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Germany’s struggling department store chains can’t afford to switch to trendy, expensive products.

Luxury: German retail woe

Shoppers snub the larger stores, buy at boutiques

– Lawyer Mareike Gruhn spends at least $600 a month buying designer products from luxury labels such as Jimmy Choo and Prada.

Retailers such as Kaufhof and Karstadt never see a dime of it.

“Department stores in Germany are a bit trashy,” said Gruhn, 36. “I never buy clothes in department stores and don’t even look at what’s on the shelves.”

In a land known for its thrifty citizens, German department stores are missing out on a shift to luxury. Spending at the outlets, which date back as far as the 19th century, has fallen 3.9 percent since 2009 as the richest shoppers have sought designer gear at single-label stores, driving luxury expenditure up by 16 percent to $16 billion last year.

Kaufhof owner Metro AG has sought unsuccessfully for more than four years to sell the chain, whose sales declined 3.7 percent in 2011.

“German department stores are not yet fully realizing the potential to exploit in the premium and luxury segments,” said Mirko Warschun, head of A.T. Kearney GmbH’s consumer industries and retail practice in Munich. “Germany is not a booming luxury market like China, but it is a strong and resilient market in western Europe.”

The growth of the German luxury market last year outpaced a 9 percent increase worldwide, according to figures from trade association Meisterkreis. Department stores accounted for less than 4 percent of the total amount spent, Meisterkreis said.

The stores’ aversion to luxury is illustrated at the Kaufhof store in Frankfurt, where no piece of clothing or footwear in the front window costs more than $125 and the sixth-floor hairdresser offers a cut for $27. At the nearby Vuitton store, items on display from the street include a $5,700 suitcase, a $1,700 dress and a jacket for $1,000.

Labels such as Prada and Cartier, readily available at Printemps in Paris or Harrods in London, can’t be found at Kaufhof or Essen-based Karstadt, which mostly offer mid-market labels such as Esprit and Gerry Weber.

“It requires so much investment, and they have a limited budget,” Warschun said. “Consumers don’t associate Kaufhof to a premium brand and will still rather go to a luxury-store shopping street where the shopping experience is nicer.”

Unlike department stores, luxury brands are jumping on opportunities afforded by a country that, according to researcher Euromonitor International, had the highest disposable income in western Europe last year at $2.4 trillion.

The number of monolabel luxury stores in Germany rose 28 percent from 2007 to 2011, according to Meisterkreis. The country is one of only a few in Europe where Italian luxury brand Ermenegildo Zegna isn’t losing local customers, the company’s eponymous chief executive officer said.

The number of German department stores is down a third from 2006, according to Euromonitor. In France, numbers have remained stable in the period, while in Britain they have risen by about 20 percent.