Hungarian stores at risk of mass closure
We can temporarily rejoice in the discounted products due to the introduction of mandatory promotions. However, the new promotional phase starting today may bring the death knell for smaller stores, according to experts.
It is hardly likely that mandatory promotions will have a beneficial effect. Those with knowledge about economics expect two things to happen mainly. On the one hand, this measure won’t stop the inflation, as it just causes further chaos in retail. On the other hand, it could cause smaller stores to close down, writes PĂ©nzcentrum.
Mandatory promotions
A few weeks ago, the government announced that weekly mandatory promotions must be introduced for basic food items in stores. Domestic stores must categorise basic food items into 20 categories and advertise mandatory weekly promotions for these items. At least one product from each category has to be be discounted by a minimum of 10 percent compared to the lowest price in the past 30 days. However, the promotions cannot affect price-controlled products.
The measure comes into effect today, on 1 June. Small stores are not expected to participate in it, as the requirement only applies to stores that had revenues of HUF 1 billion or more in 2022. This means that large retail chains and discount stores are expected to offer major promotions in accordance with the regulation. However, according to the experts, this will further seal the fate of stores in smaller settlements and villages.
Will the measure curb inflation?
Sándor Sütő, the CEO of Eger és Vidéke Coop Zrt., told Pénzcentrum that the group of companies under his leadership is making significant efforts to comply with the regulation.
“It is not possible to select a specific product for mandatory promotions as the products and types of goods differ, and it is not possible to advertise uniform promotions even if the regulation requires it. We need to find a solution for this,”
Sütő said.
He further added that in his opinion, mandatory promotions will not be able to curb inflation. According to him, there have been so many interventions in the economy, especially in the retail sector, that it is yet impossible to assess the effects of mandatory promotions.
“There is chaos in retail, and to top it off, people think that stores deliberately increase prices elsewhere due to price controls. I believe that mandatory promotions will have no impact on inflation,” he stated.
Are store closures coming?
According to agricultural economist György Raskó, the closure of small stores in rural areas has already begun. This was originally due to the microcrisis caused by COVID-19, but this trend is likely to continue with the introduction of mandatory promotions.
“Discount and large stores will benefit, but the small ones won’t. Besides not being required to participate according to the law, they lack the necessary IT and resource capabilities, and their utility costs have also significantly increased,”
he said.
György added that the closure of small stores has already begun, and this process will continue.
Source: PĂ©nzcentrum
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5 Comments
The Hungarian government should completely stay out of meddling in commerce. Let businesses succeed or fail based upon the market place. What do successful food shops all have in common? They provide products that are a good value for the money to their customers and they provide customer service that is cheerful and helpful. NOT the typical take it or leave it attitude that many Hungarian merchants are still carrying over from the Communist era. No one wants to see a business fail but merchants need to look at how they run their businesses and take a look at what they could do to improve their profits and keep shoppers coming back not because they have no choice but because they are satisfied.
This government has no idea how to run an economy. Sad.
Our Politicians will come to the rescue! They always fight for us.
Or maybe, just maybe – they’re getting this wrong and will apologize after this backfires and people are driven to bankruptcy?
This is ANOTHER example of the GROWING state of Confusion, we are witnessing, coming out of the Orban led “imploding” Government.
Is it NOT clear – Orban and his Government are Governing in a state of PANIC ???
This panic, irrationality – we are seeing, in the decisions directional processes, by Orban and his Government – are factually – VERY cataclysmically Dangerous – to our FUTURE.
Orbans – nadir for Us – for Hungary, the on-going depth of it – pace gathering of it – Horrendous to our FUTURE.
Orban is “squeezed” into a corner, caught between a Rock and a Hard place, for whatever way he moves, he bears, the cataclysmic MESS – on his SHOULDERS, under his NAME – the deepening of our problems, Economically & Financially – all the creation of Orban – his Political Financial and Economic Ideas and “warped” Philosophies.
Orban and his Government – we are witnessing GOVERNING in PANIC mode.
In typical Orban-think, the world-wide inflation is seen as an opportunity to make money for the kleptocracy. While everyone`s inflation has risen of late, Hungary`s is worst because of the corruption tax paid every day. This cannot be changed without real pain in the population. Hungarians suffer from national psychosis in an 80/20 ratio and the 20% of sensible, honest individuals who see the truth suffer from the naivete and self-centered nature of the remaining 80%. It is tragic. Sadly, this will not change without tangible hardship., without some sort of extreme disaster. Hungarians are not beyond redemption but as long as the pain of living with the current situation is tolerable, they will suffer it. Not until the pain becomes too much to bear will they react. I am quite aware of my generalizations but they are a product of living here for 24 years. I did not say anything negative until I became a Hungarian citizen but now in my elderly years, how can I not share my thoughts? It is almost too late.