The Romanian Do-It-Yourself Market
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Noiembrie 2010 |
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CODRUŢ PASCU - Managing Partner
ROLAND BERGER STRATEGY CONSULTANTS S.R.L. |
Adresa
Strada Dr. Burghelea, Nr. 5
024031 Bucureşti, Sector 2
Telefon
+40-21-306.05.00
Fax
+40-21-306.05.10
Website
www.rolandberger.com
www.rolandberger.ro
CODRUŢ PASCU
Managing Partner
ROLAND BERGER STRATEGY CONSULTANTS S.R.L.
The Romanian DIY market has experienced, in recent years, a steep growth, followed by a deep plunge. Spurred by the construction boom of the early 2000's, the market registered a double digit growth rate until 2008, and attracted a large number of players, both local and international. These players focused mainly on establishing and expanding their footprint and thus the fight for sales and margins become apparent only in 2009, when the global crisis hit the constructions market, leading to the plummeting of the DIY one.
Nevertheless, the DIY market still has significant untapped potential, given the current low penetration of stores in certain areas, and the positive economic outlook following the end of the economic downturn. The Romanian DIY market is forecasted to converge to the consumption levels of its EU peers. However, in order to further develop their business, DIY players will have to focus on improving their geographical coverage and profitability.
The macro perspective
Market evolution
The Romanian DIY market has registered an impressive growth over the 2005-2008 period, reaching a compound annual growth rate of 34%. The growth was mainly fueled by the rapid progress of the constructions market.
The constructions market grew, over the same period, with a CAGR of 46%, due to the compounded effect of the growth in disposable income per household, the easing of access to finance for property purchases, the expansion in Romania of a large number of international retailers and the expansion of the budget assigned for the development and reconstruction of the road infrastructure.
Lured by the growing market, several new DIY chains entered Romania during the 2006-2008 period (e.g. BauMax, Mr. Bricolage, Obi etc.), while the ones already present significantly expanded their coverage. As a consequence, modern DIY retailers now cover 75% of Romania's counties. Nevertheless, in most cases, modern DIY players are present only in the largest city in the county, leaving a significant share of the small urban and rural population without easy access to modern DIY stores.
Starting 2009, the global crisis significantly affected the Romanian construction market, and thus also the DIY consumption. Some of the players subsequently postponed their expansion plans, while others, highly indebted and with significant cash flow problems proceeded to restructuring their network. Overall, the market dropped by 24% in 2009.
The Romanian DIY market in the European context
Affected also by the partial market reversal experienced in 2009, Romania remains among the countries with a low DIY consumption per capita – EUR 92 per year, even below its CEE peer group average of EUR 104.
Compared to the Western European average of EUR 313 per capita, DIY consumption in Romania is approximately a third, which indicates significant room for growth on the medium to long term. Romania's modest DIY consumption is reflected also into one of the lowest store densities in Europe, with one store for every approximately 180,000 inhabitants. More developed countries, especially Western European ones, have a superior store coverage, with an average of one store for every 40,000 inhabitants.
