Economic influence on retail trade depends on migration
Looking at the influence of Latvia’s economy on retail trade industry in Q1 of 2016 and 2017 it becomes clear that future development of this industry depends on migration and inflation growth rates, as concluded in retail trade outlook Maxima Retail Trade Compass.
In this outlook, Maxima Latvia experts provide their opinion on the situation in retail trade and its development trends in the future. The country’s population declines and residents gradually relocate to cities.
Every year Latvia’s population declines on average by 1%. This also reduces general demand and consumption. Age structure and birth rate decline affect the structure of the purchase basket and demand for specific categories of products, experts say.
They note that demand and development of store networks are also affected by territorial distribution of Latvia’s population. According to data from the Central Statistical Bureau of Latvia, 68% of the country’s population lived in cities and 32% lived in the countryside at the beginning of 2016. The average decline of countryside residents is two times more rapid than the decline of city residents. «Analysis of residents’ shopping habits at Maxima Latvia stores reveals certain trends that point towards migration of residents from the countryside to cities. This trend is noticed the most in Latgale and Kurzeme. A significant portion of migration is also noticed in the direction of Riga and Pieriga,» says Maxima Latvia business analytics department director Zane Kaktina.
She also mentions that food retailers pick different development strategies because of that: some focus on the number of stores and turnover specifically in Riga and its adjacent regions and others decide to improve their foothold in regions.
2017 began for Latvia with high inflation rates
This year for Latvia began with high inflation rates. Average inflation for commodities and services was around 3% in Q1. Prices of food, alcoholic beverages and tobacco products continue growing, experts say.
According to data from the Central Statistical Bureau of Latvia and Maxima Latvia, prices have grown for dairy products, fresh vegetables, cheese and curd cheese, milk, pastries, butter, fresh fruits, sugar, fresh or frozen fish, chocolate, meat products, as well as dried, smoked and salted meat.
As noted by Kaktina, food retail trade market share growth rates as not so much associated with volume changes as much as they are with inflation growth rates, which are also affected by the rise of costs of raw materials.
It has been concluded that even though turnover of food in retail trade had declined last year, there had been a general increase of turnover in 2016 – especially in non-food product retail trade, which means a stable 5% increase. This trend is noted for the second consecutive year. Turnover has also increase in specialized stores. «Development of specialized food stores is taking place in Latvia at the moment. Expansion of specialized alcohol stores was noted in 2016,» Kaktina says. Growth is noted in the development of other specialized food stores – many producers continue developing specialized stores by opening new ones and reorganizing existing ones.