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Retailers in Bangladesh are feeling the pinch as consumers have been buying less for the last few months because of the continuous increase in the prices of daily necessities and growing uncertainty.
Bangladesh has been facing a major macroeconomic crisis since late February after the Russia-Ukraine war began, which sent consumer prices to a decade high in August, squeezing the buying capacity of the households in a country where 20.5 per cent of the population live below the poverty line officially.
The figures, however, doubled the official figure at the height of the coronavirus pandemic two years ago, according to a number of studies. And the situation for many of them has worsened for the war-induced crisis before they made a complete recovery from the fallout of the pandemic.
Last month, the Centre for Policy Dialogue even warned that many households in Bangladesh are at risk of falling into poverty due to soaring food and non-food prices.
Amid such a bleak situation and gloomy prospect, consumers have no other choice but to cut their expenses to remain above the water. This, in turn, has hurt the sales and profit margins of retailers.
Retailers say their sales have dropped 25 to 50 per cent in the last six months compared to the same period a year earlier as consumers cut down on expenses to cope with the rising cost of living.
“Sales have dropped by a quarter compared to four to five months ago,” said Abdul Hai Liton, owner of New Haque Varieties Store in the Mohammadpur’s Town Hall area.
“This is because people’s expenditure has increased, income has not.”
The number of retailers affected by the sales slump is hard to come by since no survey was carried out. But during visits to various retail shops in Mirpur, Mohammadpur, New Market, Farmgate and Mouchak, the presence of customers was found to be thinner compared to normal times, while a number of shop owners from outside of Dhaka also reported lower sales.
According to a recent survey by the Bangladesh Bureau of Statistics, there are 40.49 lakh retail trade establishments in the country.
Owing to higher consumer prices, people cut consumption by about 5 per cent, said the Bangladesh Institute of Development Studies recently, as households have been hit twice, by rising prices and falling incomes, and increasing food prices.
“Sales were 30 per cent lower than what it was at this time last year,” said Mohammad Sujon, manager of Rana Garments Shop at Nurjahan Super Market in New Market, adding that profit has also declined due to the increase in the price of goods.
Aminul Islam, a grocery shop owner in Jamalpur, says sales have dropped by at least 30 per cent.
Abul Kalam Azad, who runs a retail shop in a village in Sirajganj, says people are buying less.
“But I have had to employ more capital to run the business.”
Abdur Rauf, a shopkeeper in the Bastuhara area of Khalishpur of Khulna, said sales have been decreasing for the last seven-eight months. “But the business situation has turned very bad since September.”
Md Mukul Hossain, a grocery shop owner in Pabna town, said his sales turnover stood at Tk 30,000 to Tk 35,000 a day a couple of months ago. But this has fallen to Tk 22,000-Tk 25,000.
In Dhaka’s Mirpur-10, Fashion Gallery, an outlet in Shah Ali Plaza, used to sell children’s clothes and other apparel items worth Tk 20,000 a day at the beginning of 2022 whereas it has come down to Tk 8,000-Tk 10,000.
“People are buying fewer clothes,” said Mohammad Zakaria, manager of the shop.
He said the price of products has increased by 30 to 50 per cent in the past six months due to a hike in raw material costs and fuel prices.
“Sales are declining day by day,” said Sakhawat Hossain, manager of Ekushey Paper Stationery Shop at the Mukto Bangla Shopping Complex in Mirpur-1.
Before the current cost-of-crisis kicked in, he would sell products worth Tk 35,000-Tk 40,000 a day. Now, the sales have fallen to Tk 20,000.
The parents, who used to buy 12 exercise books for their children in the past, are now buying six, he said, giving an example.
“Now, customers are buying only what is necessary.”
PROFIT MARGINS HIT
The profit margin of retailers has taken a hit due to the higher cost of production. Some are even running the business by taking loans.
“Earlier, I used to make 25-30 per cent profit on any product. Now it has come down to 5-10 per cent. In some cases, I sell products without making any profit,” said Zakaria of Fashion Gallery.
The profit margin has slumped a lot and the price of stationery products has gone up by 40-50 per cent in the last six months, said Sakhawat of Ekushey Paper Stationery Shop.
Sirajganj’s Azad says he has had to employ more capital to run the business. “But the profit has dropped.”
Retailer Abdul Hai Liton says he is getting less commission from dealers, resulting in lower profits for them.
“Earlier, if I sold a product worth Tk 500, I could offer a discount of Tk 20. But now I can’t do so since the commission has decreased.”
BLEAK PROSPECT
Retailers were mixed when they spoke about the recovery from the current situation.
Sakhawat Hossain is hopeful that the business will rebound in January.
But Abhi Kumar Das, manager of Dreamland Bedding store in the Mouchak area, does not think that the business situation will improve overnight.
His worry stems from the dragging war, the energy crisis, the higher inflation, and the supply disruption.
He says it is not possible to pay the rent of the shop and the salary of the employees with the money that is earned. So, he is currently meeting the rest of the expenses from his savings.
Harun Ur Rashid, owner of Molla Crockery in the Chandrima Super Market in New Market, says people are worried about the overall situation.
After paying the shop’s rent and employees’ salaries, he is finding it tough to pay for his family’s expenses and the educational expenditures of his three children, he said.
Pabna’s Mukul said: “If the same business condition persists for a few months, I will have to close my business or borrow money from the market to keep it up and running.”
Helal Uddin, president of the Bangladesh Dokan Malik Samity, said several businessmen from various parts of the country called him and said that due to reduced sales, many don’t even have the money to purchase essential commodities for their families.
“Owing to the sales slump, retailers are unable to pay back wholesalers and dealers. All in all, the businessmen are in hot water.”
The business leader even warned that retailers might lay off workers if the situation does not improve.
Selim Raihan, a professor of economics at the University of Dhaka, says as people’s real incomes have fallen and the cost of producing goods has risen, many in the low-to-middle class are finding it difficult to afford.
“So, they are cutting costs in various ways. When spending shrinks, it has an impact on businesses that affects the livelihood of those involved in the businesses. This will affect the workforce as well.”
Raihan, also the executive director of the South Asian Network on Economic Modeling, says as production costs have risen, manufacturers are also shrinking the benefits they provide to dealers and retailers.
“These all are a reflection of the current crisis the country is in. This means our economy is shrinking. It will be reflected in growth.”
The economist does not see any indication of a revival from the ongoing situation anytime soon.
“The next two to three months are crucial,” he said, calling for policy support other than social protection to address the current situation.
(TDS)
