Without additional government support, “up to 50,000 shops with 250,000 employees might no longer have a future,” the German Retail Association (HDE) said in a statement.
The industry can “no longer survive without tailor-made financial assistance”, the HDE added.
To curb a sharp rise in Covid-19 infections, Germany will close non-essential shops from Wednesday until at least January 10th, in addition to measures already in place since November that have closed bars, restaurants, leisure centres and cultural sites.
To help the affected businesses, the German government is committing €11.2 billion ($13.6 billion) a month in aid.
That includes raising the ceiling for direct aid to compensate for fixed costs to shuttered firms from €200,000 to €500,000.
With the latest restrictions falling in the middle of the year's busiest shopping season, Berliners rushed to queue up outside stores for Christmas gifts on Tuesday, AFP reporters saw.
“The usually strong sales period towards the end of the year will be a fiasco for many traders,” HDE boss Stefan Genth said.
“In the fashion trade in particular, many companies are on the verge of bankruptcy,” Genth added.
Even with the promised government support, the number of unemployed could rise by between 50,000 and 100,000 as a result of the renewed shutdowns, according to the influential IFW economic institute.
The IFW expects Germany's economy to shrink by 0.8 percent in the fourth quarter of 2020 and by 1.4 percent in the first three months of 2021, plunging Europe's economic powerhouse into a double-dip recession, despite a strong
recovery over the summer.
The government however still anticipates that the economy will expand slightly between October and December by 0.4 percent.
“I'm relatively sure we will not have a recession like in the spring,” Economy Minister Peter Altmaier said on Monday.
The government expects German output to contract by 5.5 percent in 2020, before seeing a rebound of 4.4 percent in 2021 and 2.5 percent in 2022.