Bermuda is expensive
No, Bermuda merchants are not ripping us off as some claim — although it certainly feels like it at times. As many would attest, buying goods in Bermuda has been historically expensive. So why does it “feel” like prices on the island have been getting out of hand over the last few years?
As always, follow the data.
In the year 2000, the median gross annual income for Bermuda was $41,050. A decade later in 2010, the annual income grew to $58,466, an increase of 42 per cent. This represented an average annual increase of 4.2 per cent, keeping us ahead of an estimated consumer price index annual average gain of 3.2 per cent over the same time span.
From 2010 to 2019, the median gross income rose to $62,693, a total increase of only 7.2 per cent over the nine years. This averages out to 0.8 per cent annually, while the CPI over the same time increased by an average of 1.8 per cent per year.
Although this is a simplified analysis, using figures from the Department of Statistics, it becomes clear of what has occurred. The Bermuda consumer with almost stagnant wages and steady rising costs over the past decade is being “squeezed”. The cost of basic items has increased more than the increase of our pay.
There have been a lot of complaints against our merchants of price gouging. There are even some calls for price controls. With the capability of price checking at our fingertips, there are often comparisons of the same or similar product that is sold in the United States. This is highly unreasonable.
To state the obvious, our merchants cannot compete with US pricing primarily for three reasons: high operating and transportation costs, and the size of our market, which is smaller than tiny.
If you took our market size of 64,000 from the US market size of 328 million, the difference would still be 328 million. In response to the G7’s minimum corporate tax commitment proposal, the Minister of Finance recently said: “It [communique] also does not give appropriate consideration to the rights and needs of those jurisdictions which lack the economies of scale and resources of larger jurisdictions.”
This same statement can be applied to Bermuda consumers who do not understand that our merchants lack the scale and means of big enterprises that operate in the markets where prices are being compared.
Scale is a significant factor that has contributed to high prices at the counter. Bermuda is not big enough to manufacture and probably will be always a net importer of goods. We are not big enough to have leverage over international suppliers to reduce costs. Our market size is not big enough to foster intense competition. Even if we can successfully reduce our cost of living, our merchants would still face an uphill battle.
Commerce has changed, and bigger is better.
Our grocery sector receives a lot of the criticism, even before Covid-19. The reality is we have only 40 to 50 wholesalers and grocery outlets in Bermuda, and do not have the resources of a Walmart, Costco or Kroger. Even Publix, a regional grocery chain in the southeast of the United States, has 1,220 stores.
Grocery chains internationally have their own distribution and have direct relationships with manufacturers and suppliers. Our stores, in contrast, deal with middlemen, which adds to the costs. Grocery chains sell their own brand of goods, which are sold at lower prices than popular brand products. The ability to sell their own goods reduces their costs and, at the same time, competes against the popular brands. This puts pressure on the suppliers of these brands to lower the costs of their products.
Our stores, in contrast, do not have these means. I am sure some of you are saying, “So what, things are still expensive”. I get it, we all must eat at affordable prices. I am not trying to defend the pricing; I am merely giving an explanation.
An apple purchased in Bermuda and the US may look the same, it may taste the same, but it is not the same. The apple in Bermuda is laden with extra costs. It would be fairer to compare Bermuda’s pricing with a similar market. One that is small, imports most of its goods, and its stores are not part of a global chain. Such a market would be the Cayman Islands.
I selected a list of 20 grocery items from Bermuda and Cayman, and compared the pricing. To compare like for like, I chose the exact same product and brand where possible. This is a snapshot analysis, as it is a small sample size and I selected only one grocer from each island.
In summary, the pricing overall was similar. Out of the 20 items, Bermuda’s pricing was cheaper in 12 of the products. I encourage everyone to have a look at the attached comparison table. With merchants’ costs continuing to rise because of external factors, what do we consumers do? We need to be smart and disciplined by taking advantage of discount days, bulking up on non-perishables when they are on special and, of course, shopping around.
Consumers should be following their favourites on social media to be alerted on savings, signing up to their newsletters, and participating in their contests and giveaway campaigns. Every little bit helps. A refreshing trend is the increase of home farming. Why buy what you can grow in your own backyard or in a pot?
Groups of friends and family should be collaborating in sharing, exchanging, and selling their produce to at least cover some costs. Although our small market limits our merchants, the Bermuda consumer has every right to challenge them about their pricing. However, to keep them in check, we need to be fair and realistic.
• Malcolm Raynor has worked in the telecommunications industry in Bermuda for more than 30 years. Benefiting from Cable & Wireless’ internal training and education programmes held in Bermuda, Barbados, St Lucia (The University of the West Indies), and the UK, he rose to the level as senior vice-president. An independent thinker possessing a moderate ideology, his opinions are influenced by principle, data and trends