These shops, with their assortment of household items and other consumer goods, are known as retailers in the world of commerce. The vast majority of these point-of-sale locations is small and operates without sophisticated structures. Similar to their larger counterparts with familiar names like Courts, Fogarty’s and Guyana Stores, they are set-up to attract walk-in customers who buy goods in relatively small quantities and who acquire items for personal use at home or when on the move.
To many Guyanese, commercial activity is the centre of economic life in the country and comes from nondescript entities such as drugstores, “rum” shops, restaurants, jewelry shops, clothing stores, hardware stores and so on. Not all sales take place within the confines of a building. The retail trade is conducted by street vendors who sometimes fetch their merchandise in their hands and walk up and down the pavement, or who operate from a fixed location, including the back of a parked vehicle. Retail trade also includes non-store activities like the purchase of truckloads of sand and stone from roadside peddlers. The retail trade to which this behaviour refers is one part of the distribution sector.
Wholesalers and Importers
The other part of the distribution sector is made up of wholesalers. These enterprises sell their products to retailers. The wholesalers are often the link between manufacturers and importers, on the one hand, and the retailers on the other. Wholesalers buy in bulk and sell in bulk. In contrast, retailers buy in bulk but sell in small quantities. An important aspect of the wholesale trade is storage. Bulk purchases require warehouse space if the quantity of goods available for sale exceeds the quantity purchased by the retailers. Storage and handling costs add to the price of goods that Guyanese consumers buy.
Telltale Sign
The distribution sector is an important part of the economy and it engages Guyanese everyday as buyers, sellers or warehouse operators. It serves as a link between producers like GUYSUCO, the New GPC, Banks DIH and the general consuming public. Yet, the flurry of commercial activities and interactions in downtown Georgetown and in towns and other places across Guyana does not seem to amount to much in the Guyana economy. As this sector of the economy fights to survive in these challenging times, its own performance might be a telltale sign of the economic struggles of Guyanese.
The casual observer would think that, with the daily buying and selling taking place in Guyana, the distribution sector would enjoy greater stature in the economy and provide lucrative returns to its participants. While some operators might be doing better than others, the distributive trade in Guyana is hurting. This area of the economy earned about six percent of the income generated by Guyana in 2007, much of it garnered from higher prices as evidenced by a 21 percent inflation rate. If Guyanese were to look back over the last 10 years, they would see a less flattering image of the distribution sector and realize that the inertia and trouble plaguing the sector were obvious for a long time.
Distorted Optics
In discharging its reporting duties, the Bank of Guyana provides data that help to reveal the financial trauma being experienced by the distribution sector. From 1998 to 2007, retailers and wholesalers earned an average of three percent of the income generated in Guyana. This performance distorts the optics of the hustle and bustle observed daily in Georgetown, the capital and the largest city in Guyana, and still the most important commercial district in the country. The frenzied activities of minibuses and taxis discharging and picking up a constant stream of passengers on their way to or from shopping also contradict the grave circumstances facing the sector and Guyanese consumers. With the current global economic downturn and the Clico crisis leading to job cuts, and with several hotels poised to discontinue operations, matters could only get worse for Guyanese consumers and this sector of the economy.
Substantial Debt
Part of the reason for the poor performance is that the distribution sector is very competitive and incomes are relatively small. There are very little barriers to entry into the sector which appears to attract large numbers of low-skilled performers. Some of them disappear as fast as they appear. During the last 10 years, the population of Guyana has shrunk and visitor arrivals to the country have fallen sharply. These human resource movements have adversely affected market size and consumption levels. Many vendors engage in price discounts and offer other incentives to attract customers. These price adjustments shave points from the profit margins.
Value Added Tax
Matters have been made worse with the introduction of the value-added tax (VAT) in 2007. The administration offered its own evidence of this in the 2009 Budget in boasting about its actions to avert economic catastrophe in Guyana. The administration disclosed in the budget that it “maintained an extensive list of zero-rated basic food items for the purposes of the value-added tax” during 2008.
The purpose of this course of action that was accompanied by other cost-cutting measures was to ease the burdens of VAT on consumers.
This disclosure only serves to confirm that the VAT is helping to choke the distribution trade and ought to be reviewed and scaled back further to boost commerce in Guyana. Additional disclosures relating to the tax review study revealed that 40 percent of moderate-income Guyanese workers give up a whopping 46 percent of their money before they head to the shops and stores. When they get there, they join other Guyanese and give up an additional 16 percent of their income in the form of VAT.
To remain in business, many operators carry substantial amounts of commercial bank debt. In 2007, the distribution sector alone was responsible for 33 percent of the outstanding debt of the business community to the commercial banks. The distribution sector has consistently owed the most money to the commercial banks for the past 10 years, with its share of total commercial bank debt being no less than 20 percent at any time. Households too have been increasing their share of borrowing in order to purchase consumer goods. At times, household debt has accounted for as much as 40 percent of the income that went to the distribution sector, indicating that the availability of credit is very important to the viability of this sector of the economy.
Consumer Welfare
As imperfect a measure as it is, the size of the distributive trade helps us to gauge consumer welfare and quality of life. There is no hard and fast rule of what constitutes adequate or acceptable levels of consumer welfare or wide range of choices.
Yet, no one would deny that in industrialized countries like Canada, Denmark, Germany and the USA, there is a wide range of consumer goods available for buyers to choose from.
In the USA, for example, the distribution sector accounts for about 15 percent of the output or expenditure of the economy.
This is a sizable chunk of activity which suggests that Americans buy lots of items. This level of activity helps to push the economy, create jobs and add to purchasing power. The distribution sector is very important in getting goods to market and making them available to customers. Economies with successful consumer markets thrive.
The evidence is not confined to a highly industrialized country like the USA. In the sister CARICOM territory of Jamaica, there is a robust distribution sector.
The combined activities of wholesale and retail trade account for about 21 percent of the economy. Similarly high levels of participation are evident in the Barbados economy while in the twin-island of Trinidad and Tobago, at 13 percent, the distribution sector was as much as four times the size of that of Guyana in 2006.
The greater amount of consumer activities in these countries shows that consumers are satisfied with their product choices and have greater access than Guyanese.
This might be another clue as to why so many Guyanese have chosen to settle in other Caricom countries as preferred alternatives to Guyana.
