Venezuela Retail Report

Providing expert analysis, independent forecasts and competitive intelligence on the retail industry.

Report includes: BMI Industry View, Industry SWOT Analysis, Industry Forecasts, BMI's Retail Risk Reward Index, Economic Forecasts, Company Profiles and Global, Regional and Country Industry Overviews.

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Venezuela Retail Report
Product Price
$1,345.00

BMI View: Venezuelan consumers will remain under severe pressure on the back of elevated inflation and unemployment levels in 2017. Consumption growth will remain negative over 2017, as rapid price growth will severely diminish real purchasing power , and as weakness in the labour market will continue to depress total household spending throughout our forecast period.

The Venezuelan consumer will face a tough 2017, despite an uptick in oil prices. Year on year we forecast an improvement in Venezuela's consumption outlook, although growth will remain negative - private consumption real growth will come in at 5% y-o-y decline over 2017, an improvement on the 15% y-o-y decline over 2016. This improvement in consumption growth will largely supported by an uptick in oil prices, which our Oil & Gas team forecasts to average USD55.00 per barrel (/bbl) over 2017 up from USD45.50/bbl over 2016. Venezuela's economy is heavily dependent on oil revenues, whereby oil and related products account for more than 95% of all goods exports. However, higher oil prices alone will not bring about a significant improvement in consumption. Venezuela will remain in a deep recession over the coming quarters as a result of previously low oil prices and severe macroeconomic mismanagement. While gradually rising oil prices will temper the depth of the recession over this period, substantial improvements will depend on the implementation of wide-ranging reform.

Consumption growth in Venezuela will remain depressed due to rapid price growth and severe shortages of consumer goods. Income growth is trailing inflation, meaning real purchasing power is declining. With real purchasing power severely diminished, Venezuelans will significantly reduce consumption and calibrate it towards the bare essentials that they can afford. The Government's attempt to mitigate these challenges through subsidies and price controls on basic goods will exacerbate widespread shortages. A decline in real incomes and reduced economic efficiency will depress private consumption growth.

Private Consumption Growth To Remain Negative
Private Final Consumption, real growth % y-o-y
e/f = BMI estimate/forecast. Source: National sources, BMI

Elevated unemployment, high inflation and severe shortages will continue to burden consumers over 2017, preventing a rebound in consumption growth. Elevated unemployment levels will remain a challenge throughout 2017. High unemployment translates into diminished total household spending, which will negatively affect the retail sector across the board. We forecast the unemployment rate to decrease over 2017 to 11.8% from 13.8% in 2016. We do note that this decrease is not the result of improved labour market conditions; rather, it reflects fewer labour market entrants and an increasing number of discouraged workers. We forecast the total labour force to grow by 1.5% over 2016 and 2017 - below the annual average growth rate of 1.8% between 2000 and 2014 - which underpins our view that there are fewer labour markets entrants. A large proportion of Venezuelans are either underemployed or self-employed in the informal sector. For example, according to anecdotal evidence, many skilled professionals are now taking up menial jobs in response to weak labour market conditions.

Rapidly rising inflation will eliminate wage gains over 2017, eroding income value. We forecast consumer price inflation to be 558.1%, up from 351.8% over 2016. We expect inflation to remain elevated throughout our forecast period (2016-2020). We believe that further erosion of domestic productive capacity and reliance on seigniorage to fund expenditures will only place greater inflationary pressures in the economy. Wage growth will not match the breakneck pace of inflation, meaning that income value will continue to be eroded over our forecast period. In May 2016, the minimum wage increased by 30%, trailing inflation by a large margin. Rapidly diminishing purchasing power has resulted in Venezuelans taking up employment as black market vendors of basic goods, colloquially known as B achaqueros. These B achaqueros buy products from the state-owned retailer, Mercal, at the regulated lower prices and sell them at a higher rate for a large profit. This phenomenon highlights the dire conditions that consumers face in the country.

Challenging Conditions For Consumers To Persist
Consumer Price Inflation, % y-o-y
f = BMI forecast. Source: BCV, BMI

Consumer sentiment will remain negative over 2017 due to diminished real incomes, a dire economic situation and a weak labour market. We do not foresee a rebound in consumer sentiment over our forecast period (2016-2020) as a poor economic outlook will persist over this period. Furthermore, retail sales growth will remain in negative territory over 2017, driven by severe shortages and diminished purchasing power. We believe that continued government intervention in the retail sector may result in a complete shutdown of the sector, leaving the state as the sole vendor of consumer goods. Price controls amid rampant inflation will force private retail players to stop operations in a bid to limit losses.

BMI Industry View
7
SWOT
9
Industry Forecast
10
Headline Retail Forecast
10
Latest Updates
10
Structural Trends
11
Table: Total Household Spending (Venezuela 2013-2020)
11
Table: Retail Sector Spending, % Of Total (Venezuela 2013-2020)
13
Table: Retail Sector Spending, % Of GDP (Venezuela 2013-2020)
14
Table: Headline Retail Sector Spending (Venezuela 2013-2020)
15
Retail Sector Forecast
18
Latest Updates
18
Structural Trends
18
Food And Drink
19
Table: Food, Drink And Tobacco Spending (Venezuela 2013-2020)
20
Clothing And Footwear
20
Table: Clothing And Footwear Spending (Venezuela 2013-2020)
21
Household Goods
21
Table: Household Goods Spending (Venezuela 2013-2020)
22
Personal Care
22
Table: Personal Care Spending (Venezuela 2013-2020)
23
Household Income And Numbers Forecast
24
Latest Updates
24
Structural Trends
25
Table: Household Income Data (Venezuela 2013-2020)
25
Table: Labour Market Data (Venezuela 2013-2020)
27
Demographic Forecast
28
Latest Updates
28
Structural Trends
29
Table: Total Population (Venezuela 2013-2020)
30
Table: Population: Babies (Venezuela 2013-2020)
30
Table: Population: Children (Venezuela 2013-2020)
31
Table: Population: Young Teens And Older Children (Venezuela 2013-2020)
31
Table: Population: Young People (Venezuela 2013-2020)
31
Table: Population: Older Teenagers (Venezuela 2013-2020)
32
Table: Population: 21 Years Plus (Venezuela 2013-2020)
32
Table: Population: Young Adults (Venezuela 2013-2020)
32
Table: Population: Middle Aged (Venezuela 2013-2020)
33
Table: Population: Urban/Rural (Venezuela 2013-2020)
33
Industry Risk Reward Ratings
34
Latin America And The Caribbean Risk/Reward Index
34
Table: Latin America And The Caribbean Retail Risk/Reward Index, Q316
34
Venezuela - Risk/Reward Index
35
Rewards
35
Risks
36
Market Overview
37
Structural Trends
37
Shopping Centres
38
Department Stores
38
Clothing And Footwear
38
Household Goods, Homeware And Home Improvement
39
Electronics
39
Pharmacies And Drugstores
39
E-Commerce
39
Competitive Landscape
40
Clothing And Footwear
40
Table: Selected Clothing And Footwear Retailers
40
Household Goods, Homeware And Home Improvement
41
Table: Selected Household Goods, Homeware And Home Improvement Retailers
41
Electronics
41
Table: Selected Electronics Retailers
41
Department Stores
42
Table: Selected Department Stores
42
E-Commerce
42
Table: Selected E-Commerce Retailers
42
Pharmacies And Drugstores
43
Table: Selected Pharmacies And Drug Stores
43
Glossary
44
Methodology
51
Industry Forecast Methodology
51
Sources
54
Risk/Reward Index Methodology
54
Table: Retail Risk/Reward Index Indicators
55
Table: Weighting Of Indicators
57

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.

Key Benefits

  • 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.

Coverage

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.

Market Overview

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.

Competitive Landscape

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.

Sources

The Retail Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.