More brick-and-mortar retailers will leave the market
According to the Dutch Statistics Office, non-food retail turnover increased 2.5% in 2021, with online retail sales growing almost 24%. Consumer durable sales were flattening out last year after robust growth rates in 2020, when they benefited from a booming housing market and pandemic-related shifts in consumer behaviour. Furniture sales decreased 1.1% in 2021 after a 7.9% increase in 2020, while consumer electronics and white goods recorded a 7.9% decline (up 8.6% in 2020).
Growth of non-food retail sales will slow down somewhat in 2022, as food and energy price inflation dampen consumer sentiment and discretionary spending. Additionally, after the lifting of lockdowns, consumer preferences have shifted back towards services (e.g hospitality and travel). Another issue for consumer durable retailers is higher input prices, which are difficult to pass on in a very competitive market environment. We expect that domestic appliances value added should shrink about 4% in 2022, while furniture segment growth should slow down to about 1%.
Profit margins of retailers decreased in 2021, and we expect them to decline further in the coming months. Furniture retail largely depends on the housing market, which has shown signs of overheating. We also expect a deterioration of margins for household appliances and consumer electronics retailers, due to fierce competition.
Payment duration in the sector is 60 days on average for larger retailers, while smaller businesses generally pay in 30 days. Over the past two years, payment behaviour has been good and the number of insolvencies low, helped by Covid-related fiscal stimulus for Dutch businesses.
However, as fiscal support expired at the end of March 2022, and with higher input prices to digest and lower revenues ahead, we expect both payment delays and insolvencies to increase in the coming twelve months. The amount of that increase is currently hard to assess due to the ongoing economic uncertainties, but we expect it to be mainly smaller brick-and-mortar smaller retailers who are affected. Many of them struggle to raise investments necessary to adapt to an increasingly online-driven market environment. Online competition is very fierce in the consumer electronics and household appliances segments, and the number of brick-and-mortar stores has already decreased significantly during the past couple of years.
