Issue 5, 2013. October-November

   

MAPPING THE MIDDLE CLASS

In Tbilisi, new retail shops and international franchises are pushing Georgian shoppers to change their habits.

Rati Morchiladze

Despite the downturn that has overshadowed the Georgian economy for the past two quarters, young Georgians have money to spend on clothes, food, and gadgets - and new retail shops are eager to help them do it. The fact that middle-class young people have average of 400 lari (based on interviews) to spend in a month on different things, indicates that situation is not yet alarming.

Funds from work, parents, and remittances are fueling the purchasing power of teenagers and young adults in Tbilisi, despite the country's relatively low wages and high unemployment levels.While the source of income for middle class youth various, there is growing evidence Georgians are increasingly turning to retail shops and online suppliers rather than the bazaars and outdoor markets.

Retail shopping is picking up traction in Tbilisi as, over the past decade, the country's gross domestic product grew 6.1 percent, from $920 per capita in 2003 to $3,500 in 2012. Retail trade is the second largest sector in the economy, employing 168,800, nearly 10 percent of the working population in 2011, the latest year for which data are available.

New retail shopping projects like Tbilisi Mall, Rustaveli 42, and EastPoint Mall (which plans to open in 2014) are hoping to cash in on the trend.

While Georgians used to depend on small boutique shops and traders from Turkey to bring clothing and other goods to the market, major brands, from Mango to Ermenegild Zegna, have recently opened shops in Tbilisi.

They are ushering in a new era of retail shopping for a generation of Georgians more accustomed to haggling over Turkish knock-offs in ramshackle bazaars (known locally as the bazroba) than leisurely perusing the pressed racks in air conditioning.

Nini Gorgodze, the sales and marketing director at CBD Development, saidthe Georgian market is ready for a major, Western-style shopping mall.

Georgian CBD Development, together with the international investment group Cube Capital, are investing $60 million in East Point, a 65,000 square meter shopping mall scheduled to open in Tbilisi suburbs near the international airport in the autumn of 2014.

"We are very educated, normal people, we have good taste and we know it is much more comfortable to go in a good shopping mall and be there than to go to the bazaar where you are in the dust, in the rain, and in the sun," Gorgodze said.

But with median households earning just 473 lari ($284.70) a month - roughly the cost of a coat and pair of shoes at Mango - it is unclear how sustainable the retail market really is.

While there is no publicly available data on how Georgians use credit cards, or what they spend remittances on, 64.5 percent of household income goes for food and beverage compared to just 5.8 percent for clothing, according to a 2012 report on the retail sector by Jones Lang LaSalle and the Institute for Polling and Marketing (IPM), a local research and consulting company.

In an informal survey of middle class Tbilisians aged 15-26, 70 percent indicated they use both cash and credit cards to pay for entertainment, food, and consumer goods. Café managers at the restaurant-lined Abashidze Street in Vake also indicated that half of their customers pay with plastic.

But economists like Paul-Henri Forestier, the former director for the Caucasus, Moldova and Belarus at the European Bank for Reconstruction and Development, noted that the new shopping trends do not indicate there is more money being spent - just that the mentality about shopping has changed.

"What is interesting is the business model definitely became outdated faster than we thought," he said.

"[I]t is not just that there is another way of shopping. There is also probably a middle class, which has grown...[and] is very open to what is happening in the west, wanting to have that for themselves. [They are] a better informed shopper."

Additional reporting by Molly Corso.