SMALL RETAILERS: How to Survive with Daily Revenue of 200 Kuna

Traditionally weak January has been catastrophic this year. Revenue for small retailers has suddenly dropped by more than 50 percent, while payments to the state have remained the same.

Written by: Antonija Knežević
[email protected]

The number of stores smaller than 100 square meters has decreased from 11,300 to approximately 7,700 over the past eight years. Even faster than the decline in the number of small stores, the revenue generated in them has melted away – in 2000, small neighborhood stores held about 70 percent of the total market, and today only about 30 percent.

Despite the steep decline in revenue and competitive attacks from foreign retail chains, modern shopping centers, hypermarkets, supermarkets, and cheap Chinese goods, many small retailers have managed to survive. However, due to the latest blows in a row, recession, and non-working Sundays, the Croatian Chamber of Trades and Crafts claims that 20 to 30 percent of artisans will not reach the second half of the year.

Tightening belts and the noose around small retailers

Have they already felt the tightening of consumer belts, will they really be the first victims of the economic crisis, and what are their expectations for 2009? We asked several small retailers in Zagreb who have managed to find a way to customers despite all the difficulties so far.

Until November and the well-known Sanader’s statement about tightening belts, Alojzija Mihovec will say that the revenue of her store, located in a passage on Praška Street, was satisfactory. By offering more expensive but higher quality clothing, mostly from Western Europe, in three years, since she has her own craft, she has managed to create a circle of regular customers and pay salaries to herself and her son’s wife who works with her, but with the announcements of austerity, everything has started to go downhill.

– Revenue has suddenly dropped by more than 50 percent. In the first 15 days of January, we only had 20 thousand kuna, and I would need a monthly revenue of 100 thousand kuna to pay all contributions and have some profit – explains Alojzija Mihovec. Rent, monument tax, customs, VAT… – she began to list all obligations to explain the calculation which, as she somewhat resignedly concluded in the end, comes down to the tightening of belts tightening the noose around small retailers.

– Unfortunately, no one shows excessive interest in this. Neither the state, considering that small entrepreneurs pay the same levies as large ones, nor the banks, which avoid us in a wide arc when it comes to overdrafts and loans – concluded Mihovec. She sees no way out of this situation. After all, opening a store was supposed to be a lifeline after the company she worked for for years went bankrupt in 2006, so she says she has no choice but to hope that things will improve.

And it seems that the traders at Dolac have already somewhat lost hope that things will get better. Long before the economic crisis was even mentioned, the revenues of traders at markets drastically decreased. Their Grinch, who not only stole Christmas but also the rest of the year, were shopping centers. After the emergence of modern comfortable shopping malls with spacious parking lots, they simply had little chance. Neither the endless helpfulness and kindness of the shopkeepers managed to warm the cold ‘houses’ at Dolac, and the result is more than visible in daily revenue.

An average of only 200 kuna, which Fani Vunić achieved daily at stall number 50 in January, is far from the unattainable thousand for profitability.

– When I continued the family business at Dolac in 1994, I could not even imagine that things would go downhill. Shopping centers and Chinese stores have taken a large part of the customers. Compared to other markets, our position is worse because we are separated from the green part, and we are also in the pedestrian zone – explained Fani Vunić the basic causes of the revenue decline.

And due to insufficient revenue, she, like many of her neighbors from Opatovina, cannot pay contributions for health and pension insurance, nor can she take out loans to meet obligations.

Salvation in consumer goods for patching

– For the bank to approve a loan, you must not owe anything to the state, I cannot pay contributions without a loan, and the state only adds usurious interest to the debts – Fani complains and adds that she is aware that she is sinking, but simply does not see a better option.

If she closes her craft – as five or six artisans from Dolac have already done – at 55 years old, it will be hard to find another job, she is too young for retirement, and at the employment office, she cannot realize any rights because she has not been fired. And she cannot fire herself.

The best year in terms of revenue is far behind Marinka Penava, the owner of a haberdashery store in Nama at Zagreb’s Remiza. Since the most lucrative 2004, when the Bu-Ba store achieved 1.25 million kuna, revenue has been steadily decreasing.

– Last year we recorded a significant decline, especially in the second half, so we ended the year with approximately 870 thousand kuna. One part of the reason for this is the emergence of a Chinese store nearby, and partly the decline in purchasing power – Penava explained.

However, she, like most resourceful and flexible small entrepreneurs, has already gotten used to the difficulties in business. She did not give up even when she lost her job after 24 years of working in administration due to Nama’s bankruptcy in 2000. Despite the fact that revenue in January this year is 12 percent lower compared to last year, she believes she will survive and that the type of goods she sells will ensure decent revenue.

– We are saved by the fact that we have consumer goods. The harsh winter has increased the sale of socks, and it is already evident that people have become more inclined to take clothes for repair rather than buy new ones. Therefore, we sell less bedding, but sales of rubber, threads, wool, and similar items are going well. And it seems that this will be the case all year, which could save us – explained Marinka Penava.

With such an assortment, understanding from suppliers, which she believes will not be lacking thanks to long-term cooperation, and the effort put in to satisfy customers, she hopes not to enter the black statistics that HOK has been talking about lately.