AID 'most concerned' over BPL rate hikes


Tribune Business Editor


A major Bahamian retailer yesterday voiced optimism that 2023 will be "marginally better" than last year while revealing it is "most concerned" about Bahamas Power & Light's (BPL) rate hikes depressing consumer spending.

Jason Watson, Automotive Industrial Distributors (AID) president, told Tribune Business he was hopeful tourism's continued strong performance and a "drastic" decline in shipping rates to 60 percent of pre-COVID prices will help offset the impact from soaring utility costs.

Predicting that the price of retail goods may start to "come down", as suppliers pass on savings from lower shipping and freight costs, he nevertheless expressed fears that increases of up to 163 percent in BPL's fuel charge during peak summer 2023 consumption will further worsen the cost of living crisis facing many households.

With AID's own energy bill having increased by 30 percent towards year-end 2022, as the increased fuel charges start to bite, Mr Watson told this newspaper: "I'm actually more concerned about the BPL rate increase we saw at the end of the year. I'm more concerned about that than anything else.

"It's very concerning because consumers may adjust their spending habits. I expect to see a reduction pretty soon based on that. But, if tourism remains strong, maybe that will offset the effects of BPL's rates. My bill has seen a major impact. I guess it's going to hurt some time. We have to hope gas prices remain stable or go down and, hopefully, that also offsets it to some degree but it's a major issue."

With AID's light bill having already increased by around 30 percent, Mr Watson added: "It's really going to be difficult to make up for that with sales. That's [BPL] what I'm most concerned about. Households will start adjusting their spending habits and not have as much discretionary spending. I'm not watching it that closely right now, but over the next few months I will start to watch it.

"I'm just hoping that tourism remains really strong and that allows us to have more spending. Definitely when tourism is doing well, the economy does well." Mr Watson said the BPL fuel charge hikes are among multiple competing forces likely to impact Bahamian retail performance in 2023.

While the cost of living is the main negative likely to impact consumer demand, he added that how China copes with its COVID surge will play a key role in determining whether product orders, manufacturing and the supply chain are able to hold up and moderate prices.

"This year should be more of a downhill year in terms of all the obstacles we are facing," Mr Watson said. "The major issues are the cost of living here in Nassau, especially with the BPL rate increase, and what happens in China. For the most part, this year we should be able to see prices come down. Most increases are from suppliers passing on freight costs, and I think prices should come down based on that.

"Right now, I expect it to be as good if not better than 2022. I expect it to be marginally better than 2022, not a huge increase. That's how it looks. It depends on how tourism does as well as China. I'm hoping that tourism will remain strong, and that will override and the net effect will still be better even with the higher cost of living and BPL."

Citing the positives, Mr Watson said shipping costs from China have "dropped drastically. The rate is lower, much lower that it was pre-COVID. I think it's around $4,500 on MSC. It's something like 60 percent of the pre-COVID rate. It's much lower than before COVID. During COVID the rates increased by 300 percent at one point.

"Rate were up really high midway through last year, but then they dropped drastically," Mr Watson added. He suggested that interest rate increases, in the US and other developed countries, were helping to dampen consumer demand and shipping costs, with manufacturers also able to catch up with production cycles and fulfilling orders.

"The turnaround time is half the time it used to be," the AID chief said. "We're receiving goods much more quickly than expected, but now they have this large surge [in China's COVID cases] I'm not sure how much that will affect them. We're waiting to see if the orders we have in place now are shipped on time. There are still some issues with the supply chain, but for the most part we are able to source the goods we need."

However, with around 50 percent of AID's product inventory auto-related, and thus under price control, Mr Watson said the retailer was faced with having to absorb much of BPL's fuel charge hike rather than pass this on to consumers. He added that Christmas sales across its seven outlets, five in Nassau plus Freeport and Exuma, had gone well.

The company's $8m-$8.5m investment in its Blue Hill Road store, inclusive of inventory and construction costs, has also paid off with sales performing "better than expected". However, Mr Watson said staff turnover among the retailer's 200-strong workforce "is still very high". He added: "It's a major task to keep staff levels where we need them."


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