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Lankans seen spending on houses, vehicles and holidays in apparent shift towards affluent middle-inc

26 September 2017 12:00 am - 0     - {{hitsCtrl.values.hits}}

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Although Lankans are said to be struggling to make their ends meet with the rising cost of living, the numbers tell a different story as they have spent lavishly on housing and vehicles, gone on vacations in expensive villas and purchased branded products vis-à-vis essential food items. 


Despite the trend has been there for some time, it picked up pace in the aftermath of the conclusion of the war in 2009, when the incomes rose rapidly and the money was made cheap after the banks cut the lending rates to rock bottom levels to facilitate the unfettered consumerism. 


According to the household income surveys data analysed by Ruvini Fernando, Director and Chief Executive of Guardian Fund Management, a Colombo-based fund management firm, Sri Lankans have shown a rapid shift towards discretionary spending from the essentials. 


For example, during the 10 years to 2012/13, spending on food and beverage items had declined from 46 percent to 39.5 percent while the spending on housing rose from 12.6 percent to 15.1 percent and so had transportation and vehicles.

oving towards discretionary spending,” Fernando told Sri Lanka’s first- ever Retail Forum organised by the Sri Lanka Retailers’ Association, recently in Colombo. 


Much of this transformation has been fuelled by the rising incomes and credit available to the private sector as there is a strong correlation between those two and the discretionary spending. 


This is amply demonstrated by the expansion in microfinance, which financed this consumption growth during the same period, Fernando added. 


Sri Lanka’s largest consumer durables retailer, Singer Sri Lanka PLC, was recently acquired in a landmark deal by Hayleys PLC, a diversified conglomerate controlled by the business tycoon, Dhammika Perera, to create a consumer retail behemoth similar to IKEA, as he foresees the potential in the business in the country with a rising middle-income class. 


However, the durables sector is prone to economic cycles than the FMCG sector, which has relatively stable earnings. 


Meanwhile, A.C. Nielsen Country Director Sharang Pant speaking at the same forum said young Asians are driving the leisure spend and they are estimated to spend a whopping US $ 340 billion on international trips by 2020. 


As the majority of the millennials stay with parents, they do not need to invest in housing and those savings are spent on leisure and travelling, luxury brands and other discretionary spending.   


Fernando, who also analysed the listed company earnings (operating profits) across sectors from March 2009 to March 2017, showed listed company earnings barring banks have registered an annual average growth of 10 percent during the period under consideration. 


However, she stressed that consumer-driven sectors have grown much higher than the average growth in the sector. 


For instance, the FMCG segment had registered a growth of 21 percent while the durables and retail (supermarket) segments grew by 18 percent and 17 percent, respectively during the same period. 
Meanwhile, the earnings of the retail sector from 2008/09 to 2016/17 grew by a considerable 20 percent annually demonstrating a clear shift in Lankans towards the organised retail segment. 
However, she stressed Sri Lanka’s organised retail sector is still under-penetrated and has a long way to go. 


Meanwhile, Dr. Supachai Panitchapakdi, an economist and a former Secretary-General of the UN Conference on Trade and Development (UNCTAD), who spoke about sustainable retailing at the forum, said the present generation is engaging in an unfettered consumerism where they consume everything today depriving the future generations of their consumer needs.

 

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See Kapruka's top selling online shopping categories such as Toys, Grocery, Flowers, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,News, Courier/Delivery, Food Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka.

 


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