Consumer confidence fails to match up to business optimism: Nielsen’s Cader
Thursday, 21 August 2014 00:00
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By Senuri De Silva
The apparent paradox facing private sector was summed up global research giant Nielsen when its local head last week revealed that though the Business Confidence Index (BCI) has improved in the recent months, the Consumer Confidence Index (CCI) has not been able to regain its value thus far.
“The retail market is yet to recover from the loss of confidence after the devaluation of the rupee in 2012,” Nielsen Sri Lanka Managing Director Shaheen Cader said addressing a retail summit organised by the Chartered Institute of Marketing.
Cader, who was speaking on ‘Winning in the trenches: Growing in a tough retail environment,’ said: “What we have seen is, in the period when the rupee was devalued, both indexes crashed. However in recent months we see the Business Confidence Index (BCI) clawing back up. Interestingly, the Consumer Confidence Index (CCI) hasn’t returned even though we do know that retail sales have picked up.”
He also expressed his concerns that consumer spending is not on par with GDP growth: “FMCG consumption levels are still to come back despite the 70% growth that we are seeing. Sri Lanka has one of the fastest growing GDPs in the world and South Asia is the fastest growing region. However, our concerns are that consumer spending is not keeping up with this growth.”
The environment in Sri Lanka is becoming more promising for the retail industry, especially with the reducing exchange rates that support the industry, which relies heavily on imports.
Cader added: “We see the spend going up in home improvements, and people are saying they buy clothes and shoes so they are getting into a spending mode but there is an increasing number of people who are also saying they have no spare cash. So there is a divided consumer segment out there. People want to look and feel good. There is no denying such a strong consumer trend that’s happening. Companies need to understand this and try to link up with people’s lifestyles and their way of life and try to grow their brand on that line.”
According to Cader, modern trade is also more prominent compared to traditional trade in countries with a high GDP. This can be seen in countries such as Malaysia and Singapore where modern trade dominates the retail markets. In Sri Lanka, about 15% of FMCG trade is comprised of modern trade with the remaining 85% being traditional trade or general trade such as groceries, chemists, cosmetics and so on.
“In India there is far more general trade focus overall volumes. Thailand has 75% traditional trade and 25% modern trade. Problems that have occurred in Thailand in the recent times have caused modern trade to come down. Indonesia’s mini market is about half of their modern trade. 25% total FMCG trade is coming from the mini market franchise. In Malaysia and Singapore we see that modern trade dominates the market. As GDP increases beyond a certain threshold we see that modern trade sort of takes off.”
The event also featured presentations by various leaders in the industry such as Quantum Consumer Solutions Ltd. COO Roshani Fernando, MAS Bodyline Director Innovation and Consumer Insight Irfan Ahmed, Dialog Senior GM Digital Commerce and Advertising Sidath Chandrasena, Commercial Bank of Ceylon COO S. Renganathan, GlaxoSmithKline Director Sales Kumar De Silva and Unilever Head of Modern Trade Viranga Wickramaratne.
