The retail sector has yet to recover from the impact of COVID-19. Four years later, the consequences of the health crisis continue to weigh heavily on the industry, which is struggling with declining consumer purchasing power. In Morocco, the continuous rise in franchise operating costs has only worsened the situation.
A quick visit to any shopping center in the country is enough to gauge the impact of the crisis. Dozens of closed shutters and vacant storefronts reflect the withdrawal of several international franchises. On the famous Al Massira Boulevard in Casablanca, the stores New Yorker, Terranova, and Charles & Keith, owned by the Kuwaiti group Al Hokair, along with the H&M store operated by the Saudi group Alshaya, were among the latest to shut down.
“Several hundred stores closed last year, with about a dozen brands withdrawing from the country. The apparel sector has been the hardest hit”
In their vacant storefronts, advertising posters for leasing opportunities have replaced the mannequins once displayed in the windows. « Several hundred stores closed last year, and about a dozen brands exited the country. The apparel sector has been the hardest hit, but it’s not the only one—sports, furniture, and home appliances have all suffered. The decline will continue this year if no support measures are taken for the sector, with several closures already scheduled, » laments a representative of the Moroccan Federation of Network Commerce (FMCR).
Declining purchasing power
According to a recent report by the consulting firm Inforisk, 33% of the 14,245 businesses that filed for bankruptcy last year were in the retail sector. Several industry professionals interviewed by TelQuel paint the same bleak picture: shrinking profit margins, declining revenues, and abandoned expansion plans, leading to an unprecedented disruption of their business models.
For example, Moroccan imports in the clothing and knitwear category dropped by a third in 2023 compared to 2019. How did it come to this? A long series of factors are to blame, starting with the erosion of consumer purchasing power since the onset of the inflation spiral.
“Families who used to shop once or twice a month now do so only two to three times a year”
The latest data from the High Commission for Planning (HCP) reports a 4% decline in household purchasing power in 2022, followed by an additional 0.5% drop in 2023. As a result, customers who once rushed to stores with each new collection release and left with bags full during sales periods now mostly window-shop, occasionally try on a few items, but often leave without making a purchase.
« We are among the first to feel the decline in Moroccans’ purchasing power. The middle class is being hit hard by inflation, and their budgets are now primarily focused on essential needs. Even though we have reduced our profit margins, prices remain high. Families who used to shop once or twice a month now do so only two to three times a year, » laments the director of a major international clothing retailer.
Rising costs
Beyond purchasing power, another major factor has significantly weakened the retail sector. According to industry professionals, the « decline » in retail began as early as 2020, following an increase in import tariffs. The then Minister of Finance, Mohamed Benchaâboun, raised customs duties from 25% to 30% on all imported products from non-free trade agreement countries, aiming to protect domestic production. This measure was a tough blow for retailers, but it wasn’t the last.
Things worsened when, later that same year, during the adoption of the 2020 Amended Finance Law, customs duties were further raised from 30% to 40% on a taxable base of approximately 8 billion dirhams. Compounding the situation, in January 2020, the Customs and Indirect Taxes Administration (ADII) issued a circular requiring operators to pay customs duties of up to 40% on royalties paid to parent companies or franchisors.
A partial rollback was introduced in the 2024 Finance Law, reducing import duties back to 30%. However, industry players argue this is still insufficient, calling for « at least a return to the 25% rate that was in place well before the crisis. »
« In addition to customs duties and royalties, we still have to pay local taxes, particularly the professional tax on rent, which is the largest expense for distributors. All of this only drives up product prices for consumers, further reducing their purchasing power and cutting into retailers’ revenues, » emphasizes another franchisee of a European clothing brand.
Too much control hurts control
In line with policymakers’ push to promote « Made in Morocco, » importers have, in recent years, criticized increasingly strict border controls, following the outsourcing of the import product inspection system in late 2019.
Although the Ministry of Industry and Trade claims its goal is to streamline these operations, retailers on the ground report the opposite, complaining about an « unjustified complexity of procedures » and a dramatic rise in inspection costs borne by importers, which have increased tenfold since 2019.
An importer shared an example of facing shipment rejections due to the pH level of a shoe sole in contact with the ground. « Even in Europe, such standards don’t exist. What gets tested are parts that come into contact with the skin. And I’m not the only one—many colleagues have experienced similar situations, » he emphasized. « This damages Morocco’s image and attractiveness as well. When inspections are inconsistent, we are forced to either destroy or return the goods. In both cases, franchisees don’t get paid, which strains our relationships with them. Many international brands are now reluctant to expand in Morocco because of this, » he added.
Another industry professional emphasizes the importance of not opposing the development of « Made in Morocco » with retail growth, warning that doing so could weaken the national distribution channels on which manufacturers heavily rely. « Retailers don’t import for pleasure but because either the product isn’t made in Morocco or the quality and price don’t meet market expectations. It’s the basic logic of supply and demand. When we import, we have to do so in large quantities, which affects our cash flow. So, we are actually the first to support the development of local industry, » he explains.
Informal economy 2.0
Another significant challenge is the rise of the informal economy, which now represents over 60% of Morocco’s total commercial activity. This off-the-radar business has expanded with the growth of digital platforms and social media, creating fierce competition for formal retailers. Facebook, Instagram, Snapchat, and other platforms are flooded with offers and promotions from small online shops selling branded products at prices often 50% to 60% lower than those found in official stores.
These digital storefronts are mainly supplied through two channels: “tombés du camion” (goods obtained through unofficial channels), sometimes tolerated by certain manufacturers, and illegal imports of new products disguised under second-hand clothing import licenses, primarily from the European market. « Under the cover of thrift shops, several operators import new items and resell them on online marketplaces and social media at extremely attractive prices. This represents a significant loss both for state tax revenue and for the sector’s turnover. This is where stricter oversight is truly needed, » emphasizes a retail professional.
Amid declining purchasing power, rising import costs, and the surge of informal trade, Morocco’s retail operators struggle to see a way out and are calling for public authorities to intervene. They seek reduced taxation, stronger support for the middle class, and the preservation of a diverse commercial landscape.
« This concerns Morocco’s image and the society we want to build for the future. Moroccans deserve access to the best products on the international market with a fair price-quality ratio. If we continue to burden the sector, we will only reduce its appeal. It can take months to convince an investor to establish themselves in Morocco, but it takes years to regain their trust if they withdraw and confidence is broken, » concludes a representative of the FMCR.
Written in French by Safae Hadri, edited in English by Eric Nielson
