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Portuguese Market Insight: Retailers Struggle To Compete With Online Discounts

Portugal was shaken by a political earthquake in November when the prime minister resigned after he, and people in his close circle, were the target of a criminal investigation over suspicions of corruption in projects relating to the country’s energy transition. The government’s fall has put Portugal on stand-by mode with lots of projects and decisions waiting until new elections in March 2024, leaving the economy in a difficult situation.
By Nuno Principe

Even so, the state budget was approved. The OECD has reviewed downwards forecasts for the Portuguese economy indicating growth of 2.2% for this year, 1.2% for 2024 and 2% for 2025.

Low business and household confidence, modest global growth and high uncertainty are holding back economic activity. The inflation rate has been falling over the last few months and now stands at 1.6% according to Statistics Portugal.

Overall retailers are complaining about poor sales mainly in hardgoods and shoes due to the crisis and a loss of purchasing power for consumers. Stores that have a good location for tourists are happier and more prepared to face the difficulties and are making some reorders. But even foreigners have a second thought and are more careful to buy only what they really need. Bigger stores are full of stock and some customers go there, check the product but then go online to find promotions. Smaller stores that have less stock play the cat and mouse game making reorders when needed. Hardgoods and shoes segments are giving headaches to almost everyone while apparel is doing better. A few brands are running promotions on their own websites and social media and retailers are angry with them cancelling or sending back orders in retaliation.

The Surfers Lab stores are geographically in different parts of the country (Peniche, Costa de Caparica and Sagres) but all have seen a drop in hardgoods sales. However, they also see positive signs. “Apparel and accessories went slightly better than November 2022 and we ended the month as expected. In the Sagres store in particular there was a constant flow of tourists and since the waves were good this also created a positive impact on sales, pointed out retail manager, Maria João Amado. The business positioning and brand selection is key to having differentiation from the competition. “Surfers Lab’s positioning has been that we prefer to have higher quality and less mass brands. Vissla, Salty Crew, Outerknown and Lost are doing very well in our stores. Technical product sales have fallen considerably compared to last year which is a direct consequence of the reduction in surfboards demand. “Apparel sales are in line with 2022 and results are positive. However, in wetsuits things are different. There is a huge stock at all brands across Europe and as consequence aggressive discounts are constant,” she cautions.

Pipeline Surf Shop is one of the main core stores in the Algarve region. “We’ve changed the store location to a more central area in the city which attracts more tourists. The weather has been very good for business, the sea water registered high temperatures and we were all surfing with 3.2mm wetsuits until the end of October on the Algarve coast, but this was obviously bad for wetsuit sales”, said the store owner, Bruno Pinto. About trends, they have noticed a comeback. “People are returning to wear baggy clothes again and I think that over-size is a trend that will continue in the near future. Bigger and clean apparel clothing with less branding have been popular with customers”, he reveals.

Sales-wise the new Fall/Winter 24 collection was slow to take off and once again the weather had a direct impact since it was very hot until the end of October. “For this reason, also, it was one of the best years when it comes to selling t-shirts in our store. Black Friday shifted a lot of stock. Regarding technical material there was a colossal drop in sales but we are now starting to register a small improvement in surfboard sales.

Stay tuned!