| Retailing
in Argentina: Poised for a comeback
- 01 Oct 04
Author: Leonie Tait
After
a tumultuous period of damaged consumer confidence, store
closures and rapidly declining sales during Argentina’s
recession of 1999-2002, all signs point towards the recovery
of the country’s retail industry.
A
retailer's worst nightmare
In
an effort to rectify the nation’s shaky economic situation
and pull the economy out of its recession, the Argentine peso,
previously pegged to the U.S. dollar, was floated in 2002.
Already the throws of a financial crisis, the economy quickly
suffered further setbacks. The value of the peso plummeted,
inflation soared and consumer confidence crashed, leaving
the retail sector struggling.
Paltry
purchasing power
The
dramatic drop in purchasing power in 2002 created a far more
price sensitive consumer with little available credit at their
disposal. Consumers began to opt for less-expensive products
and private-label brands, which meant that the only type of
outlet experiencing growth was hard discount stores in food
and factory outlets in non-foods. Overall retail sales in
real terms declined drastically over the review period.
Curing
credit
As
the economy began to stabilise in 2003, efforts to rebuild
credit had a positive impact on consumer expenditure and consequently,
on retail sales. In an effort to repair consumer confidence,
banks and retailers introduced more favourable terms for issuing
consumer credit and retailers established more flexible payment
options to encourage expenditure.
Retail
revival
The
outlook for growth in retail sales in the industry is positive,
barring the dip in 2006 and 2007 sales, which is due to the
retail industry’s cyclical nature. As the peso stabilises
and consumer confidence begins to recover, positive macroeconomic
conditions are expected to stimulate investor confidence and
increase the number of retail businesses operating in the
market, indicating an optimistic future for the industry.
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