Catching up with the modern consumer

Expansion continues to be the most important business development strategy for modern retailers present in Romania. Overall, modern trade has already surpassed traditional trade in terms of value share (51% vs 49%) but there is still lot of potential for additional growth.

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ADRIAN COMANECI

ADRIAN COMANECI

CONTRAST MANAGEMENT CONSULTING & TRAINING SRL

One of key leading indicators is the average stock of modern retail space/capita. In 2012 in Romania there were ~84 sqm. of modern retail space/1000 inhabitants, a number which is 4 times less than the average modern retail space existing in countries like Poland, Hungary, Czech Republic, Austria and Germany.

 

In terms of priorities for expansion we can observe different tactics that are implemented:

 

(1)   Expansion through a franchise system(i.e. Shop&Go). A very attractive model because requires less financial resources and reduced involvement in operational management of the stores. Key challenge is finding the right people to manage stores and continuous training & development

 

(2)   Partnerships between international retail chains and local entrepreneurs(i.e. Carrefour and Angst, “La doi pasi” model used by Metro). Even if the overall concept is very attractive, this model requires several rounds of fine tuning until the right value equation is found for all partners involved in the process.

 

(3)   Acquisition of local/regional players(i.e. Profi is buying local supermarket chains). This could prove one of the most profitable ways for expansion because many local entrepreneurs would rather sell their business than going into insolvency and because retailer invests in a customer base that already exists. Of course it also requires that the due diligence process (commercial, financial and legal) is correctly made.           

 

Many of the retailers are taking steps in the right directions at this point so it is quite difficult to differentiate. Some of the big names worth mentioning are Mega Image which continues to grow the network of stores (205 in March 2013 vs 193 at end 2012) and gain market share. In this case the main challenge I see lies in the area of in-store service and execution. When expanding at at very fast speed the pressure for recruiting every day new people is very high, so there is a natural reaction to compromise between the number of people needed and their quality and experience. Moreover, the trainers need to talk with more people each day so the quality of training might be affected. It remains to be seen how this situation will evolve.

 

Profi is also expanding very fast through acquisitions and new store openings, lately moving also towards convenience formats. This is consolidating its position on the market, but also in this case there are still opportunities for improvements especially in the areas of private label strategies, in-store category management etc.

 

Currently the highest pressure is on independent local and regional retailers that need to fight not only with international retailers, but also with reduced consumption and lack of financial resources. I believe we will continue to see small retailers going out of business during the next period.

 

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COMMENT ON THIS ARTICLE:

  • Lawanda
    16.06.13 ora 21:11
    YJKXkRWwENCFBieIfi

    I'm out of lageue here. Too much brain power on display!





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