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Dr. Stephan Mayer-Heinisch is Chairman of the Austrian Retail Association, Chairman of the Austrian Council of Shopping Places, and Founding Partner of S. Mayer-Heinisch Consult GMBH. Credit: Credit: Stephan Doleschal

“Leave More Equity for Retailers!”

In the retail sector, the dividing line between winners and losers is particularly sharp as a result of the pandemic. Correspondingly, a substantial number of retailers in Europe will suffer from “Financial Long COVID” for years to come if politicians do not react, says Dr. Stephan Mayer-Heinisch, who spoke with ACROSS about COVID-19 from a strategic point of view.

ACROSS: What is your perception of the mood throughout the retail sector at the beginning of the third year of the pandemic?

Stephan Mayer-Heinisch: In March 2020, we all thought the coronavirus crisis would just be a wave. Its prolonged duration has presented us with major challenges. The interesting thing about the mood throughout the sector is that many retailers say that they have largely learned to live with it. Customers have also learned to deal with it. At the same time, however, the mood is quite gloomy due to the economic losses that many retailers have suffered, and that will continue for a long time. What can be clearly observed is that after the initial lockdowns, the recovery phase, in other words, the point at which customers began to return, was shorter. Following the last lockdown, it was significantly longer.

ACROSS: What is the reason behind that?

MAYER-HEINISCH: The financial environment has changed for consumers. Inflation is an issue, and there are political uncertainties with regard to China and Ukraine. Meanwhile, the cost of living is also on the rise in terms of energy, food, and restaurants. Customers have the feeling that life has become more expensive. 

ACROSS: What impact has the 2G regulation had in Austria? In your opinion, is it a role model for other European markets?

MAYER-HEINISCH: Initially, all regulations serve as a crutch. The 2G regulation is quite practicable for many customers, but there are some who feel insecure and prefer not to go shopping. From a retailer’s point of view, the regulation represents an additional cost burden with respect to carrying out checks. In addition, as was clearly evident in Austria in January, the implementation of the 2G regulation has led to a decline in customer numbers. One challenge in Austria lies in the fact that not everything is regulated on a consistent basis. There is a 3G rule for employees, a 2G rule for customers, and even though those under 18 years of age are exempt from compulsory vaccination, they are still required to have a 2G certificate if they are no longer of compulsory school age. Such complexity renders the entire process extremely complicated and, therefore, unworthy of emulation. I have also seen similarly complex regulations in many other European markets.

ACROSS: Besides additional costs, what other things have had a negative impact on day-to-day business in the retail sector?

MAYER-HEINISCH: Unfortunately, we have been on the receiving end of very aggressive behavior from a small number of our customers. That has been very challenging for our employees. The fact that a minority wants to assert its rights in such a violent manner is simply unworthy of a democracy. 

ACROSS: How does this additional challenge impact the existing staffing shortage?

MAYER-HEINISCH: Retail is a very employment-intensive industry, and a multitude of bright minds are needed. Many young people are not qualified enough when they enter the working world. Although numerous companies have created solutions by establishing their own training academies, the structural problem still exists. The pandemic has made it all the more important for politicians to reduce non-wage labor costs. At 41 percent, they are far too high a burden for retailers, especially in Austria. Retailers themselves are called upon to make the work that they do more attractive. We urgently need innovations both in logistics and in administration, which would allow the primary task of the sales staff to be communication with the customer. 

ACROSS: What should politicians do?

MAYER-HEINISCH: Politicians must ensure that retailers are provided with assistance in the short term. Non-food retailers in Vienna and Lower Austria have had to close for a total of 152 days. A great amount of aid was promised, but only a portion of it, more specifically, short-time work, has been provided. Retailers will emerge from this crisis saddled with numerous financial burdens. Those that do not go bankrupt in the short term will, at the very least, suffer from Financial Long COVID. My basic request is that politicians allow retailers, especially those in Austria, to increase their equity capital by taxing equity and debt capital equally. 

ACROSS: How much more will the market thin out?

MAYER-HEINISCH: In 2020, we lost 4040 retailers in Austria, which corresponds to five percent of our retailers. Others are sure to follow, especially retailers that offer goods such as shoes, fashion, or jewelry – items that customers buy for special occasions. Even if they survive the crisis, they will have to deal with the aftermath for a very long time. They will simply lack the equity to make investments and drive innovation. Hence, my basic request: Strengthen equity capital. Politicians must understand that a company that has equity can best pull itself out of the swamp. They should also take a close look at who entered the crisis in a healthy state and who was already ill when the crisis began. A very differentiated view needs to be taken. 

ACROSS: Online retail is the clear winner of the pandemic.

MAYER-HEINISCH: Retailers are being squeezed from all sides: by high non-wage labor costs, by COVID-19, and by an unfair tax system vis-à-vis the foreign e-commerce giants. The biggest problem existed long before the outbreak of the pandemic. Online commerce enjoys massive tax advantages in Europe. Commerce has learned to live without a city. However, if we still want to see cities with commerce, Brussels needs to wake up – that, after all, is where the EU’s headquarters are located. The fact that the COVID-19 crisis has now been added to the mix is precisely why Amazon and the like have to be taxed fairly – and right away.

ACROSS: Apart from online retailers, who has emerged from the pandemic the strongest?

MAYER-HEINISCH: Suppliers of essential goods were allowed to remain open at all times during the lockdowns. As a result, those retailers were spared the negative experience of being shut down. An additional factor, especially for food retailers, was that gastronomy outlets were closed. The rising cost of living has played into the hands of discounters, in particular. Customers spend their disposable income where they feel more comfortable in terms of price. However, we should also note that those particular retailers incurred high costs in order to introduce the necessary protective measures. 

ACROSS: How does discounter growth go hand in hand with the general trends toward more conscious shopping and sustainability? 

MAYER-HEINISCH: Discounters are very conscious when it comes to sustainable products. Regional and organic foods now have a considerable market share in the discount sector. Sustainability is not exclusively an issue for full-range retailers – quite the opposite is true. Suppliers of cheaper goods, in particular, whether in the textile or food sector, are pursuing major projects throughout Europe. However, if the general trend toward sustainability is not compatible with the customer’s financial situation, they will reach for the low-priced product. 

ACROSS: What more successful measures and solutions or better ways of dealing with the crisis have you seen in other countries?

MAYER-HEINISCH: With regard to Austria, I would definitely have liked to see a higher vaccination rate. I am firmly convinced that positive incentives work best. For example, a vaccination lottery should have been implemented much earlier. Portugal, Spain, and Italy have handled the situation much more effectively. However, now is not the time to issue report cards. It is clear, though, that Austria is not among the European leaders. With that being said, the learning curve is steep in every country. While the vaccination rate is high in some countries, they have not been able to implement other measures effectively. 

ACROSS: How can we improve the means by which we learn from each other during this pandemic and beyond?

MAYER-HEINISCH: For starters, politicians should follow the example of intensive care medicine. That sector has a very open information policy. As soon as an innovative treatment is successful in that field, whether in China or the United States, all intensive care physicians worldwide immediately know about it. That is also the way in which things should be politically communicated in the midst of a pandemic. In contrast, federalism in Austria, with its wide range of decisions and rules, is an anti-example. No international corporation could survive that way. In terms of retail companies, in particular, I am greatly impressed by the learning curve and the ability to adapt. How companies have improvised and how employees have managed to keep moving along has been truly incredible. They are companies that have to operate in a wide variety of international markets, and they have proven themselves to be self-learning systems. They also serve as excellent examples for politicians. 


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