“When we opened the first store in Giurgiu, two decades ago, we were the pioneers of modern retail in the city. Today, all the major international chains are present in the city, so that in order to survive we joined Carrefour network. Under a big umbrella you have less trouble with rain,” says Gabriel Moldoveanu, one of the three stakeholders in Sigma stores that have recently entered Carrefour’s franchise system.
With a population of just 60,000 people, Giurgiu (60 km south of Bucharest) has attracted in recent years five international networks (of a total of 12). However, the net average salary in Giurgiu county stands at around 1,300 lei (EUR290), over 20% smaller than the national average. Thus, retailers’ battle focuses on price.
“Prices dictate the flow of customers in Giurgiu, a county with a high unemployment rate and mostly public sector employees. Moreover, our county holds very few production units and very many merchants,” explains Moldoveanu. The entrepreneur, together with his two brothers, set up Gil company over two decades ago.
The company currently operates three Sigma stores, with revenue of around RON8 million in 2013.
This was the beginning of modern retail in Giurgiu in a period when no international network had yet dared to enter Romania’s market. Nowadays, the city has attracted the most important supermarket and discount store chains, which are stifling small merchants.
In recent years, marked by the crisis and the fast expansion of international chains, around 70,00 small merchants have vanished from the market. Now, the market holds around 70-80,000 small merchants (not including HoReCa players).
In this context, international chains have started developing their own proximity store networks, such as Express (Carrefour) or Shop&Go (Mega Image).
For a quick development, these networks have resorted to partnerships with local merchants.
“One of the reasons we teamed up with Carrefour was access to Carrefour’s own labels, with low prices. We hope the partnership will at least help us maintain our revenue”.
The revenue of Gil dropped during the crisis by over 25% to RON8 million.
Carrefour’s Express network reached 64 proximity stores, while Mega Image’s network includes 130 Shop&Go units. Another network that launched a franchise program was Metro Cash&Carry. The company’s network of LaDoiPasi units has already reached over 700 units.
While the number of franchised stores rose each year, there are also units that withdrew from LaDoiPasi network, such as Blanco Market of Calea Mosilor. The owner of the store, George Popescu, says he made this decision as he noticed the product range was not adapted to the area and as the store was too small to be organized after the German group’s model.
Thus, Popescu chose to turn the store into a tobacco shop. “We have between 50 and 200 cash receipts per day, but the business can be boosted particularly if legislation on the sale of tobacco products comes into effect. We should follow the European model”.
Popescu believes that, in the battle with international chains, small merchants stand an additional chance if they get specialized.
However, “this type of niche retail particularly focuses on premium products, so that I do not believe there will be many retailers in Romania managing to grow along this line. For the time being, I believe that most traditional merchants located in good areas will team up with international chains in a franchise system. There will also be merchants banking on expansion to be able to sell their business to the same international chains in the future. Fewer merchants will choose to get specialized,” believes Marcelo Mihai, senior consultant at Geva & Company consultancy.
(English version by Catalina Apostoiu)