real incomes will continue for a long time. Firstly, consumer behavior has a lot to do with psychology; you can’t flip the switch overnight. Secondly, although inflation is falling in Austria, spending on other areas (housing, energy) remains high. And thirdly, the cuts in trade were very deep during the crisis years, says Gittenberger.

Consumption remains subdued

According to a survey conducted by the JKU among 1,000 respondents, 22 percent of Austrians generally buy fewer products in stores. Two years ago it was 30 percent, a year ago it was 27.
49 percent of those surveyed resort to cheaper retail products, especially younger people.
63 percent say they pay specific attention to promotions. Retailers are trying to boost consumer mood with promotions and own brands.