BMI View: We continue to have a gloomy outlook for the Venezuelan retail sector over the medium term. The country's economic troubles, including a low oil price, high inflation and weak exchange rate, as well as the government's highly interventionist stance, will continue to dampen consumer and investor confidence in the country.
We forecast that total household spending will reach VEF7,342.1bn in 2016, equivalent to USD1978.7bn. By 2019 these figures should be VEF21,576,2bn and USD333.8bn. High inflation is driving the rapid growth in bolivar terms, but is rapidly eroding real wages and curbing consumer confidence. The government's attempts to control prices of basic goods, meanwhile, have led to shortages that have increased the role of the black market in the economy and kept the proportion of spending that goes on essential goods high.
Meanwhile, import restrictions and difficulties accessing hard currency, as well as the threat of expropriation, are all disincentives to foreign retailers looking to operate in Venezuela. Indeed, this can be said more widely of the private sector in the country as a whole, with the government an increasingly important player in the mass grocery retail (MGR) market, both by control of MGR retailers and via price controls.
Unlike most other developing countries, over our forecast period to 2019 we do not see the proportion of retail spending the Venezuelans allocate to non-essential goods rising. Instead, food and non-alcoholic drinks will continue to account for the lion's share of retail spending, at more than 30%, One bright spot is that Venezuelan spending on clothing and footwear is relatively high by regional standards, accounting for 7.1% of total retail spending. This indicates that as economic conditions improve, there will be demand for foreign fashion brands in the country. Over the longer term, there are other signs for optimism. When inflation is stemmed and real wages improve, underlying fundamentals such as rising urbanisation, positive demographic profiles and strong consumer appetite for foreign retail brands and imported items will support growth in the sector.
While the country's economic struggles continue, discount retailers and sellers of basic goods will continue to perform relatively well.
Low oil prices will continue, affecting Venezuela's balance of payments picture and government income. This will have a negative impact on the government's extensive subsidy programmes and will damage consumer confidence.
Due to unfavourable business conditions in the country, the main trend in Venezuela has been the consolidation of larger chain stores across the retail sector as opposed to increasing numbers of new entrants. We expect this to continue, as only the larger chains have the ability to challenge the big state-owned chains.
Key BMI Forecasts
Spending on essential and non-essential products as a percentage of total retail spending will remain the same over the forecast period to 2019.
Total household spending is set to rise from USD197.7bn in 2016 to USD333.8bn in 2019.
Net income per household is set to rise from USD9,440 in 2016 to USD15,082 in 2019.
The proportion of households earning more than USD10,000 a year is set to rise from 23.6% in 2016 to USD42.4% in 2019.
The proportion of young adults (aged 20-39 years), a key spending demographic, is set to fall slightly from 31.9% in 2016 to 31.6% in 2019.
The Venezuela Retail Report has been researched at source and features BMI Research's independent assessment and forecasts for the retail sector. The report examines key drivers of retail sales growth and future prospects, including consumer spending and private sector investment.
BMI's Venezuela Retail Report also examines the level of development and potential for growth of the retail sector, the commercial initiatives of major players, changing consumer demographics that influence demand and the regulatory environment. Key sub-sectors include mass grocery retail, autos, over-the-counter pharmaceuticals, computers and consumer electronics.
- Benchmark BMI's independent retail industry forecasts for Venezuela to test other views - a key input for successful budgeting and strategic business planning in the Venezuelan retail market.
- Target business opportunities and risks in Venezuela through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
BMI Industry View
Summary of BMI’s key forecasts and industry analysis, plus a discussion of major industry developments and a snapshot of key short-term demand-driving macroeconomic movements.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the retail sector and within the broader political, economic and business environment.
BMI Industry Forecasts
There are four separate 5-year forecast modules in the retail reports. These are:
- Headline Retail Forecast: Total household spending (local currency and USDbn, % growth, % GDP, per capita, per household), spending by retail sector (food & non-alcoholic drink, alcoholic drink, clothing & footwear, housing & utilities, furnishings & home, health, transport, recreation, education, restaurants & hotels, personal care & insurance (local currency and USDbn, % growth, % GDP, % of total spending)
- Retail Sector Forecast: Breakdown of Food, Non Alcoholic Drink, Alcohol, Tobacco, Clothing, Footwear, Household Goods, Furnishings, Appliances, Glass and Tablewear, Household Textiles, Consumer Electronics, Garden Toys and Pets, Home and Garden tools, Personal Care, Personal Effects Spending (USDbn, % Growth)
- Household Income and Numbers Forecast: Number of Households (‘000, % growth); gross income per household and per capita; net income per household and per capita; tax and social contributions per capita; breakdown of household incomes – USD5000+, USD10,000+ USD50000+ (‘000, % of total); labour force, employment and unemployment (‘000, % change)
- Demographic Forecast: Total population; Babies 0-12 months; Young Children 0-4yrs; Children 5-9yrs; Young Teens and Older Children 10-14yrs; Older Teens 15-19yrs; Adults 21yrs +; Young Adults 21-29yrs; Middle Aged 40-64yrs (‘000, % growth, male, female); Urban Population (‘000, % population); Rural Population (‘000, % population).
BMI’s Retail Risk Reward Index
BMI’s Risk Reward Indices provide investors looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Provides a detailed country-specific analysis of the key trends and developments in the retail sector as a whole, as well as an assessment of the main drivers affecting the major retail segments including mass grocery retail, fashion, pharmacies, consumer electronics, home improvement and personal care. The market overview also considers the most effective store formats in a given country and the impact of these factors on the main international and domestic players’ development strategies.
This provides a brief overview of the key players in each subsection of the retail sector including MGR, Fashion, Home Improvement, Consumer Electronics, Pharmacies, and Department Store chains.
The Retail Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.