Increased value of purchases in the first half of the year data show and strengthening of private label products
It is expected that from April 1, the rest of the retail trade will also be affected by the upcoming fuel price increases.
By Maria Herakleous
Increases of 10 cents a liter in motor fuel are expected until mid-April. This is apparently a result of the end of the zero rate measure on diesel and petrol from 1 April, which increases the cost of motor fuel by 8.3 cents/litre (the subsidy on heating oil is expected to be removed on 15 April). At the same time, the price of oil internationally appears to be under upward pressure, with estimates by oil market analysts speaking of an upward revision of oil prices. In Cyprus, the estimates of the Cyprus Consumers' Association place the increases, due to the raw material, at 2 cents per liter. Therefore, at least according to today's data, it is expected that by mid-April the prices of motor fuels will be 10 cents higher than today's prices. According to the Fuel Price Observatory on Tuesday 26 March, the average price of motor oil all over Cyprus was at 1.508 euros/litre, while the average price of 95 octane unleaded was 1.416 euros/litre and 98 octane unleaded at 1.472/litre. Increases in motor fuels are expected to have an impact on fuel markets. In fact, according to the 6th wave of K trends (concerning the period of January), due to the increases in fuel prices, 44% of consumers have limited their movements, while 7% procure fuel from occupied areas. Of course, the cost of commuting is a significant expense for the family budget, so its increase affects the rest of the purchasing habits of consumers. It is therefore expected that from April 1st the rest of the retail trade will also be affected by fuel price increases.
Out of necessity
What is expected is that out of necessity consumers will make more targeted and cautious purchases in an effort to offset rising fuel costs. Limitation of other expenses is expected, however, also in cases where the increase in fuel costs does not impose a significant burden on the household, since in any case the information about increases and termination of support measures have a negative effect on consumer behavior. For his part, the governor of the Pancypriot Retail Trade Association Marios Antoniou stated that in the coming period a reduction in consumer spending and more careful purchases across the spectrum of retail trade is expected, which is attributed to the fact that, over time, the cost of motor fuels and electricity are two facts that burden the budget of households without alternative options. Therefore, whenever there is an increase in these sectors, consumer spending in the rest of the retail sector decreases.
Listed
Fewer ups and downs are experienced by food retail, or more specifically supermarkets and hypermarkets, as long as they are essential products. As described by g.c. of the Pancypriot Association of Hypermarkets Andreas Hatziadamou, no particular changes in consumer behavior and purchases are recorded despite price increases and announcements related to anti-punctuality measures. As he even mentioned, the two previous three days (Clean Monday and March 25) the food markets had their “tops”, while the next one is also expected to move satisfactorily. What is changing is that shopping is becoming more targeted and based on a specific list, with a preference for products that are on sale as well as private label products. These have found their way into the supermarket basket over the past couple of years, mainly due to inflationary pressures on produce. What is now being observed is that the market share of private label products is increasing around 20-25% compared to last year, while it is estimated (without clear measurements) that their percentage in the basket is around 10%. As a result, the large supermarkets place special emphasis on private label products with options offered in addition to cleaning and personal hygiene products, and on food products.
At 82.86 million, the amount of fuel purchases in the first two months of 2024, marking an increase of 3.7% compared to 2023, while further increases are expected.
Plastic turnover
At the same time, the JCC figures regarding the amounts spent in plastic money in the first two months of the year in specific categories of products and services, are enlightening about the picture in the market and demonstrate that the purchases, or at least the value of the purchases in retail continues to take a positive sign. Specifically, in the motor fuel category, the amount of fuel purchases amounted to €82.86 million, marking an increase of 3.7% compared to €80.4 million in the first half of 2023. A 3.74% increase was recorded by electronics category (from €25.38 million compared to €26.3 million). By 4% higher was the turnover in the furniture category, which reached €23.2 million compared to €22.3 million in the corresponding period last year, while the increase in clothing and footwear was 6.5%. In particular, card purchases for clothes and shoes amounted to €76 million this year, compared to €71.3 million in the first two months of 2023. An increase was also recorded in the supermarket category by 8.3% compared to with last year. This category seems to be the largest percentage of consumer spending, since €235 million was spent this year compared to €217.3 million in January and February 2023.
Double digit increases
Larger increases in the value of purchases are recorded in the categories of electrical appliances, hotels, catering and fast food as well as car maintenance. Specifically, in the category of electrical appliances, turnover reached €17 million in the first two months of 2024 compared to the corresponding period last year, recording an increase of 19% (€14.5 million). This increase appears to be mostly attributable to upward pressure on white appliance prices due to the Houthi unrest. The biggest increase is in the fast food category. Specifically, this is a 31% increase compared to last year and a turnover of €8.8 million compared to €6.8 million last year. By 20% higher are the amounts spent in restaurants (from €106 million they rose to €127.8 million), while in the hotels category the increase was by 16% (from €36 million last year, this year they reached € 41.8 million). By 25% was the increase in the category car maintenance and parts – which increased by 25% and rose to €32.2 million. in the months of January and February. The only decrease is recorded in kiosks, which amounts to 16% (€2.8 million plastic turnover) compared to last year.
It is noted that the above amounts refer to the value of purchases paid for with plastic money and not with cash – it is estimated that around 75-80% of consumers choose to pay at the checkout with a card. It is also noted that the volume of transactions is not specified, but the value. However, looking at the latest figures from the Statistical Service, the retail trade turnover index, a difference emerges in the increase in the value and volume of business. Specifically, the value of retail operations increased by 8.9% while the volume index saw a smaller increase of 5.8% for the whole of 2023, which confirms that the increase in value was a result of the increase in product prices. Therefore, the fact that the amounts spent through plastic money are increasing can be attributed more to the increase in the cost of products and services, than to the increase in transactions, although the movement in the market – supermarkets and shops – is described as satisfactory.
