Moreover, the two companies did not bet on the capital city as hypermarket, supermarket and cash&carry chains did, but on counties like Hunedoara and Brasov (central Romania), which are not among the top five in terms of wages. Their secret? They bet on low prices.
German-held Lidl and Penny Market conquered the local market as they became the largest retail chains with 132 and 128 stores, relying on the low prices to gain customers, as this is the first thing Romanians look at when shopping.
Lidl Romania, a company that arrived on the local market about a year ago, when it took over Plus Discount, has become the largest modern retail chain, with 132 stores. Lidl thus left Penny behind, another discount store chain, which numbers 128 stores.
Even though discounters are at the top of the ranking by network size, they are not on the same positions when it comes to sales. Number one in the ranking by sales is Metro Cash&Carry, followed by Kaufland and Carrefour, each of which having posted more than EUR1 billion.
The three operate large format stores, even upwards of 10,000 square meters in some cases, while discount chains work with up 2,000 square meter stores and a limited number of products, compared with over 60,000 available in a hypermarket. Moreover, discount chains sell mostly private label products, and sales per unit amount to several millions of euros.
Under the circumstances, discount chains need a large network to be able to reach sales of hundreds of millions of euros.
Lidl arrived on the market via the takeover of the 107-strong network of Plus Discount, which posted EUR345 million in sales in 2010, up from the EUR307 million of 2009. Penny Market’s sales amounted to EUR385 million in 2010, up 5% on the pervious year. A large network allows for better visibility and stronger position compared with rivals.
Moreover, discount chains can open stores in places with less than 30,000 inhabitants, unlike hypermarkets, which go for cities that are three or four times larger in terms of population.
Even though they have all the counties of Romania already covered and have even reached smaller cities of 10,000 to 15,000 inhabitants, discount chains continue to plan for expansion. Lidl has three more openings scheduled for this year, according to the previous statements of its officials, while Penny Market will continue to expand aggressively, after having opened 12 new stores and remodeled another 30 in 2011.
(English version by Loredana Fratila-Cristescu)