Bermuda's retailers face a tougher year in 2010 than 2009, but there are a number of steps which can be taken to relieve the pressure on the sector as a whole.

That is the view of George Grundmuller, president and CEO of the Phoenix Stores Ltd., who spoke to The Royal Gazette about the challenges ahead for the retail industry and viable solutions to tackle the issues.

Mr. Grundmuller has called for the introduction of a duty free shopping for tourists, a review of sales tax and the pedestrianisation of Hamilton, as well as the need to address the lack of cruise ships visiting town and retailers pulling together to successfully stage big events.

Retail sales volume, which takes inflation into account and reflects the quantity of goods sold, fell for the 18th consecutive month, dipping by four percent, according to the Department of Statistics' Retail Sales Index for October.

Meanwhile total retail spending in October was $93 million, $2 million less than the same month last year - when financial markets around the world were going into freefall.

Mr. Grundmuller said that the Island's retailers had already experienced really difficult times but believes they will be set for further hardships next year.

"As a whole, we have had a year-and-a-half of declining sales and obviously that has to be concerning for all retailers and is concerning for everyone and I think that the slow down really has affected us in 2009, but 2010 will be more difficult for us than this year and there are a number of serious challenges that retailers face right now which need to be addressed," he said.

Mr. Grundmuller reckons that Bermuda's retail sector has seen trade impacted by the knock-on effect of the recession in the US and Europe, and a falling population with more people leaving the Island compared to last year as international businesses have downsized, as well as a greater competition from the US east coast and the Internet and online shopping.

"Internet shopping is a real threat - it is here and it is here to stay," he said.

'In the early days it was a novelty and people didn't really trust it, but now it is mainstream."

Mr. Grundmuller said that retailers in Bermuda had to compete with their overseas rivals with the added burden of big overheads such as high labour costs and rents equivalent to 5th Avenue in<\p>New York, in addition to duty on all items totalling hundreds of thousand or millions of dollars tied up in the 22.5 percent duty paid on stock.

"When you count all that in it is not difficult to see why retailers are struggling at the moment," he said.

As a result, he said many retailers were trying to reinvent themselves, cutting down on costs by running off minimum staffing levels, while some who were feeling the pinch too much ultimately had to shut down all together if they were running at a loss, as evidenced by several stores which have been forced to close in St. George's in recent months.

Mr. Grundmuller believes that Bermuda should be following the lead of its Caribbean island counterparts including St. Martin and St. Thomas through Government launching duty free shopping for visitors because certain goods US<\p>tourists could not get back home, such as English sweaters and Wedgwood china, were no longer exclusive with all of the international brands now available in the American market. They also had to pay duty on top of the regular US<\p>retail price, thus reducing their profit margin, he said.

He also thinks it is time to have a closer look at the country's sales tax system and scrap duty altogether to help reduce the financial burden on retailers and allow them to order based on demand rather than buying in bulk to get better prices, only paying taxes on goods they sell, instead of higher mark-ups and enabling them to be more competitive with their US competitors.

But he believes the city's business community has a part to play But he believes the city's business community has a part to playtoo and needs to get to work on a number of projects that have been in the offing for some years now, namely the pedestrianisation of Reid and Court Streets.

"People don't want the hassle of driving in the city and we really need to think seriously about pedestrianisation, which is something that has been talked about since I first arrived here in 1991, but nothing has happened," he said.

"I think there needs to be a revitalisation of the city, because Front Street in 2009 was essentially dead."

Mr. Grundmuller said that Hamilton retailers needed to have at least another cruise ship a week in addition to the one scheduled for the 2010 season, having benefitted from the four or five ships per week that visited three years ago or more.

He also reckons that retailers in general should join forces to provide a better shopping experience and atmosphere to get customers in the spirit at times like the build up to Christmas and other events.

But he is sceptical about new businesses starting up in the current economic climate, believing there is an oversaturation of stores available on the Island, with many existing retailers struggling for trade and customers, citing 14 drug stores, 10 major supermarkets, four or five hardware stores and three department stores catering for a population of 65,000 as an example of the reasons why.

"Overall, I think<\p>Bermuda will face a very difficult year ahead," he said.

"I think we need to look at all of these things because there is not one solution to the problems and one has to realise that retail has changed - you have to ask the question - do you want less choice on the Island or more people bringing stuff in, or do you want a vibrant retail industry here at the end of the day?"