What’s happening to Malta’s retail sector? July sees some ground regained after disappointing June

A fluctuating outlook for Malta’s retail sector has seen sales levels recover some ground after a disappointing June on the heels of a blow-out May, where trade volumes approached those of 2019, according to Abigail Mamo, CEO of the Malta Chamber of SMEs.

Speaking to BusinessNow.mt, Ms Mamo puts the fluctuations down to three key reasons: Changing consumer sentiments as attitudes towards Malta’s pandemic situation change, continued low tourism numbers, and altered consumer activities caused by continued restrictions.

Additionally, she warned that supply problems were having a further detrimental impact on businesses suffering from declining demand, and suggested companies further invest in their online offering.

Consumers respond to COVID figures

“There is a very big correlation between the number of COVID cases and how often people are going out to spend money”, she explains.

As such, when COVID cases were at impressive lows in May, as restrictions of retail outlets were lifted, consumers were much more willing to spend money.

Then, in late June, and July, with COVID cases back up in the hundreds, it was expected that people would be exercising more caution and be more frugal.

“A big part of the population changes their spending habits depending on the daily numbers”, explains Ms Mamo.

However, as she points out, case numbers do not mean what they once did, and hospitalisation and mortality levels have been cited as the new metric for judging the severity of the virus spread.

Ms Mamo expects that as people adapt to the “changing nature of the numbers”, people will be much more willing to spend money.

Changing recreational habits

It’s not just COVID-related financial caution which is seeing retail consumers spend less.

Continued restrictions on cultural and entertainment activities are also having an impact, the SME Chamber CEO observes.

Those sectors which would typically be more reliant on event-related spending such as fashion and hair and beauty, for example, have suffered without mass events, and although mass events are expected to be permitted imminently, Ms Mamo warns that continued restrictions on how they can do so mean the wider economic benefit will be somewhat muted.

Indeed, this sentiment has been echoed in the past by stakeholders in these sectors.

In May, Adrian J Mizzi, president of Fashion Association Malta told BusinessNow.mt that the fashion and beauty sector will only be able to regain “some sort of normality” when the entertainment sector is back on its feet too.

Pandemic-related restrictions have not hit all sectors equally though, she explains, and some sectors – especially home improvement – continue to reap the benefits of a reprioritisation of consumers’ home lives.

Asked whether the extent of this had lessened with the lifting of many restrictions, and the return of many to work from the office, she says no, that the industry is still going strong.

“People have still not gone back to normal”, she reports, “and many are expecting to continue to spend time working from home into the future”.

Indeed, philosophies relating to working styles across the world have shifted, and many roles are now operating in a sort of hybrid manner, with workers spending some time in the office and the rest remotely.

Lower tourism numbers have also negatively impacted the retail sector, she explains, saying: “The sector is very dependent on tourists”.

As such, with tourists only on Malta’s shores in reduced numbers, sales levels are significantly down.

This is a problem that is expected to persist, as arrivals into Malta have remained low, and stakeholders, including Malta International Airport have painted a bleak picture of the tourism outlook.

Supply-side issues

Aside from the spectre of declining demand, retail outlets are also facing difficulties in terms of supply, Ms Mamo explains.

Global shipping and supply chain problems are hitting Malta’s businesses, making it much harder for companies to plan ahead.

“Shipping prices have shot up”, she says, “and then there are delays which are really causing businesses headache”.

Even this is impacting some sectors more than others, such as those reliant on seasonal product lines.

When it comes to stock, companies have to preorder, Ms Mamo says, and shipping difficulties have aggravated the uncertainty caused by the pandemic in terms of planning, piling additional pressure on companies.

For franchise outlets, she explains, the situation is particularly dire.

“Many of them don’t have the flexibility to order product as the situation demands, and are instead contractually bound to order specific levels of stock”, meaning they are unable to carry over existing stock, risking wastage at a time when they are running on a shoe-string budget.

What can businesses do

Providing advice for businesses suffering the effects of the declined demand, Ms Mamo encourages companies to continue their digital investments.

When the pandemic came about, she says, those that already had introduced strong online options “were not sorry for their investment”, and many of those that hadn’t very swiftly did so.

Now, with their systems in place, she encourages companies not to rest on their laurels with regards to their online offering.

Many online services were introduced in a hurry, and she says companies should now think about “updating and refining the offerings to match the latest technologies”.

She also encourages retail businesses to participate in the new Government schemes covering sustainability as well as digitalisation.

Companies doing so can expect to “keep their costs lower than they were before”, thus fostering economic strength and resilience, “so they can survive if another shock like the pandemic was to hit”.