Trade begins to recover from crisis

Photo: Stock.XCHNG

 TRADE IN BRIEF:
• The number of registered trade companies reached 22 871 in 2011, their turnover – LVL 14,575 million;
• Retail trade turnover rose 9,7% in 2012, online store turnover – 28,4%;
• Industry leaders – Rimi Latvia, Maxima Latvia and Samsung Electronics Baltics turned over a total of more than LVL 980 million in 2011.

• Trade is traditionally among the most important service industries, its share in Latvia’s gross domestic product structure constituted 17,2% in the third quarter of 2012, according to the Central Statistical Bureau’s data.
• Compared to 2011, retail trade turnover grew 9,7% at constant prices in 2012. Retail trade of food products increased 3,1%, of non-food products – 12,9%. Among non-food products, the largest increases were recorded in retail trade of audio and video devices, as well as electrical home appliances.

Private consumption rises
• Retail trade leaders – Rimi Latvia and Maxima Latvia – predict that the year of 2012 will conclude with growth. In comparison with the corresponding period of 2011, Maxima Latvia sales increased 11% to LVL 215,2 million in the first six months of 2012.
• Maxima Latvia consolidated turnover reached LVL 413,21 million in 2011, profit – LVL 1,87 million. Rimi Latvia in turn achieved LVL 417,16 million in consolidated turnover in 2011. The company’s consolidated profit reached LVL 6,345 million in 2011.
• At constant prices, the amount of purchases increased 4,4% in final consumption in 2011. Compared to 2010, consumption expenditures rose 5,3% at current prices in 2011.
• Monthly household expenditures on food, compared to the previous year, increased from LVL 50 to LVL 54 per household member. Food expenditures remain the main consumption priority among households, constituting 28,8% of total consumption.

Online shopping popularity grows
• According to the Finance Ministry’s data, online shopping is increasingly popular. Over the year, online stores have increased their turnover by 28,4%. The steepest increase has been recorded in demand for computers and communication devices – 42,6%, the steepest decrease – for audio and video recordings – 12,6%, followed by books and newspapers – 10,7%, which, to a great extent, is directly connected with turnover growth in computer and similar device trade.

Euro adoption and retailers
• The introduction of the euro in Latvia was actively discussed in the autumn of 2012. The Latvian Traders’ Association claimed that the adoption of the euro will cost retailers up to LVL 160 million. Due to the fact that retailers will have to cover these costs on their own, the association predicted that the introduction of the euro will result in 0,4% to 0,5% price increases.

• According to retailers, the main difficulties are expected during the period when euros and lats will circulate simultaneously, which is currently planned from January 1 to 14, 2014. Therefore they proposed using payment cards for purchases during the period.

Retailers continue competing for buyers
• Retailers admit that there has been fierce competition for buyers over the past few years. Even though Latvia’s domestic consumption stabilizes and improves, the principle of the lowest price dominates in the spending habits of residents.

Most important industry developments
1. The 2012 VAT reduction from 22% to 21%, which envisaged changing price tags and reprogramming cash registers, did not cause any major difficulties for retailers – they made due preparations.
2. At the end of 2011, producers raised prices by 6,9%, immediately affecting local market prices, which grew 8,8%.
3. Swedish clothing retail company Hennes and Mauritz (H&M) entered the Latvian market. LVL 3,5 million was invested in opening H&M stores at the Alfa and Galerija Centrs shopping malls in Riga.
4. British clothing retail company Next also entered the Latvian market. Next invested LVL 500 000 in its first store in Latvia, which was opened at the end of September 2012.

Five largest trade companies in terms of net turnover in 2011

* Average number of employees. Source: Firmas.lv


Useful links

Latvian Traders’ Association 
Latvian Chamber of Commerce and Industry 
Latvian Association of Building Material Traders 
Latvian Association of Fuel Traders 
Central Statistical Bureau