Germans go festive to lure buyers into department stores

BERLIN

After years of declining sales, store closures and job cuts, the country's big retailers see the holidays as a chance to recapture some of the magic.

Step inside a Kaufhof, Karstadt or other German department store this holiday season, and you'll find yourself in sensory overload. There are roast goose and fresh pastries. Kids can get free baking lessons. And at one store a top designer will read Christmas stories.

After years of declining sales, store closures and job cuts, the country's big retailers see the holidays as a chance to recapture some of the magic. German shoppers will increase Christmas spending more than other Europeans this year, according to consultant Deloitte.

"Christmas can't save a dying format on its own, but it is a key opportunity to earn money," said Antonia Branston, a senior analyst at Euromonitor International. "When it comes to gifts, people don't want to necessarily get the cheapest option. They want to go somewhere nice."

The troubled industry could use a lift. The number of German department stores declined to 247 at the end of last year, down a third from 2006, according to Euromonitor. In France, department store numbers remained stable in the period, while in Britain they have risen by about 20 percent.

Even as Germans are expected to spend more this Christmas, department-store sales in the country are forecast to fall in 2012, their third year of decline, Euromonitor predicts.

A key reason is that online purchases more than doubled from 2006 to 2011, the researcher reports. While online purchases are also rising fast in Britain and France, shoppers there will spend more at department stores this year, Euromonitor says.

In Germany, "the general environment for department stores is not healthy," said Niklas Reinecke, an analyst at Planet Retail in London. "Revenue will most likely keep on declining" as shoppers turn to more specialized retailers such as Zara, H&M and Esprit.

Department stores are finding it increasingly difficult to compete with Web retailers for basics. And when shoppers in Germany look for something distinctive, they often turn to the traditional markets filled with seasonal treats and booths selling handcrafted toys that pop up on town squares across the country every December.

"If you want to get people a special German gift, it's not something that you are going to find at a department store, it's something you're going to find at the Christmas market," said Kristy Lutz, a 30-year-old mother of two who moved from Wisconsin to Stuttgart eight years ago.