Interview: Abdul Waked
How can distribution chains in Panama enhance efficiency to reduce the cost of logistics?
ABDUL WAKED: Logistics implies product movement through the different levels of a supply chain, in a profitable and efficient manner. In order to achieve higher efficiency and profitability, adequate inventory levels must be defined at each level of the chain. Moving fewer inventories requires lower transportation, storage and manipulation costs, while improving cash flow efficiency. Additionally, it is mandatory to properly determine lead times and the frequency of orders between each level of the chain. This will have an impact on supply times and the level of inventory. It is also equally important to rely on information systems that allow complete online tracking of inventory levels throughout the entire chain, which enables faster inventory replacement.
The level of service between each part of the chain must be guaranteed. One should always strive to provide the best service, but improving service involves increasing costs, so it is important to find the ideal balance between service delivery and cost. Moreover, distribution chains should work to increase communication links with clients and suppliers. Unlike Europe and the US, it is common for Latin American companies to withhold inventory and sales information from their suppliers. Finally, the organisation chart should include a supply chain section that integrates demand planning processes, order management, logistics and sales, and that reports directly to the president or CEO, who could thus lead and adjust the company’s supply.
In what ways does the development of online retail change how premium products are sold in Panama? To what extent will this change consumer habits?
WAKED: E-commerce is still emerging in Panama. Nevertheless, retail companies should be ready for the moment this form of commerce becomes more widespread. It is important to highlight that the retail of premium products is different than other categories, in that clients of this segment prefer to see, touch and try products. This is especially the case of fragrances, treatments and cosmetics, which need to be tested before being acquired. This translates into lower online sales than other categories of products. All these factors combined explain why online sales of products that are targeted at the masses are significantly higher.
What product categories are experiencing the greatest growth in demand as consumer spending rises? How are retailers responding to this trend?
WAKED: The middle class in Latin America has increased significantly since 2000, with several studies showing 30% growth in GDP over that time. This has certainly translated into higher volumes of purchases and, therefore, of consumption. As a result, the luxury retail market, in particular, has shown considerable growth and retailers are responding accordingly by opening new malls and the developing boutique shops for the main European and US luxury fashion brands.
How much room is there for growth in Panama as a luxury shopping tourism destination? What niche markets should be prioritised?
WAKED: Different studies show that the Tocumen International Airport receives approximately 8m travellers per year. After phases two and three of the airport expansion project are completed, Tocumen will have the capacity to receive 20m visitors each year. This will allow Panamanian luxury retailers to reach a much larger pool of clients and strengthen the country’s position as the regional high-end shopping hub for South America, especially for Colombia, Venezuela and parts of Brazil, as well as Central America.
It is precisely those markets that have traditionally seen Panama as a centre for shopping, and they should be prioritised. Over the past 10 years, the market has grown its hotel room capacity considerably in order to serve an increasing influx of tourists. Panama City is certainly prepared to receive higher numbers of visitors, which will help facilitate retail and traditional tourism.
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