Analysis: Greece's retail sector is feeling the impact of instability

The political situation, and with it the economic outlook for Greece, both remain highly uncertain following Sunday’s referendum, and that in itself is not a surprise.

Equipped with strong democratic legitimacy to toughly oppose the international creditors’ previous austerity demands, and with patience visibly running out at the European partners, Prime Minister Alexis Tsipras now has an incredibly difficult job ahead of him.

He needs to strike some kind of agreement with the lenders to secure a functioning economy, and he needs to get this task accomplished fast as Greek banks run out of cash, and payments of both public sector salaries and pensions are at severe risk.

The current lack of cash, and the expectation of things getting worse before they get better, is now making itself felt in Greek retail.

I admit not to having any hard survey data at hand, but very recent subjective reports from Greece over the weekend suggest that families have begun to buy non-perishable foodstuffs in larger quantities, including rice and pasta.

Supermarkets are doing their best to re-stock shelves but cannot avoid a growing number of out-of-stocks; shoppers are paying with debit and credit cards more often to avoid touching their thin cash reserves (after all, the number of ATMs that no longer work is also on the up); and some retailers have asked staff to bring coins from home to guarantee availability of change in-store.

All these are uncomfortable signs of nervousness in a market that only on Sunday celebrated some kind of national resistance on the ballot box, showing that the population continues to suffer from a deep lack of trust which cannot be glossed over by the weekend’s short euphoria.

Negative signals sent to retail investors

From a longer-term perspective, the recent history of Greece and its administration clearly sends negative signals to retail investors. The strongest one is a feeling of instability and administrative arbitrariness.

At times when Europe’s grocers take a very careful approach to internationalisation, this essentially means that Western grocers are not going to take the Greek risk at this point in time.

After all, as a long-term investment trading on low margins, grocery retail stores and their associated logistics networks require a predictable framework and operating outlook which Greece currently cannot offer. This in turn, however, means there is now a big window of opportunity for retailers already trading in the market, with a chance to expand store networks, invest in efficiencies, take market share and establish themselves as long-term leaders in the absence of any major new market entries.

FMCG manufacturers importing into Greece are less dependent on stable long-term outlooks as they can move in and out of markets relatively fast.

The biggest risk here would be the much-speculated-on Grexit with a return of Greece to the drachma. This would be likely to come hand-in-hand with heavy depreciation, making foreign branded products – and not just FMCG, but also non-foods and medicines – close to unaffordable to large parts of the population.

As short-term developments in Greece look hard to predict, we can safely expect a broad picture of insecurity that will hang around for some time.

Whether or not the long-term outlook is positive for Greece will largely depend on the country’s ability to reform. Any sustainable positive change will have to come from within.

How much are you happy to bet on this?

• Boris Planer, chief economist, Planet Retail