Retailers' association predicts difficult start to 2024

Sale being advertised at a shopping mall in Tallinn. Photo is illustrative.
Sale being advertised at a shopping mall in Tallinn. Photo is illustrative. Source: Anna Aurelia Minev/ERR

Retail sales have been declining for a year, and businesses are forecasting a difficult start to 2024. Half of purchases are currently sold at discount.

Last month retail revenues fell by 8 percent compared to August 2022. Online purchases dropped by 23 percent and industrial goods by 11 percent, while food and motor fuels declined by 4 percent. Sales only rose in pharmacies and cosmetics stores.

Nele Peil, CEO of the Estonian Retailers' Association, said consumer confidence has reached a historic low. Almost half of products are sold discounted with merchant or manufacturer's profits minimal or non-existent.

"Indeed, the downturn implies that people on lower incomes are living paycheck to paycheck now. A lot of what we've seen is that sales of the 'middle' segment have fallen, people are buying the cheapest alternatives," said Peil.

"If you now look at the average retail business, a 10 percent drop in turnover generally means that the business is on the verge of making a loss. So a very large proportion of businesses are now operating at a loss," she said.

Estonian Retailers' Association head Nele Peil.. Source: ERR

SEB economic analyst Mihkel Nestor said sales turnover decreased in almost every sector last month. This is caused by general uncertainty.

"If we look at how people are doing in the labor market, the vast majority of people in Estonia who want to work are working, the average wage is increasing quite rapidly. So there are not very many direct objective reasons to drastically cut back on consumption now," Nestor said.

Kaubamaja manager Erkki Laugus said the situation in the first half of the year was more positive, but turnover has fallen in the second half.

"Certainly the area where sales are under more pressure at the moment is household goods. While in recent years, new home construction and furnishings have been very popular, there is less real estate being purchased now, and that is certainly what we are seeing in home sales, that they are perhaps lower than in previous periods. As far as fashion and as far as cosmetics are concerned, sales are certainly much better there," said Laugus.

Nestor said we may now be past big price rises.

Mihkel Nestor. Source: Priit Mürk/ERR

"Before, if you had maybe 10 out of a hundred TVs left in the warehouse, that's fine, but now that the company's turnover is actually declining, it puts the retailer in such a difficult situation. After all, the rent for the shopping center has to be paid, employee's wages have to be paid, and in this situation, where there are fewer shoppers, to expect that prices will rise seems dubious to me," he said.

Peil from the Estonian Retailers' Association said the most difficult period for traders will likely come at the beginning of next year. After that, things may improve


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Editor: Barbara Oja, Helen Wright

Source: Aktuaalne kaamera

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