The discount retail chains have been the most aggressive in expansion over the last few years, a difficult time, when consumer spending fell by over 5% annually.
The boom of this retail format that was just beginning in Romania in 2005 and 2006, proves price has become the main purchase criterion for most people especially if they live in small cities, which are the targets of choice for the expansion policy of the major discount retail chains.
While in Bucharest, where the purchasing power is higher compared to the rest of the country, brands like Penny Market and Lidl are less known to consumers, discount chains found their best market in the cities of 30,000 to 50,000 people. The 363 discount stores in operation in 2010 covered 158 cities in all the counties of Romania.
The six discount retail networks in Romania – Penny Market and Penny Market XXL (owned by German group Rewe), Lidl, Profi (controlled by Polish private equity firm Enterprise Investors), MiniMax Discount (owned by local entrepreneur Dinu Patriciu) and Red Market (part of Mega Image) – have opened more than 200 stores over the last three years, many more than in the first seven years in business on the market, reveals a survey by market research company PMR Publications. Expansion plans do not stop here, though, as several dozen openings have been announced for the coming months.
“Almost 150 discount stores have been opened over the last two years and only a slight slowdown in the pace of openings could be seen this year,” said Jaroslaw Frontczak, retail analyst of PMR Publications.
Local discounters have reached a total 435 stores and almost EUR1.2 billion sales after eleven years on the market.
And sales of discount retailers continued to go up every year. They rose by 13.1% last year, when food retail fell 2.1%, according to PMR. The trend will continue over the coming years so that sales of discounters could reach EUR1.7 billion, according to ZF calculations.
“I think they are betting on the polarization of consumer spending, because I’ve noticed products sold in Romania are either very cheap or very expensive. Under the circumstances, discounters can rely on opening new stores to cover an increasingly wider pool of consumers,” says Doru Lionachescu, president of boutique investment bank Capital Partners.
(English version by Loredana Frățilă-Cristescu)