Business

Bumpy road ahead for retailers

BY SHAMILLE SCOTT Business reporter scotts@jamaicaobserver.com

Wednesday, January 01, 2014    

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RETAILERS will have to downscale in 2014 to survive what is expected to be a bumpy first six months of the year, says the head of the Jamaica Chamber of Commerce, Francis Kennedy.

He reckons that any growth in the economy will start between the second and third quarters, which means businesses will have a rough first half of 2014 with lower profits.

Going forward, the head of the JCC said businesses will have to cut prices.

"Why have expensive items when no one is buying them?" he asked, adding that shoppers are being conservative because there is job uncertainty.

Ian Neita, general manager of Appliance Traders Limited (ATL) also expects tough

times ahead.

"Undoubtedly 2014 will have its own set of challenges," said Neita. "Notwithstanding we will continue to be customer-focused, paying keen attention to their needs and concerns and finding creative solutions that will address them."

Michael Ammar also has some concerns.

"I'm very nervous about the first five months, the Government revenue target is slipping, which means there could be an increase in taxes," said the director of department store Ammar's.

He figures that the demand for goods needs to be increased, without which the tax revenue will lessen.

"I don't think the government realises that the problem with the economy is a lack of demand," said Ammar. "People will produce and no one wants the goods."

But Fontana Pharmacy's managing director, Kevin Chang remains cautiously optimistic.

"Once Dr Phillips (the minister of finance) stays on the path and not yield to special interests, the economy will improve," said Chang.

The New Year will be better if the economy turns around, he said.

Meanwhile, Hardware and Lumber is banking on growth it has seen in the construction sector and plans to capitalise on this for 2014.

"We know that the challenges will exist but we are optimistic about the future," GraceKennedy told the Business Observer in an email response.

This, of course, is on the heels of poor sectoral performance in 2013 and a weak economy.

The wholesale, retail trade, repair and installation of machinery sector declined by 0.2 per cent year over year for the first nine months of 2013, according to GDP estimates published by the Planning Institute of Jamaica (PIOJ).

Ammar said the purchasing power of customers was down and the underground economy stifled legitimate businesses.

"When people get paid, there's no money to spend," he said.

In 2013's tough economy, consumers were more price-focused, according to Ian Neita, general manager of Appliance Traders Limited (ATL).

A major challenge for GraceKennedy subsidiary, Hardware and Lumber, was the stagnant economy.

"We saw clearly that there was less disposable income, and people were spending on what they deemed necessary items, the company said. The increased cost of doing business all round was also an issue," GraceKennedy added.

In the same vein, HiLo -- GraceKennedy's supermarket chain -- outlined its major challenge as the numerous increases in commodites as a result of movements in the exchange rate.

Consequently, the businesses found innovative ways to cope.

ATL introduced products that customers needed, placed renewed emphasis on service component as well as implemented key value-added programmes such as extended warranty and credit bonuses, Neita said.

Hardware and Lumber did much of the same and introduced new products.

"We introduced solar solutions as well as products to assist farmers with increased productivity. As far as services are concerned, we offered more complete service solutions, for example, offering installation of products purchased," the company said.

As for Christmas, traditionally one of the busiest periods for retailers, last month wasn't quite positive.

Members of the chamber have reported that they have sold the same volumes they did last year, Kennedy told the Business Observer.

"They mostly bought the essentials -- clothes and household items, and cut back on the electronics," he said.

But for Ammar's the season ended on a low note, which was one of the real challenges the business faced last year.

"Christmas started good but towards the middle and the end of the period, things got bad," the department store boss recounted.

HiLo saw a fair amount of sales, but this was still less than expected. The Christmas season was a very tough period for Hardware and Lumber. "We didn't see any increase in business until around December 20," the company said, adding that customers were very careful with their spend.

On the other hand, Fontana Pharmacy had good business in the resort towns during Christmas; this trend was the same most of last year.

Montego Bay, and the recently opened Ocho Rios locations performed reasonably well, Chang said.

"The stores in the tourist areas are performing better," he said. "Savanna-la-Mar was okay, Kingston was alright and Mandeville was weak."

Christmas wasn't bad; it reflected the rest of the year, said Chang.

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