Not even the January sales save the textile trade: 40% drops in sales, less employment and a cascade of closures in 2021

Physical stores will be the most affected in this discount campaign due to restrictions and economic uncertainty in the face of the third wave.

The january sales They have always been one of the most desired moments by merchants. The avalanche of consumers at the doors of the shops on January 7 was proof of this. But after the liberalization of discounts, the Covid and its secondary effects draw a campaign that the sector describes as “catastrophic” And that won’t help lift sales.

Why? “Because we have had discounts all season and we have already seen sales fall,” complains Eduardo Zamácola, president of the textile employers’ association (Acotex). He says it in reference to others previous campaigns such as Black Friday, which had a worse than expected impact.

For this reason, the forecasts for the January sales campaign are not at all rosy and the employers estimate that sales will fall between 35% and 40% compared to the previous year. A severe blow to the textile trade at a time when one in four establishments has already closed their businesses due to Covid.

Behind these estimates we find the negative effect of the Christmas holidays and the third wave of infections. In addition, the instability and uncertainty of the economy and the mobility and capacity restrictions do not stimulate consumption for this campaign either.

These bad forecasts already have a first consequence: drop in hiring. The January sales campaign will bring the signing of more than 167,000 contracts throughout the country, but will entail a year-on-year drop of between 5% and 10% compared to last year, depending on the sector, according to Adecco.

‘Online’ versus physical

Despite these data, the ecommerce -the great beneficiary of the pandemic- seems to be the great hope. According to the ‘Winter Sales’ report carried out every year by iAhorro, “the drop of 4.06% in sales in physical stores (17.72%) is something clearly derived from the current limitations of the pandemic, but it is largely compensates for the rise in sales online (+ 3.11%, up to 17.04%) ”, points out Antonio Gallardo, financial expert at iAhorro.

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In fact, the ecommerce, mass consumption, food, distribution, logistics, and transport will be the most benefited sectors and those that will continue to generate employment at this time.

thank you for sale online, in these dates will increase the need for staff for distribution and preparation of shipments online. For this reason, the most sought-after profiles will be: packers, waiters, order preparers and forklift operators, according to Adecco.

On the other side of the scale is small business. The Union of Associations of Self-Employed Workers and Entrepreneurs (Uatae) highlights the need to support local trade in the face of the digital empire of large surfaces.

From the organization, they recall that “the latest data provided by Social Security reflect that in annual terms the sector with the greatest losses was that of commerce with 11,019 fewer self-employed and highlight the need to face this month of offers and great discounts from a prism that prioritizes the acquisition of products in small businesses”.

spending falls

Another major problem for trade is the economic crisis. The uncertainty about the situation – which does not seem to improve even with the arrival of the vaccine – makes many consumers opt more for saving than for consumption.

Thus, the average budget for this sales campaign is expected to drop. Specifically, it goes from the previous 96.34 euros to 93.13 euros, being 3.33% lower. A more pronounced drop if we compare it with the 2019 budget of 99.34 euros, according to the iAhorro study.

Recovery?

The January sales campaign is nothing more than the continuation of a dramatic situation in the trade. In November, retail sales fell by 4.3% year-on-year, a record 1.3 points lower than the previous month. Since the first state of alarm was decreed have not stopped falling due to restrictions, capacity and drop in tourism.

Annual rate of the General Retail Trade Index at constant prices.  Source: INE

Annual rate of the General Retail Trade Index at constant prices. Source: INE

Not even the start of vaccination brings any optimism to the sector. “The rate of vaccination is very slow and it is impossible to visualize anything at this rate,” says Zamácola, who criticizes that the support plan for hotels, tourism and commerce of the Government “does not include direct aid”.

With this scenario it is very difficult to put a date on the calendar for recovery. From Acotex, they see a “very crude” first quarter and predict “a cascade of business closures” if the situation remains the same.