A new two-thirds majority is born – so large is the number of those people who are willing to shop undisturbed on Sundays. The government rigidly sticks to its concept, not even making an exception for the retailers at Lake Balaton. However, this would not be Hungary if there were no attempts to find a way around the rules.
The new law about the general prohibition of sales activities on Sundays entered into force in mid-March. The idea came from junior coalition partner KDNP; years ago Prime Minister Viktor Orbán refused the closing of shops on Sundays, saying Hungarian society can’t afford this luxury.
When KDNP brought up the subject again at the beginning of this year, Minister of National Economy Mihály Varga wanted to turn it down immediately, in the same way as his master did. Many people are working six days a week in this country, leaving only Sundays to do the family shopping. In addition, wages in the retailing sector are so low that for many employees their Sunday supplement was a matter of existence.
However, Varga did not foresee that Orbán thought 2015 is the right time to reform the ownership structures in the trading industry.
Calling for Christian love of your neighbour
After the rigorous interventions in the energy and banking sectors, Fidesz was willing to expel the “good-for-nothing” multinationals from the retailing sector as well, or at least put an end to their dominant role. In order to make CBA, Coop, Reál and such others strong, the legislator is continuously finding new ways to control foreign market actors.
The spectrum ranges from fines collected under the name of consumer protection up to the introduction of a de facto 33% value added tax as a consequence of the brutally increased supervision fee for the food chain.
The prohibition of Sunday trade fits in well with this series of measures, since market research has shown a strong trend in the past years for Hungarian citizens to spend up to one fifth of their consumption expenses on Sundays, and in doing so prefer the large stores operated by the multinational retailing chains.
Probably it was Orbán himself who gave the impulse to KDNP leader Zsolt Semjén to come up with the proposal; after all he would have wanted to make sure that the disaster of the proposed internet tax was not going to be repeated. The Christian Democrats appealed immediately to the Christian love of your neighbour, when naming their law proposal the “prohibition of Sunday work”.
Hungary today is so absurd that the politicians had to explain their hypocrisy subsequently, saying that they want to begin with trade, and – as soon as the conditions are right – this prohibition would be extended to other branches of the economy as well.
Broad rejection, even by the supporters of the party
A private person paid for three pollsters to simultaneously survey public opinion on the acceptance of the new regulation introduced on the March 15 national holiday. At the beginning of that month a majority of 59-64% people who were questioned wanted the shops to stay open, in the research conducted by Tárki, Medián and Ipsos.
However, the supporters of the left opposition were decisive in these results; among Fidesz supporters the proponents of Sunday trading were actually the minority with only 45%. Medián repeated the questioning in May and came to a result that was quite sobering for the Orbán government, namely that 72% of respondents wanted to keep shopping undisturbed, including 63% yes votes from Fidesz supporters, 78% from Jobbik and 81% from the left parties.
These results correspond to the subjective experiences gathered by the citizens in the last few months. As expected, the Sunday turnover split between the remaining six days of the week. Especially on Saturdays, tumultuous scenes are present not only in hypermarkets but stores in smaller towns and villages are also stormed.
It’s not so easy to change long-existing habits from one day to the other. Not even mentioning those employees who hardly have a chance to breathe from Monday to Friday. The sales prohibition was a rude awakening at Balaton, since the people spending their holiday on the Hungarian Riviera are not really thinking about what day of the week it is, so the closed shops caused quite a shock for many of them in many places.
However, a shock rarely appears alone, and the small private shops that are exempted from the prohibition took the opportunity to shamelessly introduce price increases. There is no doubt that the consumer is the loser in the supposedly family-friendly intervention by Fidesz-KDNP in their everyday life.
Which business model is more efficient?
What is the situation with the retailing chains and their employees? There are regular price comparisons which, not surprisingly, show that besides the discount chains such as Lidl, Penny or Aldi, the hypermarkets Auchan and Tesco also have low prices, while on the other hand CBA and Coop have a fairly higher price level. There could be two reasons for this: the Hungarian chains often function as quasi monopolies in the areas further from big towns, and CBA at least endeavours to provide a higher level of service, comparable to the combination of Spar/Interspar, in its shops with the brand name “Príma”.
The Institute of Economic Sciences at the Hungarian Academy of Sciences analysed the “efficiency” of different store types and concluded that the threat by large, multinational markets will lead to rising prices and a decrease in the wages of employees. The added value created by the small “Aunt Emma shops”, which usually function as family companies with helpers, is just a little above HUF 1.2 million per employee (the data is unfortunately a little old, from 2011).
The research showed a clearly higher added value at shops with more than five employees, however, only in the case of supermarkets with 25-100 employees did this value add up over HUF 2 million each year. In the case of hypermarkets with more than 100 employees the study calculated an added value of over HUF 3.2 million per person per annum.
It’s quite obvious that “Aunt Emma” can’t pay much over the minimal wage to its employees. The wage gap between the employees of the smallest and largest commercial units can stretch up to 80%. The institute even made a distinction between the stores in foreign and domestic ownership, and found that the employees in foreign-owned shops created on average 80% more value than their colleagues in the locally owned shops, and on average earned about 55% more salary.
The academy also found that the foreign retail company groups are doing better even when the Hungarian competitor is playing in the same league. Factors explaining this difference could be the higher efficiency of organising work and a broader product offering with a more favourable price-performance ratio, while for the higher wages of employees the reason was the employment of more qualified workers.
The study came to the conclusion that if small local shops gain more market share at the cost of foreign businesses in the Hungarian retailing sector, the efficiency of the whole industry branch would suffer.
Retail giants try to overturn laws
Hungarian reality is a little different, however. It begins with illegal income, since especially the family members are employees who are receiving the minimum wage only on paper, which is reducing the “efficiency” of small shops in the study. Minimum wage is however quite widespread in trade, and this is why the Sunday closing “cost” the employees not only HUF 5-20,000 each month but also endangers the living of many workers.
According to statistics the employees of the individual retailing chains are on HUF 150,000-300,000 gross per month, while the minimum wage, often regarded as typical for trade, lies between HUF 105,000-120,000.
It’s quite notable that Aldi and Lidl are paying the highest salaries on average, while Metro reported that they are paying an average monthly wage of HUF 207,000 (in 2013) for the local employees. The workers of the Hungarian chains can only dream of such numbers.
CBA wanted to sue the economic magazine Figyelő because it wrote: “CBA pays brutally below average to its employees”. The methodology of collecting the numbers was wrong. When the Hungarians acquired the Match/Profi chain in 2012, the employees taken over reported salary cuts of one fifth.
Things are handled in a shameless way at Coop as well. There are a number of oligarchs residing in different regions behind this name who divided the market among each other just like in a Monopoly game. In the case of takeovers within the chain, the employees were released by “mutual agreement” and following that they were re-hired on probation just like young professionals – without any compensation or special claims.
In the meantime supposedly even Fidesz politicians are having a hard time, since the retail giants are trying to overturn the legal regulations. The fact that the Balaton Association is asking for special regulations in the main season, for understandable reasons, did not seem to impress the Minister of National Economy. The fact that more and more grocery stores are transforming into weekly markets in a wonderful way, with a couple of “flying” traders in front of the entrance, sparked annoyed reactions from the politicians. Due to the summer break of politics there will be no fast reaction in the form of a second “lex Spar” (the prompt answer by Fidesz to the attempt by the Austrian chain to open up new shops at OMV petrol stations) as yet.
As long as Lidl is making solid profits, with a turnover of EUR 200,000 per employee leaving the competition behind, CBA and its peers will use any kind of tricks to try to “win over” customers. However, customers only want to be able to use their right of free choice.