Nothing to stop the wave of shop closures in Hungary - The curtain falls on another 4,000 stores

At the end of last year, there were 106,300 retail outlets in Hungary, 16.3% fewer than four years ago, but still 3.6% down on six months earlier.

This means that 3,955 shops have disappeared in half a year, but you could also look at it as more than 21 shops closing every day in Hungary.

If we subtract the 7,150 firms selling motor vehicles and parts (which are counted separately by the KSH because they typically do not serve the retail segment),

the number of units has fallen below 100,000 for the first time.

There were 157,600 of these shops in 2005, a drop of 37% in just under 20 years.

In the graph below, we show the total number of stores (including motor vehicle dealers) based on January 2019 (dashed orange line), and above that, the retail sales adjusted for calendar and seasonal effects (green curve).

In recent years, retailers have been hit by numerous external and internal shocks. Lockdown measures during the coronavirus pandemic, soaring energy prices, rising property rents and falling real wages have accelerated store closures, as the graph shows, but even without these, concentration would still be taking place, just perhaps at a slower pace.

This slowdown is likely to become more pronounced as a result of the pick-up in retail turnover observed in recent months. In its latest release of the March retail sales data, the KSH significantly revised its previous seasonally adjusted data.

In short, this adjustment shows that retail trade is behaving broadly as "expected" in a period of real wage growth. In the coming months, we will see whether the rise in propensity to consume will be accompanied by, if not an increase in the number of shops, at least a slight slowdown in the rate of decline.

Food sector

The number of grocery stores fell to under 33,000 at the end of last year, down 2.6% from the end of June and 5.2% from a year earlier. The rate of grocery store closures is slightly slower than average, thanks in part to government support for small rural convenience stores. The cabinet says that almost 2,800 small shops escaped closure last year thanks to an average of 2.9 million forints in state aid.

6.5% of clothing stores closed in the first six months of the year, down from 10.6% a year earlier. Here the base is lower, with nearly 13,700 clothing stores operating in Hungary at the end of last year.

The group of book, computer and miscellaneous articles stores comprises 27,100 units, down 3.7% in half a year and 7.9% in a year.

Record breakers

Understandably, the biggest wave of closures is hitting music and video stores, with more than 10% of them pulling the plug over a six-month period. A total of 71 record and video stores are left in Hungary.

There is only one category of shops where new units have opened in the last few years, or where the number has stagnated in the last six months: veterinary pharmacies, with 215 in total in the country.

Cover photo: Getty Images