The market is under intense pressure due to the inflationary trends of recent months with consumers appearing hesitant on their trips to retail stores. More shoppers are looking for special offers and refraining from impulsive buys.
On the other hand, tourist flows are expected to be better this year overall, at least compared to 2021, which translates positively for retail businesses as well.
The secretary-general of the Pancyprian Retail Trade Association (PASYLE) Marios Antoniou, stated that although the prices and costs are high due to inflation, people have become careful and spendthrift. Consequently, the more inflationary pressures are reflected in fuel and energy prices, the more uncertainty prevails in the economy and businesses. "Unfortunately, the increase in fuel and energy prices inevitably affects all other sectors and clearly consumption, which is the driving force of the economy," said Mr. Antoniou.
Value vs sales
The results for the retail turnover are expected to be announced by the Statistical Service in the coming days. Results that are expected to simply confirm with data, the general picture that prevails in the market - a jump in prices despite the effort to suppress them. The first signs were felt in the April data. Specifically, the Volume Index of Retail Trade Turnover decreased by 1.9% compared to the corresponding month of the previous year. Also, for the period January-April 2022, the value index is estimated to have increased by 10.2% and the volume index by 1.3% compared to the same period of 2021. In fact, in the retail food sector, the sales volume decreased around 12% in April this year compared to last year, but nevertheless, the value of sales increased.
The largest change in the value index was recorded in retail trade (excluding vehicle fuels), in non-food products, in textiles, clothing and footwear (33.9%) and in the retail trade of vehicle fuels (37.7%). Things are unlikely to change until 2023. A recent KPMG study shows that most of the international retail turnover for the second half of 2022 and between 2023 and 2024 will depend on prices rather than sales volume, while the increase in retail sales volume is expected to be around 1.1% over the next two years (2023-2025).
Uncertainty is growing
Meanwhile, the Economic Sentiment Index showed a deterioration in the Cyprus economic climate in June. This is attributed to declining sentiment in business services, manufacturing and retail. The climate in the retail trade showed a marginal decline due to more negative evaluations for the sales of the last quarter and more pessimistic estimates for future sales. In particular, the levels of uncertainty recorded in June in services, retail and manufacturing were lower than in May, while in construction they remained almost the same. However, consumer uncertainty has increased.
Tourism will save the day
Tourist arrivals are currently giving a significant boost to the retail market. Mainly in Paphos, as described by Mr. Antoniou, there is a positive note due to tourism. May recorded quite optimistic results in relation to inbound tourism - mainly Scandinavians and Israelis who also significantly boosted the region's retail trade. There is good tourist traffic in Ayia Napa and Protaras, although the profile of tourists in the area does not leave a mark on the retail trade, he points out. "Tourism gives us very optimistic messages, we hope this picture will continue for July and August. Overall, tourist flows are expected to be better this year at least compared to 2021, which translates positively for retail businesses as well. However, It is an injection with a short-lived effect. From the autumn, with tourist arrivals declining, but also domestic consumers gathering after their spent summer vacations, the retail trade will return to a difficult reality.
Lack of staff
At the same time, the lack of staff in retail stores continues to plague companies. Existing employees are also in a bind having to work more hours to cover the gap of needed employees. Limassol is facing the biggest problem, according to the data of PASYLE. Those who have left their positions have never been replaced, while the solution with the asylum seekers is not the most ideal for meeting their needs due to the uncertainty of the time of their stay on the island, as Mr. Antoniou explains.