How Bermuda can solve its retail conundrum
Bermuda's retail business needs a fix. Last month, the Government released retail statistics to the end of 2018. It showed ten successive months of decline, with sales values now reaching a low not seen since 2016. This is a serious concern: declining retail sales are a clear warning that our economy is declining, too.
Retail sales are one of our most important economic indicators: consumer spending is a key driver of our economy. The retail industry is also a significant employer, with 3,000-plus people working in it.
Because it is one of the Department of Immigration's closed job categories, retail employees are almost all Bermudians. Retail provides numerous entry-level jobs to young workers.
Opening a shop is a favoured type of entrepreneurial venture. And retail is a significant contributor to government revenues — not just through payroll taxes, but the customs duty stores pay on the merchandise they import.
Finally, retail is an important part of our tourism product. Shopping is a tourist activity; most Bermudians travelling abroad go shopping, and the same applies to tourists coming to Bermuda.
A broad array of retailers is an important part of the island's attractions. Visitors like to wander through local shops to browse and to purchase goods. Good shopping is also important for people living here, and for those considering moving to Bermuda.
It is a myth that Bermuda's falling retail figures are simply an indicator of a global retail trend, with the traditional bricks-and-mortar retail format shrinking in favour of online sales.
In fact, online sales here and abroad make up a small amount of total retail sales.
Online purchases represent approximately 10 per cent of total retail sales in the United States and 15 per cent in Britain.
And newly released figures by the Department of Statistics show that both online purchases and goods purchased overseas and brought back to Bermuda by travellers make up approximately 18 per cent of retail sales.
Worldwide figures also show the value of bricks-and-mortar sales grew by almost 22 per cent over the past four years, a trend that appears set to continue. However, this is taking place in a changing environment, with some of the largest retailers failing, while others gain market share.
Those that have succeeded have invested money in personalising the shopping experience and engaging in creative ways to meet the ever-increasing demands and expectations of customers who can literally shop anywhere at any time, thanks to the internet.
Bermuda's retailers are well aware of these features. They know that to compete, they must offer in-store experiences as compelling and personalised as the most successful retailers in other parts of the world.
But declining sales and profits, the cost of doing business in Bermuda, and a sense of responsibility to keep people in jobs have left little room for investment and progression.
Too many stores are now dated and lagging behind in what they can do to entice customers in to make purchases.
So what steps do we take for change in Bermuda? How do we stop more retailers falling by the wayside, leading to vacant buildings, job losses and a bigger hole in government income?
Recent payroll tax concessions in the 2019-20 national budget will help the larger retailers, but we still need to look deeper into the industry picture for solutions for the entire sector.
A few steps by the Government can make a big difference to all of Bermuda's retailers:
1, Tax breaks on retail improvements. This should not only apply to the physical improvement of a store, but also investments that are aimed at improving and growing the business such as digital technology. The idea here is to help move businesses forward, increase sales and in turn create more jobs
2, A deferred customs duty allowance for all retailers. Retailers have one of their biggest outlays before earning a penny — purchasing of goods, paying for freight and paying customs duty before the product has made it to the store to make a sale. The introduction of even a partial delay in customs payments for all retailers would allow for some cash relief. Incoming containers could be released as long as a certain percentage of the duty was paid, with the balance due by the end of a certain period
3, The breakdown of import data from customs. Although the Government has just released a partial breakdown of the value of off-island goods purchased by individual shoppers, it has not outlined what categories these goods are. Knowing this would enable retailers to learn customer online and off-island shopping habits, and help stores to tailor their buying to meet the true demands of Bermuda customers
4, Population growth. Our ageing and shrinking population pool continues to take a toll on retail sales. Young families spend more on food, clothing and household goods than retirees. By addressing long-overdue immigration reforms to tie long-term expatriate residents to the island and attract new population, the Government can help to increase the number of people who live and acquire goods here
Physical shopping still remains a social activity. Nothing beats visiting the shops and getting a direct sense of the look and feel of the merchandise we are considering as a purchase — and being able to interact with people who can help.
If we can combine this with some smart application of digital technology and enhanced customer experience, Bermuda can step into the new age model for retail, enjoying and reaping the rewards of the growth that is happening in other parts of the world.
It is important to remember if we do not use and enhance our retail industry, the repercussions to both our community and economy will be severe.
• John Wight is the president of the Bermuda Chamber of Commerce