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Comment: Romania’s supermarket expansion battle

After years of ruling the residential block, there’s new competition for the shop around the corner. The big retail chains have entered the battle for the local leu and there’s no mercy for the losers in this fight to the death.

Three retailers active in Romania seem to have started a supermarket expansion battle. I noticed it again the other day when I saw a Billa supermarket opening just across the street from a Mega Image supermarket near my block. The Mega Image store, opened about a year ago, had already had the expected effect on another neighborhood shop which had been otherwise thriving with high prices and captive consumers. Then Mega Image came – much to our delight – as we could find some of their own brand products, which are usually cheaper, and a wider choice. In time, we felt we were captive consumers again. Late during the evening, when we come home from work and are in no mood to cook something, Mega Image is our usual shopping choice. Well, no more, it seems. Competition does benefit the customers.

Billa is at the store number 67 with the Bucharest unit, and a 68th was recently opened in Constanta. I used to shop quite frequently at a Billa when I used to live in Drumul Taberei, but that was a large store, stand alone, which is why it was a bit of a consumer surprise to see them at the ground floor of a building, in a smaller shopping space. I remember seeing that in Austria a few years ago, a Billa at almost every corner of the street.

In Romania, they were not that fast, and competitor Mega Image did exactly that. In my area, there are over five Mega Image shops within a reasonable walking distance, and on the large boulevard, from one end to the other, I once counted over 10 Mega Image stores. They are expanding like mushrooms. Whenever I see a new one opened within a short radius from another one, the word some people love to use comes to my mind: cannibalize. I remember the defunct Mic.ro small convenience shops chain and how fast that was expanding at a certain point, only to close – and quite soon.

Indeed, the conditions are not the same, the strategy is different – Mic.ro was a franchise, the prices were high, they only had some items, consumers did not seem to dig the recipe. But for Mega Image, it seems to work, so far. They are at 169 stores already – Mega Image and the smaller Shop & Go concept- which so far has 48 locations. I am not a big fan of Shop & Go, but it works as a replacement for the small kiosk downstairs where some rush for cigarettes and bread. That being said, small shop owners – so – called traditional retail – seem to be doomed. Unless they can get a job at one of the chains which are expanding so fast these days. And Mega Image continues expansion – yesterday, the retailer was announcing a new shop to be opened today (November 29) and as many as four other shops to be opened by the end of November – meaning in one or two days.

Now if this battle of two brings the competition flavor, add a third ingredient into the mix. Carrefour. Yes, Carrefour, the large hypermarket operator. A recent press release from Carrefour read that the retailer had opened 5 supermarkets in Constanta, bringing the number of its supermarkets to 65. In the last year or so, Carrefour has been announcing one supermarket opening after the other. Now how will this story continue? A reasonable analysis would probably have to look into the financial plans of these companies, but I’m writing this simply as a consumer, and from that stand point, I don’t know or care a lot about how well these companies are performing financially. But I do know what kind of products I am interested in, how shop cashiers treat me when I pay for my products, how many cashiers are available and how long I queue when I shop during the evening, tired from work, if the meat is fresh and not too expensive, and things along this line. And I will shop soon in the new Billa in my area and get a feeling of whether it is competition on paper or real competition for the neighboring Mega Image.

Corina Chirileasa, corina@romania-insider.com