The year 2016 has been a year of unrest; terrorism, political upheavals and conflicts have made news throughout the year. Many experts believe that the year will be remembered for the scourge of near daily terror attacks all over the world – from France to the United States to Iraq to Dhaka to Turkey and almost everywhere in-between. The continuous acts of terror have been a great roadblock to normal business in many countries, and retail, especially in apparel have taken a hit. The fact that countries like Turkey and Brazil have seen major turmoil in political stability has made matters worse.
Considered as a beacon of stability between Europe and the Middle East, Turkey has entered a period of high tension. Businesses have been affected and many buyers have pulled away from placing orders in the country fearing the worst though normalcy has returned since the coup attempt in July. In Brazil, even the euphoria around the Rio Olympics could not divert attention away from the political crises that the country was sinking into. After months of protest Brazil’s President Dilma Rousseff was removed from office in August, following an impeachment vote in the Senate. However, Brazil is still far away from peace, as the political crisis has deepened old political rivalries and slowed down growth for a country that was projected among the fastest growing economies. Brazil’s outlook is grim. The economy is expected to record another deep contraction this year. Latin Focus Consensus Forecast panellists expect the economy to contract 3.3 per cent in 2016, while retail sales are expected to contract 4.8 per cent, though for 2017, the panel sees retail sales growing 0.7 per cent.
In the meanwhile, the surge of terror attacks in Europe has raised questions over whether a potentially durable new threat to stability is settling in. The political challenges for Europe’s leaders are stark, and the impact on the region’s economy may be just as profound. Tourism, a major source of revenue both for the hospitality sector and the retail segment has dwindled. While ‘safe countries, like Spain and Portugal saw increase in traffic diverted from France, Turkey and Italy, the overall tourism intake dropped by an average 7 per cent post the attacks and are expected to continue for some time more.
The attacks have also taken a toll on the luxury industry, which relies heavily on foreign tourists, especially from Asia, for European sales. Leading brands like Hermès, Louis Vuitton and Prada have reported slumping sales as high-spending tourists stay away. Since the majority of luxury shoppers hail from Asia or the Middle East, it is only natural that they are now heading to alternative luxury markets such as China and Hong Kong.
Jacob Funk Kirkegaard, Senior Fellow at the Peterson Institute for International Economics, cautioned that the regularity of violence across Germany and France, two of the euro zone’s largest economies, may prove particularly unnerving to consumers. He said shoppers will continue to purchase durable goods such as washing machines or other appliances, but they might think twice before going out for leisure and products considered luxury like fashion. “A longer-term slowdown in European consumers, particularly in Germany, could have damaging impacts on the EU economy,” Kirkegaard said. A report by Deloitte last year, however suggested that cities now bounce back much more quickly from terrorist attacks than they did 15 years ago, it is often said that retail therapy is the best solution to ward of negativity.
In Dhaka, the impact of the infamous Gulshan massacre in July has been at many levels. At the macro level, the incident is a hit to the reputation of Bangladesh as a ‘safe’ country for doing business. Uniqlo, the owner of Fast Retailing (FRCOF) announced suspension of all ‘unnecessary’ business travel to Bangladesh while Swedish retailer H&M reportedly sent an email to all its vendors informing them about a series of upgraded security norms at its Bangladesh office. Puma, though assured to continue sourcing from Bangladesh but added, “… we will decide (travel) on a case by case basis, depending on how the situation is evolving.”
Though the expatriate community is putting up a brave front by not abandoning the country, there are concerns. More so by the fact that the unrest was perpetrated by the young, educated boys with a single agenda to kill the non-Muslims. This aspect of the attacks has scared everyone…, even those who have been living in the country for a good number of years.
Despite a long history of turbulent domestic politics, plucky Bangladesh has ridden out many storms – from labour unrest, mass transport blockades and large-scale political paralysis to workplace disasters. But the back-to-back terrorist attacks in Dhaka and Kishoreganj has brought the industry face-to-face with its biggest image crisis ever with some expressing fear that security worries have potentials of crippling the garment sector. But with the Government moving in fast to put security measures in place no major incident has been reported since, which augurs well for the industry.
