Consumer demand unlikely to recover in 2024

Consumer spending saw a decline in 2023, after several years of sustained growth. Paradoxically, though, while sales volumes fell, their total value increased. The main cause of this was inflation, which went over 10% in the first half of the year and only fell below 7% in November. Meanwhile, development in the logistics and sector continued, setting a new record for modern industrial premises. Online trade also grew, with specialists estimating it to reach the EUR 10 billion mark this year.

By Aurel Dragan

Since it was a year when consumers looked predominantly at prices, a good part of shopping migrated to retail channels that offered low prices and benefits, according to a study by RetailZoom Romania. “This year, a new retail channel has consolidated under local entrepreneurship, namely cash & carry stores or local warehouses, which offer attractive prices and benefits to shoppers,” says Bogdana Gheorghe, Managing Director at RetailZoom Romania, who adds that only convenience stores and supermarkets have managed to remain stagnant or slightly growing.

The study shows that 55% of consumers looked for products on sale, 32% bought smaller quantities, 31% went shopping with a list and tried not to deviate from it, 30% froze products to keep them longer, and 27% went for the cheapest products available. The survey also indicated a 3.3% decline in sales volume between January and July 2023 compared to the same period of 2022, while sales value increased by 15%.

“The course of the Romanian economy in 2023 was unpredictable. The uncertainties forced private consumers to allocate their available budgets more carefully. They gave up on buying products for long-term use, instead focusing on day to day needs and special offers and promotions,” says Catalin Pozdarie, General Manager at Hervis Romania, who adds that “certain statistics show a decrease of the purchasing power in large cities in Romania compared to other cities in EU countries,” mainly due to inflation.

In the retail sector, however, a distinction must be made between the food and non-food sectors. In the non-food sector it is easier to postpone a purchase or give it up altogether, while the same cannot be said for products in the food sector. The difference is evident if we look at the development of each sector.

“While the food sector is still in full expansion—the market is allowing this considering the fact that there is a limited number of competitors and the need to cover basic needs is still a priority for the average consumer—, the non-food market has been experiencing a slowdown in the pace of expansion, which also comes as a result of a slower development of new large-scale commercial centres. Even so, there are players, especially those from the discount segment, who open stores in small shopping centres located in towns with a small number of inhabitants,” Pozdarie adds.

One piece of good news is that the online trade of goods and services in Romania is estimated to reach EUR 10 billion this year, which represents 60% of the EUR 17.6 billion total online trade in Eastern Europe, according to the 2023 European E-commerce Report. With a consolidated 3.17% of GDP generated by the online sales of goods and services (e-GDP), Romania ranks third in Central and Eastern Europe and 12th in continental Europe. The report shows that 94% of Romanian shoppers prefer to order online from Romanian stores, while 21% have also ordered from foreign stores. At the European level, the most ordered products are clothes, shoes, and clothing accessories (68% of products ordered online), followed by books, CDs, DVDs (34%), restaurant deliveries (30%), and cosmetics or beauty products (27%).

The growth of online retail also generates growth in the courier industry, with the two being very closely linked.

“I anticipate the upward trend on the courier market to persist, particularly due to the growing popularity of e-commerce and circular economy models. Despite macroeconomic challenges, Sameday sustained double-digit revenue growth in 2023 compared to the previous year, thanks to the commitment of our team and our digitally driven business model,” says Lucian Baltaru, the CEO of Sameday Courier.

The same is true for the industrial & logistics sector, which has remained on the rise.

“In 2023, Romania’s industrial & logistics (I&L) market stayed on the positive path of the last three years, surpassing the 7 million sqm modern stock threshold at the end of Q3, with a vacancy rate of only 4.3%. The year’s new deliveries are set to be around 630,000 sqm, reaching a total of 7.3 million sqm of modern stock by the end of the year. Leasing activity totalled 686,000 sqm in the first nine months of 2023, with take-up representing 88%. In terms of costs, the headline rent for a standard 5,000 sqm unit on a 5-year contract has risen to 4.5 sqm/month and it is expected to continue increasing into the first part of 2024, after which we expect a stabilisation period. Logistics have dominated demand with a share of 35%, but it was the Manufacturing sector that saw the highest y/y growth. It leapt to 25% of TLA by the end of Q3 2023, up from 8% in 2022, signalling a return to pre-pandemic trends. Looking towards 2024, we expect the East/Northeast regions to step into the limelight, as their ongoing infrastructure projects are attracting more of our clients’ and partners’ attention. The 200+ km of highways set to be delivered across the country in 2024 provide a long-awaited, significant boost to the I&L sector. We anticipate that regional cities will capture 60-65% of the total demand by year-end, with possibly even a larger share in 2024,” says Calin Badea, Consultant for Industrial & Logistics Services at CBRE Romania.

EXPECTATIONS FOR 2024

2024 will start with plenty of uncertainties. The public budget is under high spending pressures in a year with four rounds of elections. The changes that have already been made to the tax code will again increase inflation, with direct effects on consumer spending.

“Individual spending will be under pressure in 2024 as well. The immediate effect of the measures imposed by the current government has been the revision of future investment budgets, personnel restructuring or a decline in the number of new engagements,” Pozdarie notes.

“We believe the Industrial & Logistic market will be shaped by five key trends in 2024. Regional developments are gaining momentum, outpacing new deliveries in Bucharest, and leading to the emergence of new hubs. In the short to medium term, the headline rent is forecast to continue its upward trajectory, reflecting the robust demand in the sector. Nearshoring, after years of theoretical discussions, is finally starting to materialise, and we’re going to welcome even more of it in 2024. The rapidly advancing green energy segment, especially photovoltaics, is also a significant trend, as evidenced by the numerous projects in which we’re engaging together with our partners,” Calin Badea explains.

“The demand for courier services is poised to rise in 2024 as consumers increasingly adopt online shopping, generating a need for efficient and reliable delivery solutions that are accessible both domestically and internationally. With a surge in the number of online stores in Romania, Hungary, and Bulgaria adopting marketplace business models or expanding into neighbouring countries, we anticipate a growing demand for cross-border deliveries—not only in the countries where Sameday has active branches, but everywhere in the CEE. Consequently, the courier industry is expected to undergo additional technological advancements, especially in the development of last-mile delivery services and the enhancement of the overall customer experience. Looking ahead, continuous progress in sending, returning, tracking, and visibility solutions is anticipated, ensuring customers receive real-time updates on the status and location of their shipments,” Lucian Baltaru concludes.

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