Discounters flood Eastern Europe

By Leah Vyse

- Last updated on GMT

Related tags Retailing Poland

Netto will open 50 stores a year in Poland, joining the current
wave of discounters that are realising the potential of Eastern
Europe, as thousands of small towns are crying out for cheap
modernised food retailers.

Analysts believe the saturated hypermarket industry in the big cities and the tens of thousands of small towns and villages that currently have no access to modern retailers, has created a huge retail opportunity for discount retailers.

Due to the size of the towns and the low level of income, larger hypermarkets cannot sustain a profitable business. However analysts believe that the smaller sized discount stores will thrive in environments where the population has less money to spend on food.

Retail analyst for Central and Eastern Europe (CEE) at Planet Retail, Boris Planer, told​ : "The big time is yet to come for discounters, there are tens of thousands of villages across the CEE with no modern retailers."

"Poland has a low population density, with only four per cent of the population living in the capital city. Small towns are a big opportunity for discounters."

Planer believes the expanse of the discounters will peak in 10 years but it may drag out for 20-30 years until incomes in these countries have increased significantly. This will then soften the hypermarket sector where there is total over saturation in big cities such as Warsaw, Prague and Bratislava.

Hypermarkets troubled times in the CEE are also a result of restricted planning regulations and the current food scandals surrounding their sale of out-of-date produce.

Big retailers are now experimenting with medium format stores. Tesco has recently opened an "Aldi-style" store in a remote area in the south of the Czech Republic. Planer believes this may be a pilot for a rollout of change in store format.

Planer claims that the current activities in Poland are being replicated in the three other "big four countries"; Slovakia, Hungary and the Czech Republic.

Planer also warns that because of their proposed accession into the EU by 2007, "Romania and Bulgaria appear on the radar of the big retailers."

Netto's move is part of its expansion from the west of Poland, which it will support with the development of two logistic centres in south and central Poland.

The speedy expansion of the discounter, which is owned by Danish retailer Dansk, will make it the second largest discounter chain in Poland, giving it more stores than competitor Lidl.

Discounters have been present in Poland since 1998 when Portuguese retailer Jerónimo Martins took over domestic retailer, Biedronka, which is now the leading discount retailer in the country.

Prior to the proposed expansion, Netto, who opened its first store in Szczecin, Poland in August 1995, discussed its strong position in Poland, stating: "Our strategy was to set up stores in the north-western parts of Poland from Szczecin to Gdansk on the Baltic coast and down through the country to Bydgoszcz, Poznan and Zelona Gora. Customer response has been amazing and now we have 83 stores across Poland."

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