23 December 2012

Uganda: Christmas Shopping Spree

Retailers peg hopes of making a profit on festive sales to compensate after a difficult year

Unlike the US, where the Christmas shopping spree officially kicks off on Black Friday at the end of November, most Ugandans don't hit the shops in the last seven days before Christmas. This period though relatively shorter in Uganda is absolutely important for retailers and service providers in hospitality, transport and body care, who having losses for most of a turbulent year, traditionally peg their hopes for a profit on the holiday season.

Like in the US and other developed economies, millions of Ugandan business people are looking at the Festive season as the last four weeks of the year produce almost all the year's profits, which largely compensate for losses of the other months.

Market analysts had tried to dampen these hopes by predicting an increase in the prices of most goods and services because of the high exchange rate experienced in recent months and the high inflationary pressures that hit the East Africa's third largest economy. By October, the exchange rate had dropped to Shs 2,700 for the US dollar -largely attributed to the high demand of dollars by traders who wanted to make orders to stock for Christmas and the aid suspensions by donors following the corruption scandal in the Office of the Prime Minister.

Earlier, the Central bank's monetary policy, which aimed at mopping up excess liquidity so as to curb inflation that touched the highs of 30.4% towards the end of last year, made life equally hard for both shoppers and retailers. Analysts had argued this would reduce the money in circulation and reduce demand for goods and services during the Christmas season.

The other worry was the oil prices going up with the result that high cost of oil was expected to increase the cost of transporting tradable goods, a cost that would in turn be passed on to the final consumer in form of high prices. Indeed, a few weeks to Christmas, fuel stations quoted pump prices for petrol at between Shs 3,600-Shs 3,800 per liter up from about Shs 3,500, weeks earlier.

For diesel, the price per litre had shot up to over Shs 3,500 up from about Shs 3,400, a few weeks earlier. However, the prices have remained unpredictably stable with many retailers, including Jemima Ntende even having the leeway to offer attractive discounts to their customers.

Denis Mashayu from Standard Chartered Bank, said the festive season is always characterized by a very stable forex rate environment as most businesses plan and do their stocking early enough in preparation for the high demand recorded during the festive season-meaning that fluctuations in these factors would not directly affect the final price unless sellers intended to exploit the customers.

Indeed, Ntende said she had ordered for her goods early long before the exchange rate had deteriorated, a reason why she was able to offer some discount on most of her goods. For instance, a dress that cost Shs 25, 000 earlier is now selling at Shs 23, 000 - recording a Shs 2, 000 discount for customers.

Christmas rush

The congestion is on in the city as shoppers do their last shopping mainly targeting clothes, footwear, food items, electronics, and soft drinks among others.

"We are too busy nowadays because of Christmas," says Jemima Ntende, a dealer in clothing and footwear. She said on a good day, she was able to handle over 50 customers, recording a total turnover of over Shs 1.2million up from less than Shs 500, 000 in the earlier weeks. "People have to buy new clothes and other items as a must because this is Christmas."

The malls, where the increased volumes of sales during the festive season were boosted by business practices like offering promotions, are packed to the brim. Shoppers, many of them travelling from upcountry, couldn't hide their excitement. "I can't fail to buy clothes for my family," said Sentongo, who travelled all the way from Mityana. "It has always been my habit to buy things for my people for Christmas."

Music sellers also target the festive season to make a kill. Hounded by those who complain about their copyrights, the sellers of pirated CDs and videos have now devised a new strategy. They sell the music as MP3 files - loaded directly to your flash disk or computer. Each song goes for Shs 500.

Meat and chicken are also high sale products. Benon Kamukama, the vice chairperson of Uganda Beef Producers' Association, said they expected to slaughter over 1, 000 cows on Christmas eve, up from about 300 animals on normal days. The high demand often pushes up the prices. "I suspect the price will increase but I can't tell by how much," Kamukama said, adding it has always been a culture for most Ugandans to buy more meat over the festive season.

"I am sure there will be a rush to buy meat," he said. Peddlers of fake or substandard goods often take advantage of the festive season to take advantage of unsuspecting shoppers. Sylivia Kirabo, the deputy spokesperson at the Uganda National Bureau of Standards, warned shoppers to be alert, adding that they had increased surveillance in the market especially in Kampala where most Christmas goods are traded - in an effort to crack down on counterfeit and fake goods.

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