So far, no obstacle has proven too difficult to overcome. Despite the economic hardships, most retail bosses are rubbing their hands with glee. Only local retailers had trouble – most were forced to close down.
Data from the Trade Registry and Finance Ministry shows the most profitable retail business last year was Kaufland, which operates a chain of large discount stores. Kaufland’s net profit in 2010 was RON172 million, more than double that of 2009 (RON78 million), despite its strategy of focusing on low prices.
DIY store chain Dedeman, owned by brothers Adrian and Dragos Paval, was at the top of many rankings by its results last year: pace of expansion, sales growth (46%), profit margin (almost 10%). It is the newest start in local retail and has come a long way from its creation. “We did not plan from the start to be a national company; we developed step-by-step, the same way we built our expansion strategy,” says Dragos Paval. He points out, though, that it has been years since he decided to expand in the entire country.
By profits, the top players also include Carrefour (RON140 million), Metro Cash&Carry (RON139 million), Selgros (RON100 million) and Cora (RON66 million).
While Kaufland had the highest profits from local retail last year, the group’s other subsidiary, Lidl, posted the highest loss: RON247 million in 2010, nearly three times larger than the previous year. Lidl’s main objective is expansion, says Friederich Fuchs, chairman of the board. A player looking to capture not only new territory, but the customers’ wallet as well, must be prepared to spend a lot. Fuchs has two weapons. The first is a PR campaign, for which an advert has already been shot, the other is personnel training – 300 people have already attended classes in Germany.
Lidl has recently hired 800 people and Fuchs says this was not exactly easy, despite the high unemployment. While not disclosing any figures regarding the investment budget, company officials say that, aside from the 11 store openings, they are working on building another 17 and also planning to purchase more land. The network currently has 118 stores, 2000 employees and about 80% of its products are under its own brand.
It was precisely discounters who came out on top in retail during the crisis: they opened over 220 stores in the last three years and had combined sales of EUR1.2 billion. The fight for customers is between 430 stores bearing the names Lidl, Penny, Profi, Minimax Discount or Red Market.
Retail is still attractive. “In the last decade, the local market grew by 123%, being by far the most active in the region,” says Adrian Comaneci, senior project manager with CMC. Between 2000 and 2010, Romania’s retail market grew the fastest (about 8.5% yearly) in Central and Eastern Europe. Other markets were slower to grow: 54% in Poland and the Czech Republic, 26% in Hungary.
The half a billion lei profit made during the crisis by the 15 top networks is a clear sign of restless expansion. In just a week, Cora opened its eighth Romanian store, Lidl announced 11 new openings and 17 more under construction, and Carrefour revealed its official partnership with Angst to launch the Carrefour Market franchise. Retail is very hot and news about an incoming second wave of the crisis seem to have no affect on the chains’ plans for development.
(English version by Radu Bostan)