December 16, 2020 | Caribbean Business by Efrén Rodríguez Martínez
Puerto Rico CofC-Commissioned Reports Gauge Confidence Amid Pandemic
The following is the second part of a report, entitled “Consumers to Purchase Fewer Gifts this Holiday Season,” that was first published on page 16 of the Dec. 17, 2020, issue of Caribbean Business.
SAN JUAN — The Puerto Rico Chamber of Commerce (CCPR by its Spanish initials) conducted two studies to learn how consumers and entrepreneurs have changed amid the new reality created by the Covid-19 pandemic with the goal of providing key tools for planning business strategies ahead of 2021.
The Confidence Index of the Puerto Rican Entrepreneur Study and the Confidence Index of the Puerto Rican Consumer Study were both presented virtually.
The results of the studies reveal economic and demographic trends, and the perception and expectations of consumers, as well as market opportunities.
“While it is true that the market has changed greatly in light of the new reality, it is also true that we have to study what these changes are in order to be successful in upcoming business. At the Puerto Rico Chamber of Commerce, we undertook the task of carrying out these studies for the benefit of our partners and the general public, to offer data to the entrepreneur that will help them to know their potential customer. At the same time, to know the perception of consumers about the current economic situation, their expectations for the next 12 months, their willingness to buy goods and services, and their expectations about the general price level, among other data,” CofC President Juan Carlos Agosto Martínez said.
The entrepreneur confidence study was conducted by Estudios Técnico Inc., a leading economic and planning consulting firm in Puerto Rico, and was presented to the public by its chairman, José Joaquín Villamil, who was the former president of the CCPR.
Regarding the demographics of the study, 50 percent were companies in San Juan (40.7 percent) and Guaynabo (10 percent) that, on average, have been established for 26 years. Almost two-thirds have up to 19 employees. Of the companies surveyed, 92 percent are wholly Puerto Rican and operate in the following industries: 28.7 percent are in service; 24.7 percent in healthcare; 9.3 percent in retail; 8.7 percent in finance; and 6.7 percent in wholesale trade.
The study revealed that the three main factors that affect operations were the economic situation (54.7 percent), followed by taxes (51.3 percent) and government bureaucracy (37.3 percent). Then comes the energy cost with 36 percent, pandemic restrictions with 29.3 percent and a shortage of workforce because it can not find and hire employees with 20 percent.
Of the companies surveyed, 47.3 percent sell their products and services on the internet. Of these, 74.3 percent reported offering the online option before the pandemic.
To the survey question: “Do you think Puerto Rico’s economy is currently in recession?” 84.7 percent replied “Yes” and 14.7 percent said “No.”
In relation to the “lockdown” forced by executive order to curb the spread of the virus, 43.3 percent of those surveyed said their company had to close or stop operations in the last six months. On average, companies closed for 100 days.
One revelatory finding: 71.3 percent of people surveyed said they had not tested positive for the novel coronavirus, while 28.7 percent said they had.
Fifty-six percent said that during the past six months, business sales have decreased. However, 60 percent said their company’s employment level has remained the same. Over the next six months, 45.3 percent expect their company’s sales to remain unchanged.
“In the next six months, 72.7 percent said that they do not expect to expand the operations of their company. Only 25.3 percent said yes. Within the next 12 months, the general economic situation of Puerto Rico will be: 38.7 percent worse, 34.7 percent the same, 23.3 percent better,” the report reads.
“In conclusion, what can we say? Basically, the year 2020 is very atypical for reasons we all know. The pandemic has created a situation that nobody expected,” Villamil said.
Consumer Confidence Altered
The other report, the Confidence Index of the Puerto Rican Consumer, was prepared by Nielsen, the global measurement and data analytics company, and was presented by the commercial director of Nielsen Puerto Rico, Tatiana Irizarry Hilera.
The study comprised 500 surveys islandwide conducted via a computer-assisted web interviewing (CAWI) system consisting of a 23-minute interview. The margin of sampling error is plus or minus 4.4 percentage points. Men and women older than age 18, and of all socioeconomic levels were surveyed between Oct. 16 and Nov. 6.
“The consumer confidence index becomes a metric to understand how pessimistic or optimistic the consumer is and how secure they feel towards their economic capacity and to move with their money in the country where they are. At the end of the day, it is a tool to measure some drivers of personal and employment financial situations and how you feel about the economy of your country,” Irizarry said.
The confidence indicator for Puerto Rico was 82, indicating that the economic outlook is 10 points higher then for the Latin American region, which includes: Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru and Venezuela. However, Puerto Rico’s gap compared with the United States is significant (-20 points).
“The indicator is mainly explained by the negative job outlook and time for purchases. Young adults are the ones who remain more positive in terms of employment and personal finances,” the study reads.
Amid the pandemic, “the economic outlook in Puerto Rico is greater than the indicator for the region, but still far from the indicator for the United States,” according to the report, which found that the “elderly and people of low socioeconomic status are the ones who feel less optimistic” about the island’s future.
Regarding how the island’s current situation is perceived, the study revealed that 84 percent believe Puerto Rico is in recession, and have a negative outlook on the future.
On the other hand, although most people will take measures to save money, the strategies are very diverse. Eighty-five percent changed their habits to save on household expenses, including cutting entertainment spending (17 percent); trying to save on gas, electricity and telephone bills (13 percent); and switching to cheaper brands (10 percent).
More “relevant problems than those of an economic nature are present in the minds of Puerto Ricans, with 18 percent saying security, 18 percent education, 15 percent with the government’s handling of the pandemic, 13 percent unemployment, 13 percent the political situation and 12 percent economic uncertainty,” the study says.
Spending in general grew slightly during 2020; however, it was distributed in practically the same areas as 2019. The average people spent monthly to stock their pantries in 2019 rose only $9, from $446 in 2019 to $455 in 2020.
In terms of the frequency of visits to buy groceries, supermarkets and convenience stores are the most visited. Supermarkets were visited for large groceries and convenience stores for refills and impulse buys. The supermarket chains were visited 4.3 times a month. Meanwhile, convenience stores were visited 5.2 times a month.
Likewise, the frequency of purchases of non-essential products such as cookies, chocolate and snacks dropped. Interestingly, some stopped consuming alcoholic beverages and fish. In addition, 70 percent increased their selection of private labels when purchasing food and household products.
The study confirmed that online stores were visited most this year.
“There is a general decrease in visits [to brick-and-mortar stores] as a result of avoiding going out as much as possible,” the study noted.
Finally, regarding the experience with digital platforms, 19 percent called theirs excellent, 45 percent said good and 11 percent said not very good, while 26 percent replied they did not know.