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MERCHANTS PREPARE FOR CHRISTMAS RUSH

Fatter wallets promise richer Christmas

MERCHANTS in Slovakia are meticulously preparing for their harvest season, Christmas, while increasing employment and wages together with low inflation indicate a generous Christmas season.

MERCHANTS in Slovakia are meticulously preparing for their harvest season, Christmas, while increasing employment and wages together with low inflation indicate a generous Christmas season.

“Merchants as well as customers are expecting a better Christmas selling and purchasing season than last year,” Ľubomír Drahovský, an analyst with the Terno market research agency, told The Slovak Spectator. “Retail sales have gradually increased by some percentage so far this year and there is a presumption that during this pre-Christmas time, that is actually a harvest for trade companies, this situation may improve.”

Andrej Arady, analyst with VÚB banka, confirms the improved consumption of households.

“The consumption of households so far this year is a positive surprise for us and a long-awaited relief for merchants,” Arady told The Slovak Spectator. “Private consumption is perceivably stronger than we originally expected before the start of the year and this [is happening] thanks to surprisingly strong revitalisation of the labour market.”

Slovakia’s economy has been generating a lower economic growth of 2.4 percent than it was in the past when growth needed to be over 3 percent to generate new jobs, according to Arady.

Retail sales grew 0.8 percent in September compared with August, but they grew 2.8 percent compared with September 2013, according to the Statistics Office.

But Drahovský points out that it is necessary to look at the retail sector also from the regional point of view.

“What customers buy in the capital and in its vicinity cannot be valid for regions such as Spiš, around Rimavská Sobota, and Sobrance [i.e. so-called hunger valleys suffering from high unemployment],” said Drahovský. “Here people have fundamentally different requirements and trade has to adapt to them too.”

Arady agrees that Christmas brings more retail sales because December sales are usually up to one fifth higher compared to other months of the year.

“Currently low inflation and the sound growth of wages can also help sales [to grow],” said Arady, adding that a portion of purchases may also be financed by loans and currently the terms of loans are the most advantageous in the history of Slovakia. “This is because the pre-Christmas period is usually also a stronger period for consumer loans.”

According to Arady, the trend of postponing some purchases for the New Year’s sales, which has occurred in Slovakia over the last few years, can act against the growth of retail sales.

Drahovský confirms this trend, which arrived to Slovakia from western Europe, that Christmas presents are often in the form of vouchers for spa and wellness stays, shopping or others, which their recipients can use during post-Christmas sales.

“This trend has settled here and keeps growing, which means that it takes from retail trade some percentage of expected sales before Christmas,” said Drahovský, adding that these sales would be realised the following year.

Christmas expectations

Arady expects that Christmas expenditures this year will be higher than last year by more than 2 percent, but they will still significantly lag behind the pre-crisis maximum from 2008. According to Drahovský, due to deep regional disparities, it is very difficult to estimate the amount households would spend on Christmas. But when cities with strong employment are taken into consideration, he estimates the expenditures which include Christmas presents as well as Christmas and New Year’s festivities at €300, plus a maximum of up to 20 percent per capita.

E-shopping

People also shop online for Christmas presents more and more often. Based on a survey conducted by one of the biggest e-shops in Slovakia, Hej.sk, on 992 Slovaks in October, 62 percent of Slovaks plan to buy Christmas presents online this year.

Drahovský confirms that the strength of internet shopping and collective shopping websites has been growing.

“People, who in the past needed to literally touch the [purchased] assortment, gradually are starting to believe offers and assortments offered via e-shops and these sales are growing,” Drahovský said, warning, however, that occurrence of unfair e-shops can cause harm to customers’ trust thus they shop only in e-shops with which they have already had positive experiences.

The price-comparison website Heureka.sk estimates that this year Slovak customers will spend €611 million in e-shops, that means an annual increase of 20 percent. E-commerce makes up almost 5 percent of the total of Slovakia’s retail turnover, but when the sales generated by the food sector are not taken into consideration, this share is as high as 10 percent.

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