If you've walked down a German high street in the past few years, you'll have noticed something contradictory.
On one side, stores are closing. Depot, the home-decor chain that once seemed to be on every German high street, has been shrinking fast. Galeria, the traditional department store group, keeps restructuring its footprint. Local shops that had been open for decades, some for over a century, are quietly disappearing.
On the other side, stores are opening. Danish brand Søstrene Grene is still expanding. Flying Tiger Copenhagen remains a fixture on German shopping streets. Some international brands are still investing in physical retail — their stores have just gotten smaller, more flexible, and more experience-driven. Even IKEA is changing shape: in June 2026, it opened a roughly 2,950-square-metre store in Ingolstadt, a format that barely resembles the giant blue boxes people are used to seeing on the edge of town.
So an interesting question follows: if physical retail in Germany is really struggling, why do some brands keep opening stores?
My read is this: what's disappearing in Germany was never the physical store as a format. What's disappearing is a business model for running a physical store that has simply stopped being profitable.
1. German physical retail really has gotten harder
Start with the broader picture. A joint study by Creditreform and the Handelsblatt Research Institute found that the number of retail businesses in Germany fell by roughly 16% between 2010 and 2025, down to about 316,000. Insolvencies among retailers have also risen noticeably in recent years, and the German Retail Federation (HDE) expects close to 5,000 more stores to close in 2026 alone.
Consumers have also gotten more cautious. In the first half of 2026, nominal retail sales in Germany grew by roughly 2.2% year-on-year, but once you strip out price inflation, real growth was only around 0.7%. In other words, people are spending more money without really buying more.
That's a particularly hard position for physical retailers, because a store comes with a rigid cost structure: rent, staff, energy, fit-out, storage, inventory, logistics. A consumer can simply buy one fewer item of clothing. A landlord isn't going to cut the month's rent by 20% just because consumer confidence has dropped.
So German physical retail is going through something fairly brutal: it used to be enough to be able to open a store. Now a store has to prove it can actually make money. Those are two very different bars to clear.
2. Depot's collapse may be more worth studying than "weak German consumer spending"
Depot is a textbook case. If you've lived in Germany, you've almost certainly walked past one — candles, vases, cushions, tableware, Christmas decorations, home fragrance, all kinds of small decorative items. None of this involves any real technical barrier, and none of it is essential.
For years, this kind of business ran on a fairly classic retail logic: find a decent spot on a shopping street, sign the lease, build out an appealing layout, fill it with attractive small items, and wait for shoppers to walk past, wander in, and make an impulse purchase. It worked well for a long time.
But the question today is why anyone still needs to walk into a Depot store specifically. A vase can be bought online. A string of fairy lights can be bought on Amazon. Cheap decor can be bought on Temu. Anything with more design sensibility can be bought from any number of niche brand websites. Once the channels for getting hold of a product become nearly unlimited, simply having "a lot of stuff on the shelves" stops being a competitive advantage on its own — while the cost of displaying all that stuff in a physical space stays just as high as ever. That's the dangerous part for traditional physical retail: it's gotten cheaper and cheaper for consumers to buy things, while it's stayed expensive for retailers to display them.
Depot's situation deteriorated sharply through 2026. The company first filed for insolvency protection in 2024, then filed a second time in May 2026, closing stores along the way. By late August, the outcome turned out to be worse than most people expected: the operating company, GDC Deutschland GmbH, announced it would wind down entirely by 30 September, terminating all employment and lease contracts, affecting around 730 jobs. A chain that once ran more than 300 stores has, in practical terms, come to an end — whether the brand survives in some other form is still an open question.
If you only read this as "the German economy is weak," you miss the part that's actually worth studying: in that same market, other brands are still opening stores.
3. Why can Søstrene Grene keep going?
Søstrene Grene, the Danish brand selling home decor, small furniture, stationery, kitchenware and all kinds of "little things," is in a completely different position from Depot — and this is genuinely worth studying, because on paper the two brands sell almost the same category of goods. The real difference is why a customer chooses to walk in.
A Søstrene Grene store doesn't feel like a warehouse of merchandise. It feels more like a designed path of discovery: you wander slowly through the aisles, running into new arrivals, small furniture, stationery, kids' items, kitchenware and seasonal goods you never planned to buy, never quite sure what's around the next corner. Browsing itself becomes part of the product. Flying Tiger Copenhagen runs on a similar logic — plenty of what it sells, you don't actually need — but people go in anyway, because what they're really buying isn't just the object. It's a sense of discovery, entertainment, novelty, and cheap, instant satisfaction.
That's a fundamentally different question from the one traditional retail asks. Traditional retail asks: what should go on the shelf? The new version of retail has to answer: why would someone walk through my door in the first place? Those are not the same question.
4. The first type of store Germany is phasing out: stores that only stock shelves
One of a store's biggest historical functions was simply display — customers didn't know where to find a given item, so they needed high streets, department stores and specialty shops to show them. The internet broke that logic completely. What's genuinely scarce today isn't product. It's a customer's time and attention.
So if a store's main reason to exist is still "we have clothes, we have mugs, we have furniture, we have cosmetics," it's effectively competing with the entire internet — and the internet has one advantage no physical store can ever match: an almost infinite shelf.
A store now has to offer something online genuinely can't replace — experience, specialist service, instant gratification, a social element, brand culture, or simply being a genuinely enjoyable place to browse. What it can't be is just "we have stock."
5. The second type of store Germany is phasing out: bigger-is-better stores
Retail expansion used to run on a fairly intuitive logic: a bigger store means more product, and more product means more sales opportunities. Today, though, a bigger footprint mostly means one thing first: fixed cost. More space means higher rent, a bigger fit-out bill, more staff, and more inventory to display. Retailers have started asking a much more basic question: how much value does each square metre actually generate?
IKEA's shift illustrates this well. The classic IKEA model put giant stores on the edge of town — customers drove out, spent a few hours wandering the maze, bought furniture, ate meatballs, and loaded everything into the car. Now IKEA is also testing smaller, more central formats. The Ingolstadt store that opened in 2026 covers roughly 2,950 square metres and displays around 2,700 items available to take home immediately — IKEA's first attempt at this compact format in Germany.
This isn't IKEA giving up on physical stores. It's the opposite: IKEA is redefining how big a store actually needs to be. A store no longer has to carry every function on its own — display can happen in person, the full SKU range can live online, ordering can happen on a phone, and delivery can come straight from a warehouse, leaving the physical space to do only what it does best. "Big" no longer automatically means "strong." Sales per square metre, flexibility, and value generated per unit of space now matter more than sheer store size.
6. The third type of store Germany is phasing out: stores that rely on passing foot traffic
German high streets used to run on a simple logic: a good enough location meant people would walk past, some of those people would come in, and some of those visits would turn into sales. Location decided roughly half the business.
That logic hasn't disappeared, but it has weakened, because customers no longer need to go into a city centre just to "see what's there." They can discover a brand on Instagram, search for a product on Google, compare prices on Amazon, and order from the brand's own site. A store increasingly has to manufacture its own reason to be visited: why come in person today, why walk through this particular door, rather than just opening an app and ordering. If a store can't answer that, even a great location just becomes expensive rent.
7. The fourth type of store Germany is phasing out: stores disconnected from online
Another shift matters here: a physical store increasingly isn't where the transaction actually ends. A customer might discover a brand on TikTok, search for it on Google, keep researching on Instagram, visit the physical store on a Saturday, think it over for two days, and finally order on the brand's website. So who does that sale belong to? In practice, no single channel can claim it — together, they form one connected decision path for the customer.
For a brand today, a store's real value can't be judged only by what lands in the register that day. It might simultaneously be doing the work of brand display, product experience, customer education, after-sales service, content creation, building local trust, and driving online conversion. That's why physical retail is shifting from being simply a point of sale to being a point of experience.
8. For companies entering Germany, the biggest risk may be copying what already worked at home
This is the part I think is most worth paying attention to.
When a company expands into Europe, the instinct is often: we already know how to do this at home, so let's just replicate it. Same fit-out, wherever you're from. Same store size. Same staffing ratio. Chase mall foot traffic the same way. Go after the best high-street locations the same way. Set the same kind of aggressive multi-year store-opening target. It sounds perfectly reasonable. The problem is that what gets copied often isn't the successful playbook itself — it's an operating model built entirely on top of your home market's commercial infrastructure.
A market like China combines extremely dense urban populations, mature shopping-mall infrastructure, near-universal mobile payments, powerful instant logistics, a very different labor cost structure, and a highly digitized consumer base. Germany isn't that market. Labor costs are different. Leasing conventions are different. Opening hours are different. Labor law is different. Urban population density is different. Shopping habits are different. Even what a "good service experience" looks like is different. A store model that works at home can produce a completely different P&L once it's transplanted to Germany.
9. Before entering Germany, run these four numbers first
The first isn't a fit-out budget. It's the single-store model: what are the real annual fixed costs of running one store — rent, Nebenkosten (ancillary charges), staff, insurance, energy, storage, logistics, point-of-sale systems, tax, maintenance — and what revenue does the store need to hit to break even?
The second is sales density: how much revenue does each square metre actually generate? Does the store really need to display the full product range? Which items genuinely benefit from being shown in person?
The third is customer acquisition cost: without reliable foot traffic, how does this store actually reach customers? Does the store itself have any content-generating power?
The fourth is what the store is worth beyond the sale itself: is it a brand showroom, an experience centre, an after-sales point, a community space, a content studio, or purely a sales terminal? If the honest answer is only the last one, the store needs to be an exceptionally strong performer on its own economics — otherwise it risks turning into an expensive warehouse.
10. Physical retail isn't dead — running a store just stopped being a simple business
What's happening in German retail right now isn't actually a pessimistic story. Consumers still go shopping. They still go into city centres. They still walk into stores they find genuinely interesting. They still want to experience products in person. What's really disappearing is a simpler era: find a good spot, rent an attractive space, stock it with product, and wait for customers to arrive.
The stores with real staying power going forward will likely be smaller, more flexible, more experience-driven, more digitally connected, and much clearer about why they need to exist in person at all.
So for any company preparing to enter Germany, I think the first question isn't "where should we open our first store." It's "why do we need this store in Germany at all." Without a clear answer, moving fast on site selection, fit-out, launch and marketing just means scaling up a mistake faster.
German physical retail hasn't disappeared. It's simply re-sorting itself, deciding which kinds of stores deserve to keep existing. For any company entering this market, understanding what Germany is phasing out may matter more than studying what's currently trending.
All company-specific information referenced in this article is drawn from publicly available sources and news reporting.