With the growth of retail sales for more than 50 months in a row and the growth of the purchasing power of citizens and consumer optimism, retailers are becoming more optimistic about doing business in Croatia. In addition to the Italian discounter Eurospin, the retail giant LC Waikiki, owned by two Turkish families Kucuk and Dizdar, will soon come to Croatia, reports Večernji List on April 13, 2019.

The first store in Croatia will be opened at the Arena Centre in Zagreb in mid-May. According to advertisements for future employees which have been appearing on Croatian websites since the beginning of this year, the chain will also open a shop in Split. This is the leading Turkish retail chain, whose largest individual shareholder is Mustafa Kucuk, worth 1.1 billion dollars. This year, the company will have more than three billion dollars in total revenues, half of which from abroad. They have decided that it is worth investing in a small market such as Croatia, where already there are rivals such as H&M, C&A, Kika, Pepco and others.

The largest clothing retail chain by the number of shops has already opened a number of stores in neighbouring Bosnia and Herzegovina and Serbia. Currently, it is trading in more than 45 countries, with around 1,000 stores and the approach that “everyone deserves to dress well” and at affordable prices. In addition to Croatia, this year they plan to expand to China, India and Malaysia. In 2017, about 12 million people a week bought clothes at their stores, and each minute they sold 1,724 products.

The Waikiki brand was established in 1988 by French designer Georges Amouyal with partners called Les Copains - Friends (LC), adding the name of the famous Hawaiian Waikiki beach. In 1997, it became the Turkish brand LC Waikiki Magazacılık Hizmetleri Ticaret. It started its European expansion in Romania in 2009, and the goal is to become one of the three most successful clothing retailers in Europe by 2023.

Four years ago, the 100th shop abroad was opened in Mostar, and the company is also present in Albania, Azerbaijan, Bulgaria, Morocco, Georgia, Iraq, Iran, Kazakhstan, Kosovo, Macedonia, Egypt, Poland, Russia, Saudi Arabia, Ukraine, and since 2017 in Indonesia and Kenya.

The year before, LC Waikiki also entered the home textile category under the brand LCW HOME. With more than 1.25 million square metres, their stores in 2017 covered the area larger than 175 football stadiums.

Translated from Večernji List (reported by Jolanda Rak Šajn).

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The Central Bureau of Statistics has released data on food prices showing the real effects of the reduced VAT rate on food. According to CBS data, only meat and fruit were cheaper in January. Fruit prices fell by 2.3 per cent, and meat prices by 1.7 per cent. All the other food groups were more expensive in January than the month earlier, reports Prvi Plan on February 24, 2019.

Significant discounts, announced and advertised by retailers, and expected by the government, did not happen. On the contrary, food and non-alcoholic beverages prices in January were 0.4 per cent higher than in December 2018.

The largest retail chains announced that the prices of products (fresh meat, fish, fruits and vegetables, eggs and diapers) to which the lower VAT rate began to apply starting from 1 January 2019, were lowered as early as in December 2018.

According to some experts, the effects of halving the VAT rate (from 25% to 13%), can only be expected in two to three months, mainly since prices of some types of products depend on seasonality in supply. However, the initial data on price movements after the lower VAT rate has been introduced are not encouraging.

In January, the most substantial increase (3.7 per cent) was seen with oils and fats, as well as coffee, tea and cocoa (2.6 per cent). VAT cuts did not cover these products. However, despite the lower VAT rate, vegetables were 1.4 per cent more expensive than in December. There has been an increase year-on-year as well – in January this year, vegetables were 4.6 per cent more expensive than in January 2018.

When all is taken together, food prices in January were 0.4 per cent higher than in December. Compared to January 2018, food was cheaper by 0.8 per cent.

Expenditures for food and non-alcoholic beverages are the largest item in the household budget of an average Croatian family – they account for 27.81 per cent of the consumer basket. Therefore, the government calculated that the decreased VAT rate should save an average Croatian family 872 kuna a year. The calculation was obviously wrong since what actually happened is what many, including Finance Minister Zdravko Marić, warned about – there is no mechanism which could force retailers to turn lower VAT rates into lower consumer prices.

Consumer prices did drop in January by 0.9 per cent, but not due to lower food prices, but mostly due to falling clothing and footwear prices (13 per cent) during January's seasonal sales.

Translated from Prvi Plan.

More news about taxes in Croatia can be found in the Business section.

Finance Minister Zdravko Marić has announced that starting from the beginning of 2019 the government would cut the VAT rate from 25 to 13 percent on fresh meat, fresh fish, fruits, vegetables, diapers, live cattle and eggs. The logical question is whether large retail chains will lower the food prices for end consumers or whether they will pocket the difference and extra money, reports Index.hr on November 16, 2018.

According to the responses sent by the retail chains, consumers should feel the difference. “Since customer satisfaction is always at the centre of our business, the prices will be adapted to their advantage. If the law is passed, Lidl’s buyers will feel the tax cuts when purchasing fresh fruit, vegetables, meat, fish, eggs and diapers in Lidl's stores,” said Lidl.

This was also confirmed by Kaufland, which also plans to lower the prices of these products. “If the announced VAT reduction is implemented, we will surely adjust our prices so that the new food prices will be lowered to the full extent of the VAT reduction, which means that the announced VAT change will have a positive effect for our customers,” said Marija Franić, head of the Corporate Communications Department, Kaufland Croatia.

If the VAT rates on individual products are lowered, Tommy Split will also adjust the retail prices down, at least by the percentage of the VAT reduction. They say it is in their interest to make their products more price competitive and make consumers feel the positive effects of the new tax measures.

“We also hope that suppliers will not increase their prices, as this is also a prerequisite for lowering consumer prices when implementing the new VAT rates,” said Dario Mamić from Tommy Split’s corporate communications department.

Konzum also explained that everything depends on suppliers and, if they lower food prices, Konzum would do the same. “Konzum welcomes every move in the supply chain that leads to lower product prices for our end customers, especially when it comes to key consumer goods from the consumer basket. To make the buyers in the stores really benefit from the reduction in the VAT rate on certain products, the lower VAT rates have to be incorporated in prices by all those involved in the supply chain,” said Konzum.

If all of their suppliers, in line with good business practices, do so, they will be able to pass the reduction in the VAT to end consumers. “Konzum will definitely not use the reduction in the VAT rate to increase its margins, and we believe that other companies will do the same,” said the company.

Spar and Plodine are yet to send their answers.

For more on Croatia’s retail trading industry, click here.

Translated from Index.hr (reported by Martina Pauček Šljivak).

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