Retail companies questionnaire 2015
29.04.2015
© Swedbank
Overview of presentation
(A) How has retail business performed?
(B) What do the companies think about the prospects of retail business in 2015?
© Swedbank
(A) How has retail business performed?
© Swedbank
Retail business
VOLUME/TURNOVER/PRICES
Retail business volume is at a record
level: from 2010–2014 the volume
increased 27.9%, on average 6.3% per
year (2014: +6.7%).
During the same period retail sales
increased 38.0%, on average 8.4% per
year (2014: +6.1%).
During the same period the consumer
price index increased 12.0%, on average
2.9% per year (2014: -0.1%).
The consumer confidence indicator is
above the long-term average.
The proportion of retail business from
GDP is 4.3%.
LABOUR/PROFIT
Fast increase of labour costs
pressures profitability.
Good time to invest: low leverage and
interest rate levels
Although in the past two years the gross
margin increased from 22.1% to 23.0%,
total profitability (total profit/sales) fell
during the same period from 2.2% to
1.6% mainly because of fast increase in
labour costs.
The ratio of retail and wholesale business
loan and lease portfolio* balance to sales
(3.8%) is less than the last ten years’
average (5.1%).
In 2013 labour costs increased 8.6%,
and total profit decreased 16.0%.
In 2014 labour costs increased 14.5%,
and total profit decreased 2.0%
(Statistics Estonia short-term statistics).
Retail business employs approximately
50,000 people, that is approximately 8%
of employed people in Estonia (2014
average).
Sources: Statistics Estonia, Bank of Estonia
*Loans and leases issued by Estonian credit institutions and leasing companies, excl. overdraft
© Swedbank
4
INVESTMENTS
The average interest rate of retail and
wholesale business loan portfolio* (3.5%)
is less than the last ten years’ average
(5.0%).
Retail business is 4.3% of Estonian GDP
20%
13,8%
15%
11,0%
10%
6,8%
5%
4,6%
8,5%
8,3%
7,9%
4,2%
3,9%
3,9%
7,3%
3,9%
4,1%
4,1%
4,3%
1,6%
2,1%
2013
2014
4,7%
2,5%
0%
-0,4%
-5,3%
-5%
-10%
-14,7%
-15%
-18,0%
-20%
2007
2008
-19,8%
2009
2010
2011
2012
Proportion of retail business* in GDP, at current price, %
Changes in retail business* added value compared to last year, %
Changes in GDP compared to last year, %
Country
Lithuania
Slovakia
Poland
Spain
Latvia
Cyprus
Italy
Slovenia
Malta
Austria
Estonia
Belgium
Greece
France
Hungary
Czech Republic
Romania
Sweden
Finland
The Netherlands
Iceland
Denmark
Germany
Norway
Ratio*
6.8%
6.6%
6.5%
5.1%
5.0%
4.8%
4.6%
4.4%
4.2%
4.2%
4.1%
4.0%
4.0%
3.9%
3.6%
3.6%
3.4%
3.2%
3.2%
3.1%
3.1%
2.9%
2.9%
2.3%
Changes compared to the previous period are calculated based on the changes in volume
*Proportion of retail business
in state’s GDP, in current
prices, %
*excl. motorised vehicles and motorcycles
Source: Eurostat, 2012–2013
Source: Statistics Estonia
© Swedbank
5
Retail merchants are operating under deflation conditions
Change in the consumer price index compared to previous year, %
12,0%
10,4%
10,0%
8,0%
6,0%
5,0%
6,6%
3,9%
4,0%
3,0%
2,8%
2,0%
-0,1%
-0,1%
0,0%
2007
2008
2009
2010
2011
2012
2013
2014
-2,0%
Source: Statistics Estonia
© Swedbank
6
Retail business volume on record level
Retail business volume index, 2007=100
120
20,0%
100
100 14,9%
102
97
15,0%
96
91
82
80
10,0%
84
80
7,7%
5,8%
5,2%
6,7%
60
5,0%
0,0%
-2,7%
-3,2%
-5,0%
40
-10,0%
20
-15,0%
-15,4%
0
-20,0%
2007
2008
2009
2010
Volume index of retail business
2011
2012
2013
2014
Changes compared to last year, %
Source: Statistics Estonia
© Swedbank
7
Volumes increase the retail business turnover, not prices
Retail sales of goods*, mln euros
6 000
25,0%
19,6%
4 874
5 000
4 594
3 952
4 181
4 000
3 907
3 510
3 532
15,0%
4 335
10,0%
10,6% 11,0%
5,8%
3 000
20,0%
6,0%
6,1%
5,0%
0,0%
0,6%
2 000
-5,0%
-10,0%
1 000
-15,0%
-16,0%
0
-20,0%
2007
2008
2009
2010
Retail sales of goods*, mEUR
2011
2012
2013
2014
Changes compared to last year, %
Source: Statistics Estonia
*excl. motorised vehicles and motorcycles
© Swedbank
8
Higher real wages  increased confidence faster
increase of private consumption  fast growth of retail
business
25,0%
25,0
15,0%
15,0
5,0%
5,0
-5,0%
-5,0
-15,0%
-15,0
-25,0%
-25,0
-35,0%
-35,0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2007
2008
2009
2010
2011
2012
2013
2014
Changes in private consumption compared to the same period last year, %
Changes of retail business volumes compared to the same period last year, %
Changes in real salary compared to the same period last year, %
Consumer confidence indicator
Sources: Statistics Estonia; Estonian Institute of Economic Research
© Swedbank
9
Increase of gross salary in retail business was faster
than the increase of the Estonian average
Average gross salary, €
1100
1002
1000
949
887
900
800
839
784
792
735
688
700
654
616
602
2009
2010
622
600
500
2011
Average gross salary in retail business*
2012
2013
2014**
Average gross salary in Estonia
In 2014, the average gross salary in retail business
increased 6.8% vs the Estonian average of 5.6%.
*excl. motorised vehicles and motorcycles
**The approximate gross salary in 2014 is based on the changes in short-term statistics of Statistics Estonia
Source: Statistics Estonia
© Swedbank
10
Fast increase of labour costs pressures profitability
Profitability of retail businesses*
25,0%
20,0%
22,6%
20,8%
20,6%
21,6%
22,4%
22,1%
22,6%
23,0%
7,7%
8,2%
15,0%
10,0%
8,0%
8,7%
8,7%
8,1%
7,8%
7,4%
5,0%
0,0%
3,3%
0,9%
-0,8%
-5,0%
2007
2008
2009
0,7%
1,2%
2,2%
1,8%
1,6%
2010
2011
2012
2013
2014
Ratio of labour costs in sales, %
Total profit** margin in sales, %
Gross profit** margin in sales, %
Labour cost proportion in
sales has increased in 2
years from 7.4% to 8.2%.
In 2013, labour costs increased
8.6%, and total profit decreased
16.0%.
In 2014, labour costs increased
14.5%, and total profit
decreased 2.0%.
*excl. sales of motorised vehicles and motorcycles
** Total profit = sales – costs, excl. other operating profits and costs
Source: Statistics Estonia
© Swedbank
11
Good time to invest: low leverage and interest rate levels
1 400
8,0%
1 200
7,0%
1 000
6,0%
1 194
1 244
917
800
5,0%
868
600
4,0%
787
3,0%
756
767
400
824
200
2,0%
1,0%
0
0,0%
2007
2008
2009
2010
2011
2012
2013
2014*
Balance of retail and wholesale business loan and lease portfolio** as of end of year, mEUR
Proportion of retail and wholesale business loan and lease portfolio** balance in sales, %
Average interest rate of retail and wholesale business loan** portfolio, %
*approximate 2014 sales and ratios are based on changes in the short-term statistics of Statistics Estonia
**Loans and leases issued by Estonian credit institutions and leasing companies, excl. overdraft
Sources: Bank of Estonia, Statistics Estonia
© Swedbank
12
Volume of investments is stable
Investments of retail business companies** into material fixed
assets, million €
Division of investments, 2014*
250
233
200
151
Other machinery and equipment, inventory
43.3%
Construction and building reconstruction
31.0%
Means of transport
11.2%
Purchase of buildings
6.7%
Computers and computer systems
6.4%
Land
1.4%
150
100
80
74
2009
2010
94
92
95
2012
2013
2014*
83
50
0
2007
2008
2011
Source: Statistics Estonia
*the approximate investment volume is based on the changes in the short-term statistics of Statistics Estonia
**excl. motorised vehicles and motorcycles
© Swedbank
13
(B) What do the companies think about the
prospects of retail business in 2015?
© Swedbank
We surveyed 146 companies, 50% of the sector’s total
turnover
Division of the surveyed
companies by sector
sales of
staple goods
20%
sales of
speciality
goods
80%
Division of the surveyed
companies by turnover
Turnover ≥
10m€
32%
Turnover < 3
m€
40%
3 m€ ≤
Turnover <10
m€
28%
The survey selection included the 400 largest retail business companies, out of which
37% responded. The median turnover of these companies is 3.9 mEUR and total
turnover is 3.1 bnEUR (approx. 50% of the sector*).
*companies whose main activity is retail business, excl. motorised vehicle and motorcycle sale
© Swedbank
15
Only 1% of companies plan decline in turnover
What is the percentage of companies planning to increase their turnover?
90%
80%
80%
70%
82% 81%
74%
73%
67%
63%
60%
65%
62%
78%
68%
60%
50%
40%
30%
20%
10%
0%
ALL
T<3
3 ≤ T<10
2014
2015
T ≥ 10
sales of speciality sales of staple goods
goods
T < 3 = Turnover < 3 mEUR
3 ≤ T < 10 = 3 mEUR ≤ Turnover < 10 mEUR
T ≥ 10 = Turnover ≥ 10 mEUR
Only 1% (2014: 4%) of the companies who
responded predict decline in turnover and 26%
(2014: 29%) predict it will remain the same.
© Swedbank
Confidence among staple product merchants
has somewhat declined, and among speciality
product merchants it has increased.
16
On average, business operators plan to increase
turnover by 6.0%
Planned increase in turnover*
9,0%
8,1%
8,0%
7,8%
7,5%
7,2%
7,0%
6,0%
5,7%
6,0%
5,6%
5,2%
5,9%
5,8%
5,6%
4,9%
5,0%
4,0%
3,0%
2,0%
1,0%
0,0%
ALL
T<3
3 ≤ T<10
2014
T < 3 = Turnover < 3 mEUR
3 ≤ T < 10 = 3 mEUR ≤ Turnover < 10 mEUR
T ≥ 10 = Turnover ≥ 10 mEUR
© Swedbank
2015
sales of speciality sales of staple goods
goods
*turnover weighted average increase
In 2014 retail merchants planned a 5.7%
increase, actual +7.2% (Source: Statistics
Estonia short-term statistics).
T ≥ 10
Turnover increase expectancy of speciality
goods sellers has increased from 5.8% in
2014 to 7.8% in 2015.
17
77% of the companies are planning significant
investments
Into which areas are significant investments planned in 2015?
60%
55%
50%
40%
33%
30%
27%
27%
25%
23%
19%
20%
10%
10%
12%
10%
12%
13%
13%
10%
6%
3%
3%
0%
0%
ALL
sales of speciality goods
sales of staple goods
Interior and furnishings of stores
Payment solutions
Warehousing/logistics
E-commerce
Other
No significant investments planned
The main investments are planned for stores’ interiors and furnishings and e-commerce.
© Swedbank
18
38% of the companies plan to increase investments
Will the investments increase, decrease or remain the same in 2015?
70%
58%
60%
51%
50%
50%
40%
38%
37%
30%
29%
30%
20%
45%
44%
42%
20%
21%
20%
19%
33%
29%
22%
13%
10%
0%
ALL
3 ≤ T<10
T<3
increasing
T ≥ 10
decreasing
sales of speciality
goods
sales of staple
goods
remaining same
T < 3 = Turnover < 3 mEUR
3 ≤ T < 10 = 3 mEUR ≤ Turnover < 10 mEUR
T ≥ 10 = Turnover ≥ 10 mEUR
Investment increase is planned more
among larger companies.
© Swedbank
Staple goods merchants are more aggressive than the
speciality goods sellers when it comes to investments.
19
Nearly half of the retail sellers have a store in a
shopping mall
Does the company own a store in a shopping mall?
70%
62%
60%
50%
61%
62%
54%
46%
46%
38%
40%
55%
54%
39%
45%
38%
30%
20%
10%
0%
ALL
T<3
3 ≤ T<10
Owns a store in a shopping mall
T ≥ 10
sales of speciality
goods
sales of staple
goods
Does not own a store in a shopping mall
T < 3 = Turnover < 3 mEUR
3 ≤ T < 10 = 3 mEUR ≤ Turnover < 10 mEUR
T ≥ 10 = Turnover ≥ 10 mEUR
Large companies own more stores in shopping malls than small companies.
© Swedbank
20
The most important factor in choosing a shopping
mall is location
What is the most important factor when choosing a shopping mall?
60%
50%
50%
42%
40%
40%
29%
30%
24%
21%
20%
23%
18%
14%
9%
10%
8%
6%
1%
8%
2%
7%
0%
0%
0%
ALL
Proportion of rental costs in turnover
Location of the mall
Store’s location in the mall
sales of speciality goods
sales of staple goods
Indicators of attendance frequency for the mall
Presence of competitors in the mall
Other
Compared to staple goods sellers, speciality goods sellers consider the proportion of
rental costs in turnover as a more significant criterion when choosing the shopping mall.
© Swedbank
21
In 2014, goods worth of €220 were sold per m2 of
commercial premise on average.
Sales per m2 of commercial premise per month, 2014
350
312
300
250
227
220
199
200
150
150
117
100
50
0
ALL
T<3
3 ≤ T<10
T ≥ 10
sales of speciality
goods
sales of staple
goods
T < 3 = Turnover < 3 mEUR
3 ≤ T<10 = 3 mEUR ≤ Turnover < 10 mEUR
T ≥ 10 = Turnover ≥ 10 mEUR
Staple goods sellers sell twice as much per m2 as the
speciality goods sellers do.
© Swedbank
22
By 2016, the proportion of retail merchants active in
e-commerce will grow from today’s 40% to 65%
Is the company active in e-commerce?
80%
74%
70%
69%
65%
63%
62%
60%
48%
50%
40%
40%
43%
32%
32%
41%
36%
29%
33%
30%
39%
31%
20%
10%
10%
0%
0%
ALL
T<3
2014 actual (surveyed companies)
3 ≤ T<10
T ≥ 10
sales of speciality
goods
2015 actual (surveyed companies)
sales of staple
goods
2016 planned
K < 3 = Turnover < 3 mEUR
3 ≤ T < 10 = 3 mEUR ≤ Turnover < 10 mEUR
T ≥ 10 = Turnover ≥ 10 mEUR
If in 2014 none of the surveyed staple goods sellers were active in ecommerce, then in 2015 every tenth and, according to plans, in 2016
every third, will be active in e-commerce.
© Swedbank
23
Fast growth is expected in e-commerce
E-commerce proportion in sales 2013-2015
14,0%
12,0%
10,7%
12,0%
10,0%
8,0%
8,0%
6,8%
6,1%
5,0%
6,0%
4,1%
3,2% 3,2%
4,0%
2,0%
2,1%
1,1% 1,3%
1,2%
0,3%0,5%
0,7%
0,0% 0,0%
0,0%
ALL
T<3
2013 actual (surveyed companies)
3 ≤ T<10
T ≥ 10
2014 actual (surveyed companies)
sales of speciality sales of staple goods
goods
2015 plan
T < 3 = Turnover < 3 mEUR
3 ≤ T < 10 = 3 mEUR ≤ Turnover < 10 mEUR
T ≥ 10 = Turnover ≥ 10 mEUR
© Swedbank
24
To develop, e-commerce investments are made mainly
into IT solutions and marketing
Which activities are planned to aid e-commerce development in 2015?
80%
67%
70%
60%
54%
52%
50%
42%
40%
40%
33%
30%
20%
10%
5%
4%
2%
2%
0%
0%
0%
ALL
Investments into IT solutions
© Swedbank
sales of speciality goods
Marketing
sales of staple goods
Development of goods delivery system
Other
25
Retail sellers are focused on profit growth
What are the retail sellers focused on in 2015?
60%
54%
51%
50%
42%
40%
30%
20%
25%
26%
24%
20%
26%
18%
10%
1%
6%
3%
1%
3%
0%
0%
ALL
Turnover growth
© Swedbank
sales of speciality goods
Profit growth
Market share size
sales of staple goods
Merging with other companies/assumption
Other
26
Summary
TURNOVER/PROFIT
Retail sellers’ confidence continues
to be strong. 73% plan turnover
growth (2014: 67%), on average
6.0% (2014: 5.7%). Profit growth is
in focus.
Confidence among speciality goods
sellers has increased; among staple
product sellers it has declined but is
still strong.
SHOPPING MALLS
46% of the retail sellers own a store in
a shopping mall.
The most important criterion in
selecting the shopping mall is location,
incl. location in the shopping mall (2/3
respondents).
INVESTMENTS
77% of retail sellers plan
significant investments. 38% plan
to increase the investments.
Only 20% of the companies plan to
decrease investments: the average
investment volume is growing.
58% of staple goods sellers and 1/3
of speciality goods sellers plan to
increase investments.
The staple goods sellers invest
mostly in store interiors and
furnishings (55% of respondents);
speciality goods sellers invest more
in e-commerce (33% of
respondents).
E-COMMERCE
The proportion of retail sellers
active in e-commerce will increase
by 2016 from the current 40% to
65%.
Every tenth staple goods seller is
active in e-commerce (2014: 0%);
prediction for 2016: every third.
Retail merchants predict an ecommerce proportion increase in
sales to 2.1% in 2015 (2014 actual
1.3%).
Investments are made into IT
solutions and marketing to develop ecommerce.
Staple goods sellers sell twice as
much per m2 as speciality goods
sellers.
© Swedbank
27
See the information portal for businesses for more data
www.swedbank.ee/infoportaal
© Swedbank
28