By Dennise Williams, Staff reporter
Shoppers at HiLo, Cross Roads. - Ian Allen/Staff Photographer
PRESIDENT OF the Jamaica Chamber of Commerce, Michael Ammar, Jr, says consumers should expect prices to begin creeping up again in the run up to the premier shopping season, as merchants replace old stock with new.
The size of the increases, suggests Ammar, who heads the boutique chain, Ammar's, is heavily reliant on the behaviour of the exchange rate in the run up to Christmas.
Other key retailers in Jamaica shared this outlook, in reactions to the Statistical Institute of Jamaica's recent publication of July inflation figures.
Over the past year, July 2002 to July 2003, inflation was recorded at 10.7 per cent, a significant increase over the 7.6 per cent outturn for the July 2001 to July 2002 period.
Ammar laid the blame for the 40 per cent leap in inflation largely on measures in the current Budget.
A FIASCO
"This April/May period was a fiasco. The budget and the resulting negotiations did more to destabilise the business environment than the four to five years of high interest rate regime in the mid-90s."
The budget included a four per cent advance tax on imports, which could be deducted from income tax liabilities, but the business fraternity revolted against it, forcing the Ministry of Finance to reconsider its position.
A compromise was reached where importers now pay a non-refundable two per cent user fee.
Stated Ammar: "In the Chamber's view, it was better to accept the 2 per cent cess than the advance income tax. It's not that we have a problem with the paying advanced income tax, but its implementation would have created another layer of bureaucracy with more forms and more paperwork for tracking by companies. So the cost of goods and services are up because of the user fee but much less than would be with the 4 per cent cess."
However, Ammar feels that shoppers have been spared the full brunt of price increases because competition among firms is fierce.
COMPETITIVE
"My personal opinion in terms of the two per cent cess, is that the retail sector has had to absorb the cost and not pass them on because competition in the fast food, clothing and haberdashery has never been as competitive in Jamaica than now."
However, when it comes to the prices at supermarkets, the Jamaican consumer has not been spared. Citing taxes, fluctuations in the value of the local dollar, high security costs and even rising electricity rates, grocers contacted said the resulting higher price of their shelf items was an unfortunate fact that the consumer had to face.
Cameron Bisland, managing director of HiLo Food Stores (Ja) Ltd. informs the Financial Gleaner that, "We rely on our distributors for most of our products, which we then mark up. When they increase their price to us, we in turn have to raise prices at the stores," said Cameron Bisland, managing director of HiLo Food Stores.
"I believe that the cause of this is devaluation of the Jamaican dollar and General Consumption Tax on formerly zero-rated items. These items add on to the consumer's costs. And remember that it was hectic when the dollar was moving, forcing us to change prices on goods everyday."
The management of Lee's Food Fair, echoes Bisland's outlook but offers a more detailed listing of the costs that force supermarkets to charge higher prices.
At one point, he said, the dollar went to $70, hiking the cost of imported stock, adding that the cess compounded those expenses.
"If you have a container of goods to clear valued at US$30,000 that cess really adds up."
LITANY OF EXPENSES
Included in the litany of expenses are the cost of gasoline to transport goods to and from the store, electricity bills increasing by 60 per cent and security expenses.
"We have to have 10 security guards that we pay $150 per hour. It is killing us."
In relation to non-grocery items, Ammar said that those prices must rise, as retailers have to recoup a portion of their expenses.
"Many clothing stores and haberdasheries lost on foreign exchange in the second quarter. So new merchandise will definitely be higher priced," said the store operator.
"From a cost (of merchandise) point of view, we experienced 15-25 per cent price increases but passed on to consumers only a 10-15 per cent increase on the retail level. Again, because of competition, we have to have lower margins."
Also citing competition, stores like Courts and Singer say they have tried to keep prices stable, but have increased some stock.
According to Opal Levy, product executive in charge of bedding at Courts, the furniture giant, part of the strategy included bringing in even more expensive stock in the bedding department.
OSTENTATIOUS PEOPLE
"Jamaicans are ostentatious people and we have upgraded our offering by selling Simmons bedding. The double bed in this brand costs on average $59,999". The average double bed is about $26,000, she said.
Levy states that even though there have been price increases and a more expensive line of products offered, her clients are undaunted.
"Beds are necessary items and will be sold no matter what," Levy said.
However, furniture retailer, Singer Sewing Machine Co, admits that steady price increases have taken effect at their stores.
At Singer, between the months of April to July prices increased on all bedding between 12.5 per cent to 15 per cent.
Novelette Heslop, Singer purchasing officer, said prices moved because of the devaluation of the dollar, but when the dollar stabilised, the cess imposed by the government forced prices to remain the same.
Said Heslop, "Now more persons purchase cheaper lower level beds (priced from $2,995-$9,995) and sales of our high end beds (priced from $15,500 to $25,795) have fallen off dramatically."
According to Heslop, the sales of lower priced beds have risen by 25 per cent and the high-end bed sales have fallen by 30 per cent.
For the upcoming Christmas shopping season, the fate of the retailer and their customer lies in the Government's ability to continue the stability of the market.
HIGHER PRICES
Ammar predicts, "the outlook for Christmas is that most newer merchandise will have higher prices. The older stock that came in the first quarter is gone. If dollar stays stable prices will not increase, or if the dollar stays within a tight band of 50 cents, then we can accommodate without re-pricing. But with devaluation of $1 or $2, it is a different thing." Factors that will affect final quarter pricing are the availability of foreign currency and consumer confidence.
Ammar states, "If the tourism and mining sector remain buoyant, then there will be less pressure on the foreign exchange market. Because demand for foreign exchange is high in November, the positive filter-down effect of those two markets will give the dollar a break in Christmas. Also good news about the economy helps people feel good and spend more. For Christmas, I am reasonably optimistic. "
While the official figures from the JCC's Business Confidence Index are to be released on October 7th, informal evidence gathered by the President reveals that the retail sector has been able to withstand the travails of the second and third quarters of 2003. An informal survey of JCC members reveals those sales for May were very bad, June was stable, July and August were quite good and 'Back to School' shopping was very good.
It is the new year that is in question.
"I am concerned about the period after January up to the pre-budget period," states Ammar.
But for the immediate future, Ammar advises consumers, "it is the dollar that you need to watch for now, as this will have the greatest effect on future price increases."
