The economy may be changing in Germany, but will retailers notice? And will foreign chains learn from the Wal-Mart fiasco? DAVID BRIERLEY reports  Stroll down the high street in affluent Wiesbaden, prosperous Heilbronn, thriving Düsseldorf or even well-to-do Munich and, while you might not see tumbleweed blowing in the wind, you won’t find too much optimism from the bunkered-down retailers. Across the country, shops are pulling down shutters or they have been replaced by discounters and cheap-and-cheerful emporia. Previously popular department stores such as Karstadt and Kaufhof are suffering an extended spell of consumer disinterest.
Many financial analysts expect the post-Christmas slump to last until at least July, following the 1 January rise in the VAT rate from 16% to 19% (designed to ease Germany’s stretched public finances and to cut non-wage labour costs). This is despite the fact that German consumer confidence is at a five-year high, unemployment is low and few economists foresee trouble ahead. While Americans and most Europeans have recently enjoyed a free-spending era fuelled by rising property prices and easy credit, Germans have demonstrated an iron restraint. This, after all, is the country that invented the discount format used by giants such as Aldi and Lidl. Indeed, the adage 'Geiz ist geil' (saving is sexy) has been bandied around for at least a decade. Before the country’s reunification in 1990, however, German shops – in particular family businesses – flourished. Specialists offering good service and advice were a high-street fixture. Today these shops are disappearing as consumers refuse to pay the higher prices necessitated by trained personnel and proper service. The penetration of discount stores is now higher in Germany than anywhere else. Aldi, Lidl, Plus, Netto and the rest enjoy a 40% share of the groceries market. These stores are often small, suburban units. Service is minimal and products are just displayed in cardboard boxes. Lidl has branded goods while Aldi mostly doesn’t. Plus has a wider range of goods, including household items. Most shoppers buy their fresh fruit and vegetables and bread elsewhere. The key is that the discounters offer the staples at very low prices.  If local shopkeepers struggle to sell to Germans, leading foreign retailers have tied themselves up like pretzels trying to crack what is not only Europe’s largest market, but the world’s third largest after the US and Japan. Marks & Spencer and Gap have arrived, failed and left, while other chains such as C&A have lingered. US giant Wal-Mart, the world’s most successful retailer, famously wrote off nearly a billion dollars when it quit Germany last July. A spokesman for the UK supermarket Tesco, which is expanding through much of eastern Europe, said: “We have no plans to enter the German retail market.”
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