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Following the collapse of the Soviet Union, Central European nations wasted no time in embracing Western-style retailing and that contributed to a rapid increase in the number of hypermarkets.

The shift in preference toward Western consumer goods is most pronounced among youth in nations slated to join the EU this month. Due to increasing exposure to Western media and Internet, young people have tuned into Western fashion trends. Although most young consumers have limited discretionary funds available, they are spending more on Western apparel, cosmetics, music, and personal hygiene products.

Due to their heavy emphasis on imported consumer goods and competitive pricing, hypermarkets are the main beneficiaries of changing youth preferences. Growth in hypermarket sales is most pronounced in the Czech Republic, Hungary, Poland, and Slovakia.

Leading European hypermarket chains have reacted to anticipated growth in sales through aggressive expansion. The growth pattern is most apparent in the Czech Republic, where over 130 hypermarkets have been built in the past eight years, and the number continues to rise.

Poland now has 33 hypermarkets and several others are in the process of being built. As major European hypermarket chains wrestle for market share, there is increasing evidence that saturation is not far off. However, competitive advantages offered by international hypermarket and mall operators should allow them to achieve healthy sales growth this year and in 2005.

During the communist era and the years immediately following the collapse of the Soviet Union, consumers in Central European nations were accustomed to drab and poorly lit retail establishments. Most now view the well-lit hypermarkets with attractive displays as a welcome reprieve.

Attractive pricing is also a big draw in Central European nations where household budgets amount to only a fraction of those in Western Europe. In most areas, there are no regulations prohibiting selling at a loss, and some major hypermarket chains are willing to do just that in order to woo customers away from their competitors.

By offering prices at or below cost, hypermarket chains are severely squeezing the profit margins of local retailers. The result will be a consolidation of the retail sector in 2004, with international hypermarket operators absorbing or replacing local retail chains.

Malls and shopping centers got off to a slower start than hypermarkets, but are now coming on strong. Growth potential for malls is great because consumers are attracted by facilities that offer a variety of entertainment and shopping operations under one roof. The Czech Republic, Poland, and Slovakia will be the focal points of mall development this year and next.
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Article Details
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Publication:Market Europe
Geographic Code:4E
Date:Apr 1, 2004

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