Saturday, October 27, 2012

A Growth Model for Greece - Retail & Wholesale

"Greece 10 years ahead" (GTYA) is the title of a study published by the Athens Office of McKinsey in mid-2011. It outlines a National Growth Model which, the study predicts, would create over 500.000 new jobs and add roughly 50 BEUR to Greece's GDP within a decade. The executive summary of the study consists of 72 pages. I have already explained in a previous post that I will make short posts about each major point of the summary for those who prefer not to read 72 pages.

The study focuses on growth opportunities in 5 major 'production sectors' which are already of prime importance to the Greek economy and on 8 'rising stars', i. e. new sectors where present activity is still small but where significant potential can be expected. In this post, I will focus on the 'production sector' of retail & wholesale (page 55 in the executive summary).

Production Sector - Retail & Wholesale
This is the last post in this series and good things come last. GTYA states that the Greek retail & wholesale sector is the largest sector in the Greek economy accounting for 19% of gross vallue added (GVA) and 18% of employment. Moreover, it is one of the most dynamic sectors, having grown more than double the rate of the economy as a whole. There is significant room for improvement as evidenced by the fact that productivity lags by 30-40% behind EU-averages (GVA per hour and square meter). GTYA makes the following observations in this regard:

- poor format mix (almost double the number of stores compared to EU-averages)
- limited usage of innovative IT and supply chain management solutions
- lower scale, driven by heavy category specialization and lower levels of sophistication in terms of inventory management, customer service level and warehouse management
- high suppliers' concentration; lower penetration of private label products; lower penetration of discounters --- all leading to lower competition

GTYA proposes 10 measures to improve the situation, grouped into two categories:

* further reinforcing competition, investments and compliance with regulatory requirements: define 'commercial zones' in urban and suburban areas to facilitate and accelerate growth in retail and wholesale investments; lift constraints on the currently restricted product categories; increase price transparency; extend informality controls; improve Competition Committee's ability to secure fair competition
* boosting retailers' and wholesalers' productivity: expand scale of current retailers' operations; pursue targeted investments in IT, logistics and e-commerce; eliminate remaining retail-related labor rigidities; accelerate full liberalization of the public transport market; simplify unnecessary retailer-specific reporting and regulatory compliance requirements

For details, please refer to the GTYA-report.

Previous posts in this series: P1, P2, P3, P4, P5, P6, P7, P8, P9, P10, P11, P12.

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