Monday, February 21, 2011

Shopping fad in Nepal

Adapted from Deepak Adhikari’s feature story in AFP. The nominal purchasing power of remittance receivers, those that can get loans easily, and those in real estate and housing businesses are the ones that are spending relatively more and are upping demand for imported goods and services. On the one hand, it is fueling consumption and increasing imports. On the other hand, it is contributing to macroeconomic imbalance, sticky prices, and a housing and real estate bubble.

Nepal's growing middle class takes to the malls

by Deepak Adhikari, AFP

When the first indoor shopping complex opened in Nepal's ancient capital Kathmandu in the 1980s, it was such a novelty that visitors had to be shown how to use the escalator.
Few residents of the city, celebrated for its rich cultural heritage and historic palaces, had ever shopped anywhere except the centuries-old bazaars that still do a brisk trade in everything from spices to saris.

Three decades on, a huge rise in land prices in and around the capital and growing remittances from Nepalese migrant workers are fuelling a retail boom that has seen Adidas, Nike and Levi's open their first stores in the country.

Rukeen Maharjan, 21, works in his family business selling handicrafts to tourists. But in his spare time, he goes to one of Kathmandu's dozen or so malls to shop for clothes and catch up with friends. "It is so much easier to shop when you have all these branded goods under one roof," he tells AFP in the Kathmandu Mall.

"It's often cheaper than shopping on the street, it's convenient because you don't have to worry about finding a parking space and it's where young people like to hang out."
Nepal remains one of the world's poorest countries. The World Bank puts the average annual income at just $440 a head and economic growth has slowed in recent years, constrained by political uncertainty and chronic fuel shortages.

But the World Bank says growing remittance income from India, Malaysia and the Gulf has pushed up spending power among the urban middle classes, with almost a third of Nepal's male working population now estimated to be abroad.

Analyst Chandan Sapkota says the spending rise can also be attributed to a major property boom in Kathmandu as people migrated to the capital from less secure areas during the decade-long Maoist insurgency, which ended in 2006. "Remittances and urban jobs that pay relatively well are increasing the number of middle class families in urban centres," says Sapkota, who works for Kathmandu research group South Asia Watch on Trade, Economics and Environment.

"Another factor is the real estate boom. Anyone with a small patch of land around Kathmandu became a millionaire virtually overnight because of property inflation."
Remittances now account for almost a quarter of Nepal's gross domestic product, which last year reached $15.5 billion, and the World Bank says consumption is thriving and imports have more than doubled in the past decade.

"Consumers, especially middle class ones, are becoming increasingly brand-conscious due to globalisation and increased Western influence," says sociologist Dilliram Dahal.
"Their shopping habits are also changing rapidly, they prefer to buy goods in malls rather than in stores."

City Centre, which opened in 2009, is the most upscale of the malls, with shops selling designer sunglasses and Western clothing brands. There is also a multiplex cinema and a food court serving Thai and Japanese dishes.

"I come here with my nine-year-old son, who likes the video games and the toys in the children's play zone," says full-time mother Karuna Shahi Gurung. "Whenever we visit I end up spending about 200 rupees ($3) on him, and I have spent about 5,000 rupees on clothes for him today."

Not everyone has adapted to the new way of shopping so easily. Unesh Shahi, 34, who moved his clothing store from a city-centre street to a mall in 2009, says many customers struggle with his new fixed-price policy. "It will take time for people to get used to it and stop bargaining," he says. "But business is good. Customers can go to lots of stores in one place, they feel safe and there's a good atmosphere."

In Kathmandu's Ason market, where residents of the capital have shopped for essentials for more than a century, clothes shop owner Angurman Tuladhar is bargaining furiously over a jumper he is trying to sell. "I don't have any fears about the malls. I have regular customers who depend on my store for their shopping and it hasn't had any impact on business," he tells AFP.

Sociologist Dahal believes shopping mall culture is here to stay. "With the increase in the income level and an exposure to the outside world, Nepalese customers are drawn towards quality service and convenience," he says. "It is the neighbourhood stores that will be threatened by this trend."