Thebankruptcy of Karstadt, the end of Bread & Butter, and the entry of Chinesecompanies were some major headlines that dominated in Germany, writes Regina Henkel.

 

Both a plethora of problems and anumber of new developments made the fashion headlines in 2015. The exhibitionlandscape changed significantly, and retail continues to be challenged by theever-growing relevance of e-commerce. And while classical retail is trying tostabilise its business, online giants are battling against each other.

 

The bankruptcies

Almost a permanent fixture in theheadlines was department store group Karstadt. The bankruptcy of the Arcandormother company, which itself went insolvent six years ago, will still take"many years" to find its footing again, the liquidator said inNovember, according to the German Press Agency. The reasons were mainlylitigations, including those against numerous former managers of the group,like former top executive Thomas Middelhoff. In all, 37,500 creditors areasking for €1.2 billion, according to the report of the liquidator. At the sametime, reports of real estate sales of Karstadt stores have been coming in.

Another bankruptcy thataffected the fashion industry was the end of Bread & Butter. In December2014, the bankruptcy sounded like a drumbeat through the denim and sportswearindustry. Although the show reported repeatedly about lower exhibitor andvisitor numbers, the daring plans of CEO Karl-Heinz Muller polarised the denimcommunity, and the end of the show came for many quite abruptly. But even moresurprising was the news of the takeover of the fair by the Berlin e-commercegiant Zalando. His idea: Bread & Butter should continue to take place onthe grounds of Tempelhof Airport in Berlin-but no more as a fair, but as afashion event for consumers. The premiere of the new concept-that Muller hadwanted to realise earlier, but had failed due to the resistance from brands-hasbeen scheduled for January 2016. But in December, the Berlin Senate decidedthat the Tempelhof Field and the halls of the former airport would be used asrefugee shelters until the end of 2019. Therefore, Zalando now has to searchfor a new location for Bread & Butter. The proposed January event was,therefore, postponed.

 

Also, Escada struggled through theyear. In July, the fashion label announced that it would have to cancel about200 jobs in the next two years. At the company's headquarters in Munich, some150 employees had to go. The job cuts are part of a restructuring programme,which is aimed to reposition the company since the departure of former CEOBruno Salzer.

 

Berlinexhibition landscape

Despite the loss of Bread &Butter, which was the strongest event in the Berlin trade fair scene some yearsago, the city presented a fragmented, but lively exhibition scene. Panorama andPremium especially have won and further developed their respective profiles. InJuly, the premium operators reported an increase in visitors of 70 per cent onthe first day itself. Panorama will enlarge its area in next January by about3,000 square metres. The sale of skate-and-streetwear fair Bright to thePremium fair was welcomed with excitement. With the acquisition of all sharesof Bright-founders Thomas Martini and Marco Aslim, Bright merged with the Premiumsub label Seek. In summer, both events took place in the same location for thefirst time, and the response was positive. In addition, quite a number of otherspecialised trade fairs were organised in Berlin: Show & Order, BerlinFashion Salon, Green Showroom, Ethical Fashion Show and of course BerlinFashion Week, among others.

 

Clash ofthe online titans

The growing e-commerce businessdominated the news landscape considerably. Not only did online giant Zalandodemonstrated a remarkable pace and launched its exclusive distribution dealwith Topshop and Gap this year, the announced sales target at the end of theyear was €3 billion. The competition from abroad is already started. Uniqlowent online in Germany this year, while Alibaba opened a branch here. To startwith, Alibaba will help conquering the Chinese market for local traders, thecompany said. But for the future, the German market shows potential too. Thisis the strategy of the Otto Group which has a joint venture with Chinese onlinemarketplace JD.com. In return, JD.com will invest in Zitra GmbH, a subsidiaryof the Otto Group. The 50:50 joint venture has been designed to enableinternational brands to break into the Chinese market, or increase their ownsales on JD.com and other online marketplaces worldwide. Thus, JD.com is a newglobal competitor to Amazon. Amazon, on the other hand, announced its intentionto enter the fashion market with six of its own brands, but at the moment thiswould only be in the US. Even more interesting are Amazon's new logisticssolutions. Amazon is offering same-day delivery in Germany for the first time,and even drones will carry packets in the future. Many doubt the feasibility ofthis idea, though drone delivery is being tested in some areas by DeutschePost.

 

Price wars and international implications

Discounts without end: that's thesummary of the year 2015. Difficult weather conditions last winter had causedlower turnovers and resulted in a sales battle. And the same seems to be theforecast for this winter. Moreover, the discount wars of Black Friday and CyberMonday have been recognised by large numbers of German consumers for the firsttime this year. More than ever, brands and retailers have taken the opportunityto reduce their stocks before Christmas. In Germany alone, about a quarter ofGerman online retailers participated. Experts expected a sales growth of 16.8per cent from the previous year for the Black Friday weekend and onlinerevenues of a total of €924 million.

 

Meanwhile, Swisscompanies have felt the full brunt of its currency reform this year. After thesurprising decision of the Swiss National Bank in January to lift the minimumeuro exchange rate with immediate effect and to decouple the franc from theeuro, many Swiss retailers suffered from a declining demand. Especially in theborder regions, consumers preferred to shop in cheaper Austria, Italy orGermany. The price transparency of the Internet amplifies the shopping inforeign online shops. At the same time, the brands reacted with priceadjustments. So, luxury goods house Richemont and watchmaker Swatch announcedprice increases in the euro area, with market leader Rolex going up to 14percent.

 

The Russian embargo caused manyproblems as well. Brands such as Escada and Laurel or the Ahlers AG with itsbrands Pierre Cardin and Baldessarini, which are traditionally strong inRussia, suffered heavy losses.

 

And there was anothertopic too, which was quite ubiquitous, especially in the fashion media. Thelarge quantities of refugees in Germany and Austria led to an incredibly highnumber of events and actions to help them. Many brands and retailers donatedclothes and shoes or even collected money for them.

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