Just five months after the increase in Jamaica’s duty-free threshold, long-established brick-and-mortar retailers are grappling with a noticeable decline in sales, particularly in the clothing and electronics sectors.

Local business operators say they were already struggling with rising operational costs, shrinking disposable incomes, and a challenging job market; however, the recent changes in the duty-free allowance — which doubled to US$100 for personal items and increased to US$1,000 for travellers — may be the final blow, pushing them closer to the brink of collapse.

For retailers like Ammar’s Department Store, a Kingston-based family-owned business that has been operating for about 64 years, the pressure from online competition is palpable.

According to Michael Ammar Junior, owner of Ammar’s Department Store, the increase in duty-free allowances is negatively impacting the business.

“I can definitely say the rise in duty-free traffic is affecting us,” Ammar told the
Jamaica Observer. “There is a courier company located upstairs, and all day long you see people going up and down, up and down with packages. The summer hasn’t been strong, but this only magnifies the challenges we’re facing.”

E-commerce has rapidly grown in popularity, driven by convenience and the perceived cost savings. Consumers can now shop from the comfort of their homes, with global platforms like Amazon and eBay offering a vast array of products at competitive prices. For many, the appeal lies not only in the variety but also in the convenience of shopping online, with relatively quick shipping.

Local operators began feeling the impact of e-commerce long before the COVID-19 pandemic, but sales worsened significantly with the introduction of movement restrictions. As the Government prepared to enforce an increase in the duty-free allowance, industry players warned that this measure would further damage the sector. Unfortunately, their concerns went unheeded.

The increase in the duty-free allowance was widely seen as a strategy to garner voter support ahead of the local government elections in February this year.

“It makes no sense to bring in clothes and shoes duty-free for individuals while local businesses are left to struggle,” Sonia Trehan, manager of Lee’s Fifth Avenue, told
Business Week. “The US is working to protect its stores. Why aren’t we doing the same?”

While Jamaica has raised its duty-free threshold, making online shopping more appealing, the United States has been moving in the opposite direction. To protect its brick-and-mortar businesses, US companies have turned to technology like artificial intelligence and personalised marketing to enhance the in-store experience and compete with online retailers. Additionally, US regulatory bodies have cracked down on unfair pricing practices, ensuring that physical stores aren’t undercut by unethical competition online.

In contrast, Trehan argues, Jamaica’s current policies risk wiping out more local retailers.

“Look at how many stores have closed down in the last 10 years, and a lot of that is due to online shopping. Now, with this increased duty-free allowance, it’s as if we’re being told to just go shop on Amazon or Shein and forget about supporting local stores,” she said.

Both Ammar’s and Lee’s Fifth Avenue have reported a notable drop in sales since the duty-free allowance increase, with the latter seeing a downturn almost immediately.

“We started noticing the fall off in sales the same month the new allowances came into effect. It’s been tough ever since,” Trehan said.

While the recent change in the duty-free threshold has worsened the situation, the retail sector was already under significant strain. The COVID-19 pandemic brought many businesses to their knees, and those that survived now face rising operational costs. From skyrocketing rent — up by well over over 100 per cent in some cases — to escalating costs of security and insurance, the overall cost of running a physical store has become untenable for many.

“Since the pandemic, our rent has doubled, and we’ve seen insurance costs increase by over 50 per cent,” Ammar explained. “When combined with the rise in utility prices, it’s extremely difficult for businesses like ours to keep up.”

Jamaicans’ disposable income is also under siege, with rising interest rates cutting into what little is left for discretionary spending. Inflation may have cooled in some sectors, but food prices remain stubbornly high, diverting household budgets away from apparel and other non-essentials.

“People are spending more on groceries and less on fashion,” Ammar remarked. “We’ve had to hold prices down, despite rising costs, to keep customers interested. But the reality is many can’t afford to spend as freely as they used to.”

Despite the rise in e-commerce, Ammar believes that physical stores still hold appeal for those who prefer to “see and feel” what they’re buying, especially when it comes to fashion. “When it comes to clothes, people still like to touch the fabric and try on items. That’s why we continue to offer the best service, including our flexible return policy,” he said.

Retailers are not sitting idly by as these changes unfold.

The company heads say they are adopting a more selective approach to inventory, focusing on quality and durability rather than fast fashion.

“We’re buying more conservative fashion, items that have a longer shelf life,” Ammar explained. “It’s not just about price, people want value for their money and we’re trying to meet that demand by focusing on quality and offering superior service.”

In the run-up to the busy Christmas season, Ammar’s is gearing up with a series of promotions, including its annual anniversary sale and Black Friday deals.

“We know price reductions alone won’t win back customers, so we’re focusing on service, quality, and the overall shopping experience,” Ammar said.

Brick-and-mortar stores are also trying to adapt by offering online shopping options and in-store services like personal shopping, but this hasn’t been enough to offset the decline. Both Ammar’s and Lee’s Fifth Avenue are focusing on selective buying and quality, aiming to offer products that deliver more value and durability.

“We’re just trying to hold on and weather the storm, but it’s clear that the playing field is getting increasingly uneven,” Ammar said.