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ePaper created 2015-05-08, 10:57:20 | version 1.38.0
13ANNUAL REPORT 2014 Deutsche EuroShop SHOPPING given the huge number of prices in Germany, they’d have to be look- ing at billions, so this is at best just a sample. “There isn’t a single house- hold in Germany that behaves in the way our weighting system works,” explains Nadin Sewald, an inflation expert at the Feder- al Statistical Office. Instead, for the sake of simplicity, the agency works with an imaginary average household that heats with both oil and gas and whose members travel by both car and public transport. This leads to a number of prob- lems. One could be described as a rolls conspiracy, where the statis- ticians only collect the price of the most popular product in each cat- egory. The large number of other goods in the same category are simply overlooked. At the bak- ery, the product sold most is the standard roll, which goes by dif- ferent names in different parts of the country. The price change for other kinds of roll isn’t reflect- ed in the calculation at all. How- ever, bakers avoid raising prices of these key products, as customers pay particularly close attention to them and are unhappy if prices go up. Something to bear in mind: to qualify as “the most popular prod- uct”, a product only needs a share of just 20%, which means that 80% of products can be overlooked in some circumstances. The restric- tion to key products may be under- stating the development of infla- tion as a whole. The second problem is the way in which statisticians handle tech- nological progress. What happens, for example, if the new smart- phones can do many more things than the earlier models? Should they include the price increases anyway? Or take into account the fact that your mobile phone can now take photos and play videos? “Adjustments for quality are essential,” stresses Sewald, noting that it’s essential to quantify the improvements made to any new generation of products brought out by dealers or manufacturers, and not to just include them in the price increase. Critics object that this simply conjures away ac- tual price increases, as consumers ultimately have to pay the price anyway. Vehicles are another example of just how complicated the situ- ation is. Today, almost all cars have air conditioning as a standard fea- ture. In earlier models, this wasn’t part of the standard package. As a result, the Federal Statistical Office deducts the air conditioning unit from the price of the new models, albeit only by half. Another example is the energy- saving washing machine, which is more expensive to buy but uses less electricity over its life- time. Would it not make sense to look simply at the purchase price, without including the long-term energy savings for the house- hold? The official answer is: no. As a result, any price increase be- tween an old and a new washing machine is reduced before includ- ing it in the inflation calculation. In the following year, prices are then compared between the new gen- eration of models. There’s another phenomenon that makes calculating inflation even more complicated. Psychol- ogists have shown in studies that consumers are more aware of price increases than price decreases. As a result, “perceived inflation” is mostly higher than the figures that statisticians produce. Conversely, economists from the Austrian School, who follow the economic theories of Friedrich August von Hayek and Ludwig von Mises, regard any increase in the money supply as inflation, argu- ing that more money means that its value in terms of products and services will inevitably decrease sooner or later. In this sense, any increase in the prices of real as- sets is also inflation. The Austri- an School sees a surge in equity prices as indicaing a distortion in the financial system that should sound an alarm. However, the Federal Statistical Office’s infla- tion index takes no account of ei- ther DAX stock market records or a boom in the real estate market. So, what’s the true rate of inflation? In America, economists have come up with an alternative meas- ure. The Billion Prices Project, launched by top university MIT among other bodies, collects mil- lions of prices on the internet every day in order to gain an im- pression of real-time inflation. In fact, the rate of inflation calculat- ed with this technique is signifi- cantly higher than the official one. Recently, it was around 3% in the USA, compared with the official figure of 2%. However, even the creators of the Billion Prices Pro- ject wouldn’t claim that they know the true inflation rate. Ultimately, everybody faces a personal rate of inflation, depending on their age, where they live, and how they shop. “The consumer price index is useful in looking at the econo- my as a whole, but it has its lim- its when it comes to looking at personal price increases,” as even Nadin Sewald admits. Even so, the website of the Federal Statis- tical Office has an inflation calcu- lator that people like Katja Lüders can adjust to show that they spend more on food (for example) than the average German. The calcula- tor still has a weakness – the rolls conspiracy. C * The name has been changed by Daniel Eckert and Holger Zschäpitz » The inflation “perceived” by citizens is usually higher than the inflation measured by statisticians. Comparable figures? T he Federal Statistical Office (Destatis) pub- lishes monthly sales trends for retailers in Germany. When interpreting these fig- ures, however, a few peculiarities should be kept in mind with regard to the methods used – par- ticularly if these figures are intended to serve as bench- marks for comparing the trends of retailers in the shop- ping centers of Deutsche EuroShop. One of these is that the figures published by Desta- tis only reflect retailers that have a legally independent head office in Germany and generate annual sales in excess of €250,000. By implication, this means that the German statistics not only neglect many small companies but also those reporting their sales in an- other country, including Amazon (which does so in Luxembourg). To assess sales trends in Germany, Destatis takes a representative random sample of around 24,000 re- tail companies. Those companies are legally obligated to send their responses electronically to the Statistical Offices of their respective states. The sales figures they report in the survey are used to allocate them to a spe- cific commercial sector based on the area in which the majority of their revenue was generated: If clothing ac- counts for 55% of sales, for instance, and shoes for 45%, all of that retailer’s sales are attributed to the clothing merchandise group. Sales are not broken down into and attributed to their relevant commercial sectors. The same applies to the differentiation between over- the-counter and online retailing: If the lion’s share of sales are generated through a bricks-and-mortar shop, they are allocated in full to that category. All of H&M’s sales, for example, are allocated to over-the-counter retailing even though a considerable portion of those sales are generated online. That means that the sales trends shown for over- the-counter retailing also include online sales. Yet ex- actly what percentage of those represent online sales is difficult to ascertain. Use of this method therefore means that the sales trends published by Destatis could either be overstated or understated. The sales figures reported to Deutsche EuroShop, on the other hand, are exclusively attributable to sales generated through over-the-counter retailing. Apples should not be compared with oranges, how- ever, and these statistics need to be assessed in detail to prevent benchmarks from being applied out of context. GfK’s sales figures, for instance, and their trends (both online and over-the-counter) deviate from those published by Destatis and are based on numerous other sources, one main source being the analyses of GfK’s consumer panels. This permits a differentiation between the two sales channels (online and over-the- counter) while also enabling a differentiated assess- ment of individual stores. C How are German retail revenues performing? This is a question that the Federal Statistical Office regularly addresses in its publications. But do these figures constitute a suitable benchmark for the tenants of Deutsche EuroShop’s shopping centers? Satisfied customers, satisfied tenants All sales generated by the Douglas perfumery, which is comprised of revenue contributions from around 430 bricks-and-mortar stores as well as the online shop at www.douglas.de, are allocated to over-the-counter retail. Yet as a tenant in the shopping centers of Deutsche EuroShop, Douglas only reports those sales generated within the shops. That precludes any comparison with the figures from Destatis: The revenue Douglas generates online when customers are led to an Internet terminal where they can place orders for out-of-stock scents, which are then sent out by post, appear in Destatis’s statistics but not in the sales report sent to Deutsche EuroShop. Customers and tenants are both satisfied; that’s multi-channelling at its best. C by Wilfried Reinhardt, GfK GeoMarketing