High costs, interest rates hitting retailers: Association

ISTANBUL

High costs and high interest are taking their toll on Türkiye’s retailers with the outlook in the industry in the coming months remaining bleak, says Sinan Öncel, the president of the United Brands’ Association (BMD), citing a recent survey.

Costs of retailers are twice the inflation rate and loan interest rates are running at around 60 percent to 65 percent, according to Öncel.

Retailers’ operational costs soared more than 100 percent over the past one year, he said, adding that due to high customs duties, the price local retailers pay inputs is well above the global average.

This hinders retailers’ competitiveness in the international markets, according to Öncel.

Besides rising costs, retailers also suffered from a decline in sales, he noted.

“The numbers for the unit sales for the first two months showed that the retail sector shrank in the January-February period.”

Some 43 percent of BMD member companies reported their unit sales fell in February compared to January, while 33 percent said their turnover declined, he said, citing the results of the association’s survey conducted among retailers.

“There is talk of authorities planning to introduce curbs on credit card spending. [If that happens], the contraction in the retail industry is likely to continue,” Öncel argued.

He noted that retailers made large investments last year and they need to find new financing to keep their businesses going.

“But with loan rates at around 65 percent, borrowing from banks does not look sustainable. Squeezed between high costs and high-interest rates, the retail industry is looking for a way out,” Öncel said.

According to data from the Banking Regulation and Supervision Agency (BDDK), the total debt of the retail industry increased from 328 billion Turkish Liras in January 2023 to 491 billion liras, he added.

Separately, Erdal Bahçıvan, the president of the Istanbul Chamber of Industry (İTO), has warned that unemployment may become a pressing issue in the coming months, depending on the pace of slowdown in economic growth.

The aging population and the decline in birth rate are posing challenges, he said.

The elderly population grew more than 20 percent over the past five years, reaching 8.7 million people, while the share of youth in the total population declined from 20 percent to 15 percent in 2022, Bahçıvan noted.

“The unemployment rate among the country’s youth is more than 25 percent. This is alarming,” he said.