Gyula Gyalay-Korpos, President of the Hungarian Council of Shopping Centers. Credit: MBSZ
Opinion

Hungary abolishes Sunday shopping ban

The re-introduction of Sunday business hours for shopping centers in Hungary was announced and introduced unexpectedly and with surprising speed, even quicker than the introduction of the obligatory Sunday shopping ban in March 2015. Why was it so urgent?

BY GYULA GYALAY-KORPOS

The official reasoning was that the customers—mainly working women with families—could not get used to the Sunday shopping ban and it was a topic of annoyed discussions even one year after its introduction. The other reason could be that the opposition was preparing a referendum on three topics and the most popular item among them was to reopen centers and hypermarkets on Sundays.

In any case, most of the shops were reopened on April 15 this year, causing quite a headache for most of the operators, who had to secure Sunday labor forces in just three days and decide how much extra salary to pay for that day.

How did the Sunday reopening influence turnovers and visitor numbers? To answer this, we should first look briefly at the macroeconomic figures. Annual GDP growth in 2015 reached 2.9 %, which was the best since the start of economic crisis. Inflation ran at just 0.9% and the unemployment rate came in under 6%. The central bank’s base rate was reduced to a historically low 1.2%. Solving earlier problems arising from unfavorable housing construction loans based on Swiss francs and introducing favorable loan conditions for buying housing also helped to increase the consumer confidence of tens of thousands of families.

The most visible result was that retail volume figures increased over the last 36 months to an average of 5.3% to 5.7 %, mainly due to an increase in net salaries, the introduction of online cashiers, the increase in overall employment, and the fact that consumers had postponed buying certain goods over the last six to seven years (non-perishable consumer goods were among the main drivers). VAT on some basic agricultural products was decreased from 27% to 5%. The Sunday opening of shops after April 15 even strengthened this tendency.

What has happened since April 16? What are main changes? Before March 2015, Sunday turnover was nearly 10% of the weekly value in the fast-moving consumer goods (FMCG) market. Since April 2016, this has reached 6% to 8%, but is growing. Around Lake Balaton—where most Hungarian families spend their summer holidays and the main season runs from the end of June until mid-August—the number is far over 10%). In the non-food sector, like consumer goods and electronic products, fashion, cosmetics, perfumery, etc. the turnover figures have in some cases reached 9.5% to 9.7% in the last three months. Along with gastronomy, this sector helped most of the shopping centers to produce good results in 2015 and in the first two quarters in 2016. Visitor numbers in FMCG market on Sundays had fallen by only one quarter (approximately 770,000 compared to 1,070,000 before March 2015, according to figures of GfK Hungary), and the average shopping basket also became smaller on that day. Friday is still the second-strongest day after Saturday.

Another important factor was that the prolonged opening hours on Thursdays and Fridays introduced during the Sunday ban were eliminated.

New problems recently arose, including a lack of workers in retail and employees’ demands for increased salaries level with a special emphasis on extra payment on Sundays. Increased wages will bring small enterprises into a disadvantageous position. The state secretary in charge for retail recently announced that new regulations are being prepared to compensate for the existing disproportion in competition between small enterprises and large companies. No details are known. Let us hope the labor force problems will be solved and no new ones will be created.

In summary, the mood in the retail industry after several bad years is positive. Tenants, representing big and small brands alike, are showing renewed interest after a long drought. This will hopefully trigger a new wave of developments in the sector.

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