Greek spending power has been eroded and the summer saw temporary restrictions on cash

Greek spending power has been eroded and the summer saw temporary restrictions on cash

The economic turmoil in Greece has been one of the biggest business stories of the year. But what kind of effects has the crisis had on the ground? How have shoppers reacted? IRI's Panagiotis Boretos investigates.

In June when Alexis Tsipras, the Greek Prime Minister, announced a referendum to decide whether Greece should accept the bailout conditions set by the EU, International Monetary Fund and European Central Bank for the country’s debt crisis, it became the first referendum since the republic referendum of 1974.

Queues immediately started to form outside banks and ATMs as people began to panic, fearing their money would run out. Within days, the country's Finance Minister announced people could only withdraw up to EUR60 a day from cash machines and that no money could be sent outside Greece, thus restricting imports and payments to exporters. Despite the fact that the Greek economy has shrunk by 25% since 2008 and one in four people are now unemployed – as high as 50% for the under 25s – people voted ‘no’ to the tough bailout conditions electing to keep the euro.

From an IRI perspective, it's interesting to see how shopping behavior changed in the immediate aftermath of the referendum announcement.

First, we saw evidence of extraordinary spending, as shoppers decided that if they were about to lose their money, they may as well spend it on luxury goods like expensive watches, electronic devices and even cars. Some market reports suggested that luxurious watches were out of stock.

Second, IRI scanning data show consumers started to stockpile key products from supermarkets, including essentials like rice, pasta and sugar and purchasing products that could be stored long-term like evaporated milk in favour of fresh products.

Just prior to Tsipras' announcement on 25 June, value sales for evaporated white milk were just short of EUR1m, but shot up to EUR4m in the week of the referendum (w/c 5 July 15) – an 80% difference compared to the same week of the previous year. On the other hand, chilled white milk stayed relatively stable and followed a similar trend to the previous year.

Pasta was also a popular purchase, with value sales at just over EUR2m (w/c 21 June 15) rising to a high of just under EUR5m during referendum week, a 200% value difference versus the same week last year.

We also saw a sudden increase in the sale of certain essential personal care and household products, as people started to panic buy. Sales of incontinence pads/towels, for example, rose to EUR1.2m in value sales (w/c 5 July 15) from EUR700,000 (w/c 21 June 15) – a rise of 50% versus the same week the previous year.

Bath and shower products also reached a high of EUR1.2m w/c 5 July, a 20% difference versus the previous year and up from EUR900,000 the week before the announcement. Sales of hair care rose 30% versus the previous year, worth almost EUR2m in value sales (w/c 5 July 15).

Worried parents also affected sales of powdered and liquid milk for babies and infants, perhaps fearing that supermarkets would sell out or prices would rise, in the aftermath of the referendum.

After the no vote, we saw figures drop quite dramatically the following week for product categories like pasta, UHT white milk and hair care products. Having bought more than usual the previous week, shoppers no longer needed to buy the same products and in many cases, sales fell well below those of the weeks leading up to the referendum.

What happens now to the Greek economy is uncertain and unprecedented. We’ve never seen this before and it may never happen again, but IRI figures show that both value and volume sales have stabilised across many categories after the referendum.

As for the future of the Greek economy, there are mixed messages. According to official figures, the economy grew by 0.8% in the second quarter of the year, possibly driven by household spending in anticipation of further capital controls, yet people are still limited to withdrawing EUR60 per day from the bank.

A third bailout agreement has been agreed, meaning a further EUR86bn of financial assistance will be released into a struggling economy over the next three years.

Retailers were affected in many ways during these unusual few weeks. First of all, they faced the challenge of handling huge amounts of collected cash, but at the same time they couldn’t trust banks to deposit this money. People working in retail were those who took the full amount of their salaries in cash directly from the employer. In many cases, through social media, many of the retailers gained positive recognition.

At the same time, there were some retailers who seemed to gain market share during these weeks. These were the ones trusted more by consumers during an unstable period. On the other hand, some lost market share, because they were trusted less, not just by consumers, but also manufacturers.

Retailers had also to handle ‘out of stock’ issues, especially for imported products, due to limitations and restrictions on imports, but this lasted only for a few days and action plans have now been put in place by most retailers.

We expect to see the recent crisis accelerate developments that were already happening in the retail environment and weaker players unable to continue.

At the same time, manufacturers tried to protect their resources. So they either cancelled or reduced marketing activities, especially during the first weeks. Many of them also decided to give staff mandatory annual leave to try to control expenditure.

At the moment, market conditions in Greece cannot be predicted accurately, and this uncertain period will last until at least September when elections take place. But what we have seen is that political instability influences heavily on the market. We hope that this will be the last tough period for the Greek economy and that signs of recovery will begin to appear soon.