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Spanish Market Insight: Changing Consumer Habits Make For A Challenging Business Climate
The Spanish economy grew five times faster than the rest of the Eurozone last year. Forecast for 2024 is positive too, in contrast to the persistent downward forecast of Europe as a whole. However, the average spending of Spanish families is restrained. Recent analysis also reveals a staggering 38% increase in grocery shopping prices since 2021, in contrast with a bare 6% uptick in salaries. Inflation is predicted to be less than initially thought, but consumers mentality still needs to catch up.
By Rocio Enriquez
Ben Wesseling, from Duna Trading distribution, thinks plummeting prices due to the overstock situation will reactivate customer spending. However, Sergio Mur from La General Surfera shop in Barcelona has observed a shift in consumer priorities towards travelling and dining out. Any leftover money they have after their grocery shopping will be likely spent on that.
Winter was not good in Spain. Lack of snow and warm temperatures have resulted in poor sales, especially of outerwear jackets and wetsuits. Stores looked forward to some Easter snowfall, but most of the country suffered terrible rainstorms, which hindered sales of new summer products. The demand for skateboards and surf skates has dropped significantly.
“There is too much stock and people have already bought everything they need for now”, says Mur. Bar the explosion in popularity of wing foiling, the boardsports scene offers no observable growth trends. Cheaper products with more versatile use, such as backpacks or beanies, are selling better in a cautious financial climate. Expectations for Spring are not all bad, though. If the weather behaves, sales of summer apparel should follow suit. However, the trend of using surf apparel to lure customers into stores seen in the past years seems to have declined.
“Surf stores have to go back to core, which is selling, renting, and showing hardware”, says Ben Wesseling. Duna Trading works with a lot of schools. These have become competitors to stores by selling newcomers the hardware they have been taught with. Some stores are setting up schools just to have one more sales channel. Online sales are the biggest threat to retailers. To compete in this environment, stores need to offer something different. Mur only sells premium products in his online store. “The entry price products are the ones that flood the market, I offer products that are hard to find”.
The difficult winter will leave retailers with more unsold stock than they had hoped for, but they had pre-ordered with caution, so it won’t be too dramatic. In the current business climate, brands and distributors have stopped demanding MOQs. They are planning for an increase in the in-season ordering business model. With rising numbers of store closures and cancelled orders adding stock to existing inventory levels, there is always somewhere to order from.
“It is not hard to know how much stock big manufacturers have in their warehouses, and it’s scary”, says Ben Wesseling. Nevertheless, he thinks that all this movement in the market offers good opportunities for small and flexible distributors, for example, buying overstock from big brands. However, even that cheap overstock needs a retailer to sell it to the final customer, and they are seeing less of those walk through their door by the day.
Online competition is fierce, and many customers that visit the store use it as a showroom. Mur worries that, at this pace, the small retail store will disappear. Brands need to stop prioritising their D2C business and engage in a more ethical approach. Hopefully, the promise of a new European price regulation law expected for 2025 will help. It is brick and mortar retailers who offer the experience of talking to someone who knows and loves the sport. “The survival of the sport is not secured by making a lot of money”, says Mur, “but by keeping the passion for the sport alive”.
Recap our last Spanish Market Insight.
