Regular main street and mall shoppers may have noticed the high turnover among the storefronts as businesses come and go. Clearance sales abound. As it turns out, the whole Austrian retail sector is under some stress this year, according to research by KMU Forschung Austria that reviewed nearly 8,900 financial statements.
Every third Austrian retailer booked a loss in the 2017/2018 fiscal year: Building and home improvement suppliers did better than average, while clothing and footwear did worse – and every second book, jewelry or watch dealer ended in the red.
Consumers might complain of high prices for everything from tank-tops to tomatoes, but that doesn’t mean retailers are lining their pockets: Last year, operating profit margins averaged around 3% overall and just 0.9% for grocery and cosmetic shops – down from 3.6% in 2016/2017, and lower than the overall economy’s 5.5% average.
The decline in profits is a result of intense competition and higher wholesale prices that cannot be passed on to consumers, according to Peter Buchmüller, chairman of the division for trade at the Austrian Chamber of Commerce in an interview with the Austrian Press Agency APA. Staple foods, in particular, don’t allow fat margins.
But while last year was worse than the year before, overall trends are positive – in 2007/2008, when the financial crisis began, only 53% of retailers were profitable and their profit margins averaged at just 1,5% percent, as opposed to 65% today.