Retailers brace for a tough festive season

Rising operating costs squeeze margins as Dec. trading nears
Weak consumer demand prompts ‘high turnover, low margins’ strategy

As the crucial December festive season approaches, Sri Lanka’s retailers are bracing for a challenging peak trading period, with rising operating costs eroding margins while weak consumer demand leaves little room to raise prices.

Speaking to The Sunday Morning Business, Sri Lanka Retailers’ Association (SLRA) Founder President Hussain Sadique said that retailers had seen their bottom lines erode due to the increase in operating costs observed over the recent past amid external economic pressures stemming from the Middle East crisis.

“Our cost of operating has increased by at least 20%, while sales have not witnessed a similar increase. As a result, our bottom line has been heavily impacted,” he said.

He said that retailers were facing significant increases in overheads, including rents, fuel, and other operating costs. However, retailers have been unable to pass these higher costs on to consumers through price increases, as doing so could have a significant impact on consumer demand.

As a result, Sadique noted that retailers had been forced to absorb the losses despite the erosion of their margins, with a greater focus on sales volumes.

He said that retailers had already begun preparations for the upcoming festive season by placing orders with suppliers based on last year’s winter demand. The expectation, he said, was that demand would at least meet last year’s levels.

However, he noted that consumption had weakened amid challenging economic conditions, with households refraining from overspending on luxuries and prioritising essential purchases.

Sadique stated that retailers would monitor the situation and amend their volumes accordingly as the festive season approached.

For the upcoming festive season, he said that the industry strategy of retailers would be one of “high turnover, low margins,” with the priority being to ensure that their overheads were covered.