Retail: Small is beautiful

Retail

Recession fosters specialty stores

The recession has intensified the decade long market concentration where the share of big hypermarket and discounter chains has been growing continuously, while smaller businesses were forced to shut down.

During the first year of recession the number of mixed-product FMCG shops decreased by 3,740, which accounted for 11% of the entire network. By mid-2009, altogether some 7,000 stores – one in five from every mixed-product stores – were forced to shut down.

The number of specialty food stores, however, rose from 14-17,000. The number of greengrocers’ shops has risen by 15%, but bakery shops performed the biggest jump: their number increased altogether by 60% in three consecutive years.

Weakened purchasing power and rising fuel prices reduced the importance of high-value family shopping trips – usually by car – to big hypermarkets built on the edge of towns.

So while in the course of the retail boom – when sales were rising 4-8% every year – the big malls could absorb purchasing power from the small competitors, statistics clearly show that from 2008 big hypermarkets suffered a greater drop in turnover than little and often specialized convenience stores located nearer residential areas where customers buy less, but more frequently.

In order to cut their costs, hypermarket chains often broke contracts with some of their local suppliers, primarily goods producers and wholesalers because these high-cost perishable products result in significantly lower margins than manufactured and branded foods. 
So these suppliers were forced to open stores themselves.
 The other main reason is likely increasing consumer awareness. Recently, the customer base of those who care about product quality and are willing to pay more for fresh foods in specialized stores, has noticeably strengthened.

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