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Published: 21 june 2021 16:10

Retail trading contributes more than 10% to Lithuania’s total value-added

Pirkėjai lankosi prekybos centre „Ozas“
Žygimanto Gedvilos / 15min nuotr. / Pirkėjai lankosi prekybos centre „Ozas“
The added value generated by Lithuania’s retail trade is amongst the largest in the Baltic region in terms of its contribution to the local economy. It also exceeds the EU average, enabling this sector to allocate more than half of the added value it generates to staff wages.

This was one of the insights from a recent study conducted in Lithuania by public policy analysis and consulting firm ESTEP. The study – the first of its kind – was commissioned by the Lithuanian Trade Association (LPĮA) to assess the contribution of the retail sector to the country’s economy.

“Normally, statistics would only provide the main indicators of retail trading, such as turnover, the number of companies or stores, and profitability. Any deeper data would often come as part of the overview focusing on related sectors – wholesale trading or the vehicle repair industry. But we wanted to see a much clearer and more detailed picture surrounding retail trading in particular, as well as measuring its contribution to Lithuania’s economy,” said Rūta Vainienė, Managing Director at LPĮA.

Rūta Vainienė. Arnas Strumila / 15min photo
Rūta Vainienė. Arnas Strumila / 15min photo

The study revealed that the added value generated by retail trade makes up 6.8% of all added value generated in Lithuania. A similar proportion is being generated by the country’s real estate sector, with wholesale trade and land transportation generating slightly more (8.3-8.4%). Most others sectors contribute less to Lithuania’s economy. For example, production of food, drinks and tobacco generates 3.8% of added value, while information and networking operations contribute 3.7%.

“The figure of 6.8% is based on retail trade margins, i.e. after the cost of purchasing goods is deducted from the turnover figure. Usually, when calculating the added value generated by other sectors, turnover is used as a basis. Trade is the only domain where added value is calculated by removing a significant part of sales income,” R. Vainienė notes.

Important for the economy

The percentage of the added value generated by retail trade-in Lithuania is among the highest in the Baltic region. Only the Polish retailers generate more (8.1%) of their economy’s added value, while the Swedish contribution (3.4%) is the lowest in the region, due to more restrictions and limitations applied to retailers in this Scandinavian market.

A closer look shows that the overall contribution of Lithuanian retail trade to the country’s added value is even greater. Based on the national account data, the input-output calculations confirm that the added value generated by businesses directly dependent on retail trade generated another 2.4% of added value for the Lithuanian economy. The main sectors offering services to retailers are real estate operators, security, market research and advertising providers. Furthermore, purchasing made by all of these businesses, spurred on by retail trading needs, increases the added value contribution by another 1.3%.

“This means that the added value contribution which dependens on retail trade is at least 10.5% of the total added value generated in the country. This number does not include any turnover volumes, i.e. the percentage of production which is made available to consumers by retail traders. By the way, the study revealed that retail trade in Lithuania is still more inclined to handle most of its operations internally,” R. Vainienė says.

Lithuania’s employer

The study also examined the importance of retailers as employers. It has been calculated that the retail sector employs a total of more than 110,000 people. This is 11.5% of all employees in the non-finance sector in Lithuania. This sector is a crucial employer for women, who comprise 74.3% of all staff working in retail trade.

“Businesses dedicate more than half (53.5%) of all added value generated by retail trade to staff wages, which includes both salaries and social insurance payments made by employers. This indicator is above the Lithuanian average,” R. Vainienė explains.

The benefits received by employers is a little lower, reaching 39% of the added value generated by the sector, which is around the Lithuanian business average. For comparison, catering businesses are left with 30%, while companies operating in food production and land-based transport sectors receive around 48-49% of the total added value generated.

Social insurance taxes paid by the retail trade sector make up 6.6% of all tax paid by employers in Lithuania.

“The study revealed that retail trade is particularly evenly distributed across Lithuania’s regions. Both the company turnover and the store numbers show little divergence between the municipalities, making this sector perhaps the most important employer in every corner of Lithuania,” the head of LPĮA notes.

Creator of demand – as well as supply

The analysis makes use of the most recent available national account data released by the Lithuanian Department of Statistics and EUROSTAT. The indicators from the Lithuanian retail trade sector were compared to other economic sectors in Lithuania as well as the data from four other countries in the Baltic region – Sweden, Estonia, Latvia and Poland.

“Rather than examining a single sector, the study looked at its entire role in the economy. Retail trade is often analysed only from the business perspective, with the main focus being on sales and customer needs. But this study provides a more detailed examination of the demand Lithuania’s retail sector creates across the entire economy. The sector’s overall economic, social and financial impact was assessed, highlighting the previously-underestimated importance retail trade has due to its close ties with other sectors of the economy,” says Dr Rimantas Juozas Vaicenavičius, Associate Partner at ESTEP.

Dr Vaicenavičius stresses that various reliable statistical methodologies and techniques were used in order to analyse the data obtained during the study. As statistical data can often be released at different times, the ESTEP analysis used the most up to date information, statistically integrating it and comparing it objectively. According to Dr Vaicenavičius, the indicators chosen for the study change very little year on year, so the analysis provides an exact and detailed picture of the current situation, which has not been done previously.

You can view the research presentation here

Norėdamas tęsti – užsiregistruok

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