THE economic slowdown deepens, stoking inflation and squeezing household budgets. It seems to have altered the composition of the Eid economy. The market has witnessed a shift from branded to unbranded categories in a wide range of consumer items and services.
The fall in sales, according to leaders of market associations, ranges between 20 and 40 per cent in various categories of goods and services this year due to a variety of factors including price elasticity and the order of placement on the priority list of consumers this year.
The market was generally slow compared to last year all over the country, but the fall in sales was most significant in the second-tier cities of Punjab like Faisalabad, Gujrat, Sheikhupura, Wazirabad, Sialkot and Multan, traders believe.
Higher regulatory duties, the rupee’s plunge to Rs152 from Rs119 since last Eid and the rising cost of business curbed the availability of global brands in the domestic market and increased their prices, in some cases, manifold. With limited access even the high-end consumer had little choice but to switch to local brands.
The key gainers of this shift were local providers of goods and services who strategically moved away from big margins and kept prices as low as economically viable and targeted volumes
The key gainers of this shift were local providers of goods and services who strategically moved away from big margins and kept prices as low as economically viable and targeted volumes. The buyers scrambled for better deals but this time they were inclined towards affordability even if it meant compromise on the quality.
The higher spending on clothing and footwear compressed the budget for accessories while the wish list for home improvements was put on hold by many families, an initial market survey suggests. The wait for a pickup in sales of home appliances, furniture, etc did not end. For gift and decoration items shops this year proved to be dullest so far, according to salesmen in Karachi.
The food, confectioneries and restaurant business was down, some say by 20pc. Even massive discounts offered by hoteliers failed to attract customers at a scale these outfits expected. The business, however, was brisk at the roadside eateries.
In the services sector, the impact was milder on the transport and the sharpest on the grooming business. The economic pressures did not affect the drive of out-city workers to unite with their loved ones back in their hometown on this holy festival. Transport (road, railways and air) boomed despite the rise in fares.
There was rush in the outlets offering grooming services closer to Eid but the per head spending was half of what it was last year, operator of a renowned beauty parlour in a middle class locality in Karachi told Dawn.
In the inter-provincial comparison, most marketers and business leaders believe, Punjab was hit the hardest where pre-Eid orders from retailers dropped with a sharp increase in the value of stocks. The retailers probably found building inventories both costly and risky because of the perception of weaker consumer demand this year.
The harsher summers did hit the sales because the sweltering heat with temperature hovering over 40 degree in many cities close to Eid forced families to stay indoors for the better part of the day, reducing the collective time spent in bazaars by shoppers.
The providers of cheaper items and services made hay at the cost of comparatively expensive local brands, popular in the middle class. The share of cheaper Chinese goods in the overall Eid spending pie increased over the last year.
According to credible market sources China enjoyed close to 17pc of Eid market in 2017 while Malaysia, India, Bangladesh and Indonesia collectively shared 3pc to the total Eid spend. The remaining 80pc was with the locals.
“The smaller Eid budgets and high price tags forced people to alter their preferences to cover the requirements of children at the very least if the pocket does not permit indulgence for adults,” commented a market watcher working for a digital company that conducts commissioned retail market surveys.
“Even the people of limited means traditionally do try to buy new clothes and shoes for Eid. Many might have shopped on trimmed budgets but it seems many more lacked means to enter the market this year. They might be celebrating by spending whatever little they had on better food for the family and guests on Eid,” he remarked explaining the dip in clothes and footwear market.
Fast Moving Consumer Goods and Imports Association Chairman Anjum Nisar asserted that the sales dropped by 25 to 45pc this year for different categories of imported items.
“The shelves of imported branded items in malls and departmental stores are visibly empty. The government’s policy to curb imports by hiking the rate of the regulatory duty has rendered imports unviable for many smaller companies. The depreciation has already made imports dearer. The resultant increase in the price, particularly for high brands, has pushed them beyond the means of middle classes,” he told Dawn over phone. “Yes our orders have dropped, more so in Punjab,” he added.
The digital companies were reluctant to share data or offer comments and said they needed time to be able to pool in the relevant sales numbers before they can offer a comparison of the market to last year.
Published in Dawn, The Business and Finance Weekly, June 10th, 2019