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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. | 
