Mega Image and Profi are the only two retailers to have gone to rural towns so far. Who else is planning to and when will the battle between supermarkets and traditional food kiosks move to rural areas?
“Kaufland Romania network has no stores in villages and rural towns. Kaufland has so far gone to cities with a population of more than 20,000 and wanted to cover all the county seats in Romania. We will decide whether to expand to rural areas depending on the trend of the market in the coming period,” Kaufland officials said.
This retailer is the local market leader, with a network of more than 80 discount hypermarkets.
The only ones to have to set up shop in rural communities thus far are Mega Image and Profi, both of them operating small format stores similar to a traditional food store.
Mega Image was quick to venture outside Bucharest in the surrounding area right from its entrance on the market. The Belgian-held retailer also opened stores in the neighboring counties and also tourist destinations like Zarnesti, Bran and Busteni.
Profi opened its only rural store in Panticeu Cluj (NW Romania) but does not rule out opening more such stores, as Pawel Musial, its chief executive said at the end of last year that the retail had developed a store format tailored to the rural areas. Loco was introduced as a rival to the stores previously found in villages selling all sorts of items needed there.
The stores will sell both foods and non-food products needed in a village. Musial said those stores would not focus on food because people in rural areas can produce their own such as milk or eggs. The officials of Profi have not announced any Loco opening yet.
Marius Caluian, general manager of market research company Vektor Marktforschung, too, believes that fresh products, fruit and vegetables, dairy products, wine and certain spirits will not be in high demand from consumers in rural areas. Moreover, he believes that analyzing the rural areas strictly by territorial organization shows they have limited short-term potential for modern retail because of the lower purchasing power of the people living there, and because of the different buying and consumption habits.
“Traditional retail in rural areas usually consists of family businesses and those owners have already attracted loyal customers with their services. Moreover, they most often sell on credit (…) and customers settle the debt at the end of the month when they get their pensions. Modern retail representatives will find it hard to change this state of affairs.”
Caluian thinks a solution might be to sell certain consumer goods or durable goods, which already have customers. Retailers should focus on small format 150 – 200 square meter stores carrying a narrower range of products.
Alexandru Vlad, chief executive of Selgros Cash&Carry chain, too, says rural areas will become attractive for small formats, of less than 1,000 square meters, either discount stores or supermarkets. Still, traditional retail will not go away.
“Small format players will go to rural areas with more than 5,000 people to tap into a new market niche,” Vlad says.
He says modern and traditional retail account for equal shares in the total in Romania but there are differences between Bucharest, urban and rural areas.
“Traditional retail accounts for merely 20%-30% in Bucharest. Still, traditional retail won’t be going away.”
Vlad runs a cash&carry business whose customers include small storeowners.
While modern retail may have won the battle in Bucharest, in rural areas kiosks and food stores still prevail. Moreover, even though retailers announced plans to go to rural communities on long term, they have no intention to do so any time soon.
“We have no stores opened in rural areas. The development potential is there but it’s a long-term thing,” says Sabin Fane, marketing manager of supermarket chain Billa.
Lidl officials say they have not opened any store in rural areas but the company does plan to cover the entire country. “Lidl has not opened stores in Romania’s rural areas. Lidl continues expansion plans and wants to develop as much as possible by expanding throughout the entire country.”
The German discounter is the latest retail chain to arrive in Romania and has been aggressively expanding ever since to both large and small cities of 20,000 – 30,000 people.
(English version by Loredana Fratila-Cristescu)