Economic uncertainties and low appetite for consumption did not scare off supermarket and discount store chains, which invested EUR120 to 175 million to expand their networks, according to Ziarul Financiar estimates.
The biggest retailer in Romania, German chain Kaufland, is also the main investor in modern retail, and invested EUR50-70 million to open seven new hypermarkets this year.
Kaufland was also the only hypermarket chain to bet on expansion this year. One possible explanation is that opening a large store requires more time, an investment of as much as EUR20 million and large plots of land. Also, getting all the necessary approvals can take months. On the other hand, other hypermarket chains have decided not to expand at this time.
Kaufland currently operates a network of 78 stores, which are smaller in surface than those of competitors Carrefour, Real, Auchan or Cora, and this is one of the reasons why the German chain was more aggressive in its expansion policy – its store format allows expansion into areas with 30,000-50,000 inhabitants, where a hypermarket of over 10,000 square meters isn’t profitable.
Over the next period, rivals Cora and Auchan are set to open new units in time for the holiday season. Cora will be opening new stores in Bacau and Bucharest and Auchan will open one new store in Bucharest.
Real and Carrefour will not be opening any large stores this year.
Although it won’t be opening a new hypermarket until next year, French retailer Carrefour has expanded its smaller store chain and opened 22 new supermarkets in January-October. The group plans to expand on this segment to compete with more aggressively expanding chains such as Profi and Mega Image. This strategy is employed at a time when Romanian consumers are not only looking for lower prices but also for stores close to their homes or work.
The first ten months of the year have seen many openings of supermarkets and discount stores. Since the beginning of the year, Mega Image opened 56 new stores, more than in the previous two years combined. The company plans to open a total of 150 stores in 2012-2013. The Belgian retailer has scheduled 12 new openings in November and could reach a network of nearly 200 stores by the end of the year if it keeps the same pace in December, which would make it the biggest retail network in the country. Mega Image currently has 161 stores, ten more than Germany’s Lidl.
Lidl launched one of the most aggressive expansion strategies in 2011, when it officially entered the local market. Since the beginning of this year, the retailer invested EUR20-30 million in the opening of 22 units.
Players in the modern retail sector have continued to invest in expansion over the past four years despite economic downturns. Retailers continued to open stores because it was the only way they could keep their sales at a similar level to that before the crisis. Some retailers were also driven by declining prices for land and lower rents.
Retailers have thus remained among the most “loyal” investors in the local economy. Foreign direct investments in the first ten months of the year stood at EUR941 million, up 55% from the same period in 2011, according to central bank data, but still a very far cry from the EUR9 billion FDI pouring into Romania at times of economic boom.