Market Report, "Colombia Retail Report Q2 2014", published

From: Fast Market Research, Inc.
Published: Wed Mar 05 2014

Colombia's retail sector is on a positive growth trajectory, thanks to decreasing unemployment, an increasingly affluent middle class and solid economic growth. Retail spending over BMI's five-year forecast period (2014-2018) is expected to average 9.3% growth per annum, with transport, recreation & culture and personal & insurance registering the biggest gains. However, around 40% of the population exist below the poverty line, and are thereby excluded from the spending habits enjoyed by the rest of the populace.

Colombia has a thriving retail sector, with impressive growth rates and increasing disposable incomes leading to an expanding middle class with a penchant for premium goods and international brands. This is being aided by declining household size, with people more likely to live in smaller, increasingly more expensive, urban dwellings. Retail hubs, such as shopping centres, are more likely to be located in these areas, thereby increasing people's exposure to the sector.

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Many young people are following trends from the developed world, breaking cultural traditions and leaving home at an early age to study and work. This early mobility has led to the creation of new households that consume more than older generation households. The young people sector of the population represents the driving force behind the strong domestic demand, with domestic consumption to increase by 5.4% in 2014 and retail sector spending to total 58.4% of GDP.

Over 2014-2018, the greatest annual gains in the retail sector will be seen in transport, recreation & culture and personal & insurance, which are all set to increase by 9.6% per annum. Domestic transportation costs in Colombia are also extremely high; in fact, they are the highest in the region - a contributing factor to the increased spending we anticipate, in addition to increased income. The rise in per capita and household earnings is also being reflected in increased spending on recreational activities, with sports & camping equipment a notable beneficiary; annual growth of 11.7% is expected over 2014-2018. Over the five-year forecast period, the lowest spending gains will be seen for education, although this will still register average growth of 8.3% per annum

Colombia's geographical position holds an advantage as well. It is surrounded by other thriving economies, such as Brazil and Peru, as well as the Caribbean Sea. Increased international tourism to Colombian beaches has spurred the luxury tourism sector, which constitutes growing potential in the retail sector.

Recent developments:

* In January 2014, Cencosud announced that it will be investing less in expansion over 2014 as it focuses on consolidating its Brazilian and Colombian operations. The company said it will invest US$425mn in South America in 2014, compared to the US$731mn it invested over 2013.

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