Retail spending slumps as economy slows

Retail spending in Nigeria has slowed considerably especially in the luxury segment as an economic downturn leaves consumers with stretched pockets.

A number of mall operators have also cut back on staff, while those who could not stand the heat have closed their shops permanently, BusinessDay investigations show.

A survey by BusinessDay in some Lagos malls revealed that the huge traffic of customers, which was a common sights around malls, have since disappeared, leaving most malls almost deserted.

Few mall operators who spoke with BusinessDay expressed fears over the prolonged low patronage, which they say is seriously hurting their businesses.

“Our sales have been so bad. It even costs some of my colleagues their jobs. Earlier this year, we used to make N3.5m a week but recently can only boost of N1.5m or less. Many of my colleagues are scared of being laid off at the end of this month,” a manager, at an accessories shop in Ikeja City Mall complained.

A store Manager at Levis who gave his name simply as Williams said sales has been bad but they have managed to stay hopeful.

“I opened the store around 9am but I just made my first sales around 2pm. I made N50, 000 yesterday, which was really bad, compared to two weeks ago when I made between N200, 000 to N300, 000 on a daily basis. We placed some items on sales but no one is buying them. The shop beside mine has just closed up because they could no longer cope with the present day hardship,” he said.

The combined effects of lower growth rates and higher inflation are squeezing Nigerian consumers.

The economy which is Africa’s largest contracted by 0.4 percent in the first quarter of 2016.

Inflation climbed to 13.7 percent in April from 12.80 percent in March, the highest in almost four years.

Amarachi Maduka, Assistant Manager, Essenza, a skin care shop in Apapa mall, who could barely hide her worries said, “We have never seen such poor sales since we started this business; it’s been terrible. I hope this challenge in the economy fades away soon if not, we won’t have businesses to go to.”

The sales decline has mostly hit demand for imported and luxury goods.

Iyabo Anafi 40, a trader at the popular Apongbon market in downtown Lagos still remembers when shoppers moved in droves to buy expensive wines.

For Anafi, all that now, seems like the distant past.

“Market has been very terrible. I’ve not sold a bottle of champagne for days now. Before now, I sell at least four cartons in a day but things got worse after January this year,” Anafi said.

According to a 2013 report by Euromonitor, Nigeria spends an average of N41.41 billion on champagne annually, making it the second fastest growing market in the world for champagne, after achieving a compound annual growth of 22 percent between 2006 and 2011.

Nigeria consumed about 593,000 bottles in 2010, which is the highest consumption in Africa.

South Africa, another emerging market for luxury goods consumed 384,000 bottles in the same year.

In 2011, total champagne consumption reached 752,879 bottles (75cl), higher than consumption in Russia and Mexico, thereby placing Nigeria among the top champagne markets in the world.

BusinessDay retail survey in some Lagos markets revealed consumers decreasing demand for champagne- owing largely to the present economic downturn.

BusinessDay survey at Apongbon, one of the largest markets in the country showed that a carton of crystal champagne, which goes for N420, 000 increased by 54.7 percent and now sells for N650, 000.

Moet and Chandon now goes for N114,000 per carton against N90,000 which is a 26.6 percent increase, while a carton of Rose champagne increased by 45 percent to N145,000 from N100,000 in the last three months.

“Customers are buying but not as much as before because it’s very expensive and most people cannot afford to spend that much. Those that import champagne have reduced the number of containers they bring in because the exchange rate is still high,” said a seller who doesn’t want her name mentioned.

Exacerbating the already anaemic position of retailers and consumer goods firms in Africa’s major oil producer, are capital controls imposed by the apex bank that made it difficult for businesses and manufacturers to import goods.

“It is largely because of the FX controls as most of these luxury goods we talk about are imported,” said Tajudeen Ibrahim, head equity research at Chapel Hill Denham by phone.

Trade GDP grew at low 2.02 percent in the First Quarter of 2016, down from 4.69 percent, 6.47 percent in Q4 and Q1, 2015 respectively, reflecting the slowdown.

“Business has been poor generally, we are barely managing. The economy is so bad and the money we used in clearing these goods are now high.  I can’t tell you how much we make now or before because it’s against the company policy but our sales have dropped drastically,” a manager at Montaigne Place, an accessories shop at Surulere shopping mall, lamented.

BALA AUGIE & CHINWE AGBEZE