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Spain Scraps Siesta as Stores Stay Open to Spur Spending: Retail

By Manuel Baigorri
July 22, 2012 6:00 PM EDT 4 Comments
Photographer: Denis Doyle/Bloomberg
Pedestrians carry shopping bags along Calle Serrano street in Madrid.

The Spanish shopping siesta may be about to become the latest victim of the sovereign debt crisis.

To stimulate spending after a 23 percent drop in retail sales since 2007, the euro region’s fourth-largest economy this month approved measures that allow shops of more than 300 square meters (3,229 square feet) to open for 25 percent longer a week. The new rules may encourage the outlets to sell during the traditional afternoon snooze from 2 p.m. to 4 p.m., and on an additional two Sundays or holidays a year for a total of 10.

“When everything was fine, nobody complained, but now that things have gone awry, then it’s another story,” said Carmen Cardeno, director general for domestic commerce at the nation’s economy ministry, which created the rules. “We need to evolve and be more flexible.”

Spain is following its European neighbors in trying to liberalize shopping hours that have traditionally been checked by governments in the region to protect religious observances, for rest and on behalf of smaller retailers that have fewer resources to staff shops around the clock. England has allowed retailers to open for longer on Sundays during the Olympics than the six hours usually allowed. In France, food shops can be open 13 hours a day and stores located in tourist areas have the right to open on Sundays.

Spanish shops are allowed to open for less time than anywhere else in Europe, according to its government, which was asked by retail associations to allow large stores to open 16 Sundays or holidays a year. Some smaller merchants opposed the extension, arguing that the bigger stores would have the necessary manpower and they wouldn’t. The new measures allow stores 18 additional business hours a week and will permit merchants to decide when to cut prices in sales instead of only twice a year.

Siesta Time

The country’s regions will get to decide how to implement the rules, though they usually follow the lead of the central government. In Madrid, which is an exception, stores have been able to open for as long as they want since July 15. Outlets of less than 300 square meters also have no restrictions on opening hours, though the Spanish tradition of eating at home and having a siesta means most shopkeepers keep their businesses closed for about two hours in the middle of the day.

The new measures may not be enough to offset shrinking demand in Spain’s 217 billion-euro ($264 billion) retail industry, which is worsening each year the crisis goes on in a nation where one in four people is out of work. The number of companies seeking bankruptcy protection rose 22 percent from a year earlier to 2,224 in the first quarter, according to the nation’s statistics institute, with commerce being the third- largest contributor behind construction and housing firms and industrial and energy companies.

‘Almost Insignificant’

Javier Millan-Astray, director general of retail association ANGED, said the approved loosening of restrictions on opening hours doesn’t go far enough.

“The government’s reform is almost insignificant,” Millan-Astray told reporters in Madrid, when retail groups pushed for 16 Sunday openings. The associations’ “new proposal would help boost consumption and create more jobs because when we open on a holiday, people come and shop. It’s unbelievable that amid this crisis, we have to keep our stores closed.”

Spain has been wrestling with the dilemma of preserving its culture and modernizing the industry for decades. The socialist government of Jose Luis Rodriguez Zapatero in 2004 rolled back liberalization of opening hours instituted by his predecessor, bringing them back to rules from the 1990s and leaving the country with the tightest regulations of any European country.

Job Creation

Even with the latest proposals, “retail regulation is hurting both business and customers in Spain,” said Fernando Fernandez, a professor at the IE Business School in Madrid. “Both big and small retailers would benefit from fewer restrictions. When big retailers such as Ikea or Zara open a store, all small shops in that area benefit from that.”

Ending the restrictions completely would create 337,581 jobs across all industries and add 17.2 billion euros to economic growth this year, according to a study commissioned by the government, which examined the implications of several scenarios. The nearest of those to the current proposals, under which stores open on 16 Sundays or holidays, could have added 47,945 full-time retail jobs, the study found.

About 1.8 million people worked in retail in the first quarter, 0.3 percent less than in the year-earlier period.

Stores are also bracing for change as the government looks to the retail industry to help boost tax revenue. Prime Minister Mariano Rajoy will increase the most common rate of sales tax to 21 percent from 18 percent on Sept. 1, putting an additional brake on consumers’ ability to spend.

Foreign Tourists

The changes will make the country more enticing to tourists, who have for decades been frustrated at finding shops shut for the afternoon siesta. More than 57 million tourists visit Spain every year, accounting for 10.2 percent of the country’s gross domestic product, the economy ministry says.

“It would be better if everything is open, not only for tourists like me, who are here for just a few days, but also for the Spanish economy as a whole,” said Victor Savioli, a 20- year-old business student from Sao Paulo.

With some stores getting as much as 50 percent of revenue from foreign tourists, it has become “crucial” for them to be able to stay open for longer and more often, said Jose Luis Nueno, a professor of IESE Business School in Barcelona.

“More flexibility will give a real boost to retailers, especially those that are in survival mode because they rely on the Spanish market,” Nueno said. “As the economic crisis continues to hamper consumption and online shopping grows, shops will push for more liberalization. This is just the beginning.”

Still, longer hours aren’t going to open the wallet of Fatima Rodriguez, a 44-year-old resident of Barcelona, who first needs a job to afford shopping more often for her 10-year-old.

Rodriguez, 44, gets 400 euros a month from a government subsidy and after cutting her budget by half in two years is concerned that she’ll have to reduce it even more. “I’m trying to find a job, but it’s very difficult right now,” Rodriguez said by phone. “I just don’t have any money.”

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net

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