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Fiji’s Exciting Growth Comes With Challenges

Fiji’s Exciting Growth Comes With Challenges
September 09
11:02 2017

The food retailers and stores in a number of non-essential re­tail segments in the west are reporting that generally business in not as good as it was. Taxi driv­ers, a good barometer of the discre­tionary spending of the country, also say that business is not as good as it had been.

There are complaints amongst the hotel and resort operators that business is down, but one of the best indicators of room occupancy rates, the commercial laundries, does not support the reduced level of occupancy cries.

The tourist numbers out of Aus­tralia, Fiji’s leading source market, have been in very slow but steady decline over the past year or so and this is an area of concern for the operators, but that fall is somewhat balanced by significant increases in new or developing source mar­kets such as China, India and Sin­gapore.

The real Problem.

The real problem in the hospital­ity industry is not so much absolute numbers but yield (the profit per person) which has been an issue for quite some time.

The reduction in yield has its causes in the marketing that has taken place over the last two years or so.

With the negative impact on the industry due to events outside their control, such as Cyclone Winston, the odd flood and economic con­striction in source markets, par­ticularly in Australia, have called for immediate action to boost short-term numbers.

To achieve this, the industry in Fiji decided that the price had to be cut to entice greater numbers and they did this quite successfully by seeking help from the national airline in reducing fares and also reduced their own room rates, thus creating a very attractive package rate. However, it was inevitable that the category of tourist attracted by these activities were the lower end of the market and their spending in Fiji led to reduced dollars per indi­vidual.

To recover some (if not all) of the money they lost because of the room rate reduction, the industry increased the food and beverage costs and worked hard to ensure that guests stayed mostly in the re­sort.

They were somewhat successful in this, which led to reduced business for the independent restaurants, ca­fes and bars.

The hardest hit were the Dena­rau operators, some of whom are reporting business down by 30 per cent.

These issues are what you would expect in a rapidly growing sector of the economy and the Govern­ment has taken steps to minimise the problems associated with such growth but it will still need careful and constant management until all of the factors settle down.

While there is clearly a boom hap­pening in the tourism industry in Fiji, the benefits are not evenly delivered and there is concern in a number of areas, particularly the Australian market, but at this stage there appears to be no real answers being put forward.

The issues with the retail food industry are basically of their own making.

The business has gone through a long period of sustained growth as the people of Fiji move away from the traditional food that they were buying from the markets.

Often directly from the farmers and producers to shopping from branded retail chains where they purchase processed goods, canned and packaged, thus providing a continually growing market mass.

In addition, many more people moved into organised employ­ment which provided them with a regular cash purse which allowed them to spend more on food that offered more convenience and they changed their diet significantly.

This change was often not to the benefit of their health and created some concern amongst government agencies involved in the health and welfare areas, but the lure of con­venience they have recently found keeps them buying processed food.

In addition, the major supermar­ket chains protected their market share by building more outlets in the growing peri-urban areas of the country, employed significantly more staff and increased their capi­tal investment.

This created a noticeable over­supply of shopping outlets, usu­ally clustered closely together and competition for customers amongst the various supermarket brands in­creased.

As usual in Fiji, the competi­tion took the form of price cutting rather than value-adding and the profitability was seriously affected. One of the leading supermarket chains just recently changed their strategy and their branding for all their stores that were classified as “B grade”.

In doing this they further cut the prices of most of the lead-in items in each category and positioned the new brand clearly on a price propo­sition.

In doing this they demanded that the wholesalers make a contribu­tion to support the lower price, so overall food retail profitability has taken a hit.

While this may appear a benefit to the consumer, the wholesalers will need to put in place strate­gies that ensure their margins are maintained and this could lead to reduced quality.

They appear to have maintained their strategies in the “A class” properties, but some have recently place additional emphasis on offer­ing non-food items such as white goods and electrical appliances.

It will be interesting to observe the dynamics of the overall market over the next twelve months and see how the strategies pan out.

With the new affluence and some changes in government policy there has also been a very signifi­cant growth in the number of mo­tor vehicles, most of which are pri­vately owned, on Fiji’s roads.

This market must also be moving close to saturation point, where Sales growth slows.

This situation will create issues for the retail motor industry, not too different to that the food retail­ers are facing and again it will be an interesting area to observe.

The smart motor retailers are al­ready developing strategies to ad­dress the situation

Fiji is a very successful country with excellent government policies in place and the lifestyle (and there­fore the aspirations) of most Fiji­ans is changing but we will need to accept changes in the business en­vironment and grow with the situ­ation.

Anyone who tries to fight the in­creased expectations of the average Fijian will surely fail in business and the people who successfully adapt and ride the wave of national change will prosper move than ever.

Feedback: maraia.vula@fijisun.com.fj

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