Romania – Retail Development 2008. Perspectives for 2009
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Aprilie 2009 |
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MAGAZINUL PROGRESIV |
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“Although Romanian retail largely remained the same in 2008, future trends become more visible. If 2007 represented the year of hypermarkets and discounters, 2008 could be characterized as the year of ‘however’: retailers continued their expansion, however the pace was slower, consumption continued to grow, however at a more temperate rate, price was still important, however consumers were more interested in premium goods.”
Romania – Retail development 2008. Perspectives for 2009
Both 2007 and 2008 were important years of growth for Romania, especially in the FMCG segment. Consumption was the main driver of economic growth, however, since it was especially influenced by exports, it became problematic because of the running account deficit it generated.
Both retailers and suppliers announced double digit sales growth, determined by purchasing power consolidation. Therefore, according to Euromonitor, the Romanian packaged food market was worth EUR 6.9 bn in 2008 and it could reach EUR 10.5 bn by 2012.
Predictions for 2009 foresee a rise in sales of 10% on average, considering that 36% of the companies which were surveyed by The Economist stated that they expected their performance to be “as good” or “better”, while only 30% were expecting a decline in sales next year, compared to 2008.
Year-end results will be influenced by the economic environment and international analysts predict a 2-3% rise of GDP.
The store landscape remains constant
Store landscape was almost unchanged compared to 2007. The decrease of small stores and kiosks was replaced by the development of larger outlets.
The latter, including discounters, recorded a 10% growth rate. Other changes include a decrease of small stores (under 20 sqm sales area) and a rise of medium type stores (20-40 sqm sales area) and specialised stores (butcheries, pharmacies, gas station stores).
As for a development in quality in this segment, the challenges are the same.
Traditional store owners are aware that discounters have become their main rivals, although their efforts to retain customers have been insufficient.
The main issue for traditional retailers is their inability to differentiate themselves from the competition and to adapt, which leads to sending an ambiguous message to consumers, as well as ambiguous product choices.
The idea that large stores are a threat because of the lower prices they offer is still dominant, which is why traditional retailers continue to focus on offering lower prices, instead of reaping the benefits that are associated with this type of retail: specialisation, proximity, consumer closeness.
On the other hand, the threat generated by modern retail is a real one, proven by the fact that in 2008, only 19% of households spend most of their budgets on traditional retailers, compared to 37% in 2007. (Nielsen)
In Romania, according to Nielsen, there are 15 small supermarkets, 1 hypermarket and 1 large supermarket per one million consumers, compared to the European average of 109 small supermarkets, 14 hypermarkets and 40 large supermarkets per one million consumers.
Modern retail enjoys national coverage
The main features of modern retail remained the same in 2008: focus on expansion and price communication. Most retailers stated they enjoyed nationwide coverage, due to the fast pace of development. If hypermarkets reached medium-sized towns in Romania, discounters entered small towns, with less than 15.000 inhabitants. Towns such as Buziaş, Călan, Chişineu Criş, Lupeni, Motru, Titu or Victoria were on the discounters’ list.
This is why, in their attempt to promote their business, retailers turned to TV advertising, in order to increase public awareness nationwide. Territorial expansion will continue to be the main focus for retailers; however their plans are somewhat less aggressive because on the one hand land prices are expected to drop, and on the other, the global financial crisis will prevent retailers to open as many stores as they did in 2008.
This is why, during the first six months of 2009, retailers’ growth will be slower. Another feature recorded in 2008, besides network expansion, was the purchase of rival networks and their re-branding and integration. Mega Image and Carrefour finished the acquisitions of Artima and La Fourmi respectively. The two chains were remodeled and re-branded into an integrated concept.
Remodeling and efficiency
Re-branding the stores was another important feature in 2008. Besides the examples above, French retailer Interex started a re-branding campaign of its stores. The strategic decision of intensifying investments on the Romanian market depended on the improvement of its commercial concept according to the latest standards, developed by the French mother-company. “The most important thing we accomplished was an in depth analysis of our portfolio of goods, which, together with an examination of local consumer needs, offered us the best solution for Romania. The range of goods we chose will be available in all our stores starting 2009”, said Vassante Monany, Interex Commercial Director. Interex, part of Les Mouschetaires Group, operates its own stores in Romania, unlike in other countries, where the stores are run by an association of retailers.
Metro continued its re-branding strategy started in 2007. The German retailer brought significant changes to its distribution centers in Suceava, Bacau and Constanta, and managed to open a new store in Deva.
