After more than five years of talks and speculations, 2011 marked H&M’s debut on the Romanian market. Its entry tightened competition among the top players, with the largest European apparel retailers present on the local market–Inditex, C&A and New Yorker–deciding to open tens of stores this year.
At the opposite end, smaller players in terms of sales, both local and foreign ones, either made no statements to the press or decided not to invest in expansion this year and wait for consumer spending to recover.
The crisis and the austerity measures–the VAT hike and the public sector wage cuts in 2011–lowered Romanians’ spending appetite.
Retail players expect an improvement in the second half of the year or in early 2012. Big European and international retailers are taking advantage of the lower rents in times of crisis to consolidate their market position.
Local clothing retail, estimated by Euromonitor at EUR1.9 billion last year, is very fragmented, with a high number of players.
Retail players fight over the around EUR7.5 that Romanians spend every month on clothing. Euromonitor estimations, however, show that the market is poised to grow in the next few years to EUR2.9 billion in 2015 and EUR4.2 billion in 2020.
Inditex is accelerating expansion, planning to open over 30 stores this year, which compares with a rate of 14 stores in each of the last two years, being set to exceed 80 stores on the Romanian market at the end of the year.
Germany’s New Yorker, which first started with store openings outside Bucharest, now holds 18 stores in Romania. This year saw the opening of the Piatra-Neamt store, with at least four other openings planned for this year.
Dutch-held C&A, one of Europe’s biggest players, plans to open 9 stores in Romania this year and reach 16 stores.
The Dutch retailer, which in its first two years of market presence, opened three and four stores a year respectively, doubles its expansion rate this year, tightening competition on the fashion segment, shortly after H&M’s market entry.
Swedish H&M wants to reach eight stores on the Romanian market at the end of 2011, the biggest number of stores opened by the retailer in its first year on a market, according to company officials.
On the other hand, small players are not planning any new openings.
Polish-held LPP Fashion, with EUR5.6 million in turnover last year, similar to the 2009 figure, which operates brands such as Cropp Town, Reserved and House, will not be opening any store this year and says “this will most likely happen in 2012.”
Big retailers are relying on big sale volumes, which could bring them between EUR3 million and EUR6 million per store each year. Thus, store openings, even in times of crisis, can prove an inspired move. This is not true of smaller retailers, who need to settle themselves with sales of several hundred thousand euros per store.
Such is the case of TEX-AS Group, which owns the La Femme brand. Launched in 1994, with a store in Pitesti, La Femme now has eight stores, having opened its last unit in October 2009, in Afi Palace Cotroceni mall.
“This year we are not planning to open any new stores because there are no new projects opening on the market. We will relocate the La Femme store in Feeria to Baneasa Shopping City,” said Magda Trandafirescu, general manager of TEX-AS Group.
The company posted a turnover of 4.45 million lei (around EUR1 million), VAT-less, down 15% against 2009. For this year, forecasts point to a maximum 5% growth against 2010.
Trandafirescu says tight competition has both positive and negative effects. A store chain becomes much more mindful of the shelf price and of whether it is trendy or not. On the other hand, clients’ spending behavior changes, “in that they have turned from shopping in free-standing stores (between 1997 and 2005) to shopping centers or malls located within the city limits or just outside the cities. So, the number of clients is lower because they have more alternatives.”