Holiday season may be cause for cautious optimism after October retail sales slump

11-12-2013

Czech retailers and economists had reason to be optimistic when sales figures for September showed a 4 percent growth. But last week, the Czech Statistics Office announced that in October retail sales saw a year-on-year decline of 0.6 percent. This may put a slight damper on the hopes for a steady recovery from the economic recession, but many hope that the recent monetary interventions and the pre-holiday shopping season will put sales growth back on track.

Michal Brožka, photo: Czech TelevisionMichal Brožka, photo: Czech Television An analyst for Reiffeisen Bank, Michal Brožka, said that although disappointing, the recent sales figures are not catastrophic.

“We did expect the figures for October to be higher and that the growth trend from the past months would continue, but at the same time there was the possibility of disappointment.”

Medicine and cosmetics took the biggest hit in October, along with clothing and shoes. At the same time, improvements in automotive sales buffered the decline for in small retailer. One sector that continues to thrive in the Czech Republic is online shopping, which saw a year-on-year improvement of 17.8 percent in October. With internet shopping growing rapidly in this country since 2005, it is expected that Czechs will spend somewhere around 50 billion crowns in online stores this year.

As for brick-and-mortar shops, the slump in October may prove to be short-lived. According to Michal Brožka, household spending will most likely pick up again, despite the somewhat unoptimistic economic indicators recently released.

“The budgets of Czech households are not in great shape, for sure. Recent data shows that real wages in the third quarter stagnated, at the same time we see that unemployment is not decreasing, so it’s understandable if consumers are not so optimistic. At the same time, we see that in the long-term consumer confidence is improving every month. This tells us that the outlook for small retailers for the next few months may be quite good. At the same time it will be partly skewed by the interventions of the Czech National Bank.”

Photo: Kristýna MakováPhoto: Kristýna Maková Retailers have already forecasted that since the announcement of the interventions to weaken the crown in November, Czechs started on their Christmas shopping a bit earlier, buying imported goods before prices rise. The biggest jump in November is expected to be in electronics sales, though exact numbers are not available yet.

So, the disappointing October is not stopping retailers from being optimistic about the pre-Holiday season this year. I spoke about the changes in consumer behavior this season and interest in discounted items among Czech customers with Ondrej Hloupy, a project manager at the discount web portal AkčníCeny.cz.

“There is a change this year. For example, five or six years ago Czech customers were focused primarily on the price and on discounts only. And the main goal for them was to buy as many discounted products as possible. But now they are also focused also on the quality of products. So, when they are shopping they want to buy good products for a good price.

“This is a trend of the last two or three years, especially in the area of food, and it is supported by various cooking and healthy living TV shows.”

And currently, during the pre-holiday season, when people are looking for presents, do they spend a longer time looking for better deals, or is it just the focus on best quality?

“Czech customers are waiting for interesting offers during this Christmas, I think. They want to spend approximately the same amount of money as last year, or maybe just a little bit more, but they also want to get really interesting discounts on quality products. This means that discounts of less than 20 percent are not interesting at all, and I think that many are willing to wait for quality offers.”

There has been a lot of talk about online stores beating out the regular brick and mortar shops. From your experience, do you think that this is really the case that online shopping is not more popular than going to normal stores and looking for discounts there?

Ondřej Hloupý, photo: iDNES.cz - Petr TopičOndřej Hloupý, photo: iDNES.cz - Petr Topič “Online shopping grows significantly each year, but I think off-line stores will always be important, because of the quality of supporting services, the consultations and the possibility to touch the products that you want to buy.

“Our project AkčníCeny.cz is focused on off-line shopping primarily and we’ve seen a 30 percent growth of the audience this Christmas season. That is the year-on-year growth for the month of November.”

What would you say are the most popular items during this pre-holiday season among Czech customers?

“I think the most desired products of this season are probably tablets, e-book readers and notebooks. Tablets especially had great success last year, but this year they are much cheaper, so they are more affordable for Czech customers. And it is becoming a standard to have a tablet at your home.

“There is a similar situation with e-book readers, the famous Kindle reader cost around 5,000 crowns, and now it is about 2,000. And the market with e-books is also growing in the Czech Republic,

In terms of food items, is it still the case that Czech are for the most part looking for discounts and are focusing on how much they spend on groceries, or is there more of a focus on quality of the food?

“Yes, I think that they are much more interested in quality, but the price is still very important. We still see that the biggest interest for discounted food are milk products, meat, pastry products, coffee or alcoholic beverages and people wait for brand-name quality products to go on sale.”

Photo: Ambro, Free Digital PhotosPhoto: Ambro, Free Digital Photos Are people more interested in paying for Czech-made food products?

“I think that this regional focus has become really important. We now have a lot of programs like the ‘Czech Food’ labeling and various trademarks. Czech customers are also affected by newspapers and TV reports and, for example, the recent scandals over food imported from Poland. So, I think, they are focused a little bit more on Czech products, but I think the price, the amount of discount and the quality of the product are also important.”

11-12-2013