Among 11 consumer goods categories, food and beverages sector is the outlier when it comes to sales forecasts, with an expected growth of 21.1% until 2017 (BMI – Industry View – Romania – Q4 2013). The following two segments generating high turnover in 2013 are DIY and consumer electronics. In terms of household spending, food and beverages represent 27.4%, housing and utilities 22.7%, while recreation has a 5.1% share.
Consumer spending rising
Unlike Western European countries, Eastern Europe has managed to avoid stagnation in the retail market during 2013. According to forecasts released by BMI, a total retail spending of EUR 85 billion is expected in Romania in 2014, which is 9% higher than in 2013.
With the population steadily achieving a middle class status, consumers increasingly expand their purchasing power which drives sales growth across the retail market. As a result, a significant increase in the quality of life is expected among the population, driving upward preferences of consumers regarding retail experiences and brands.
Considering that food and non-alcoholic drinks represented approximately 27% of consumer expenditure in 2013 (Eurostat), global retailers still regard Romania as an attractive country in terms of further investment.
E-commerce, new shopping centers and possibly new international entries are among the modern trends foreseen for the Romanian market in the following period.
Wider retail expansion
Up to now, grocery retailers already present on the market such as Auchan, Carrefour, Cora, Kaufland, Lidl, Mega Image and Profi have focused their strategy on store expansion. However, sooner or later, the market will pressure operators to move on and adapt to strategies based on improving store performances as the returns from store expansion will diminish.
The Romanian food retail can be described as a relatively fragmented landscape where established international retailers share the market with independent convenience stores. Nevertheless, for the convenience stores the trend has been towards slowly losing share lately. Established large retailers aiming to improve their share started to open smaller shops. For instance, Mega Image, the local retailer held by Delhaize, opened 66 Shop & Go proximity stores during 2013. Moreover, following Metro Cash & Carry’s 2012 launch of La Doi Pasi franchise, over 700 local grocery stores acquired the franchise, which is now present in all counties in Romania.
A growth story
Consumer electronics is among the leading non-essential retail segments in Romania. A percentage of 5.1% of household spending was allocated to the sector in 2013. With possession rates of modern electronic devices behind other European countries, Romanian consumers are gradually adapting to an active shopping behavior regarding computers, smartphones and tablets. Samsung, Altex, Flanco and others are the biggest winners in terms of annual turnover in 2013. Analysts expect growth in both volume and value of sales in the following years on the Romanian market.
Do It Yourself is another important sector in Romania, with an annual turnover comparable to that generated by food. Dedeman, who plans to increase its network until 2015, generated an annual turnover totaling EUR 604 million in 2013 (Wall-Street Ro, 2014). Among DIY retailers, Dedeman had the widest expansion, ending 2013 with 40 stores.
Tailoring online retail strategies
Romania’s online market is gradually expanding as more people gain Internet access and trust in online payment methods. According to VISA, MasterCard and RomCard, due to increased online security, 35% more transactions were secured by credit card during 2013 as compared to 2012. However, there is still a long way to go until technologies used by retailers in Romania align to those used in Western neighbors, especially in terms of mobile commerce sales through smartphones and tablets. Consumer electronics is the preferred product category when it comes to online shopping because these products have different specifications which can be easily communicated online.
Moreover, customers can read reviews online and compare prices among retailers. Apparel and fashion internet retailing have also increased in value with high street chain Zara entering the Romanian online market. Established online retailer eMag has continued to diversify its offer by entering into the home and decorations segment and by partnering with grocery retailer Mega Image. Furthermore, Carrefour, one of the leading grocery retailers, tapped on the e-commerce business by officially launching the first online grocery store operated by a large retailer, in July 2013. However, grocery online retailing remains poorly promoted. In the following years, the whole retail operating model will change should online shopping gain more and more customers and obtain figures comparable to those in Western countries.
The Romanian retail sector is expected to continue growing over the following years, thus creating new opportunities for investment. The target segments will mostly remain the same, with food and non-alcoholic beverages leading the way, followed by consumer electronics and DIY retail. However, the share of food retail will start to decline once increases in disposable income of the Romanian consumer get allocated to more discretionary areas of the retail sector. As a matter of fact, we can already see global luxury retailers attracted by the market, with Dolce & Gabbana and Roberto Cavalli opening official stores in Bucharest in 2013.
To conclude, the trend observed in retail is towards getting closer to consumers with convenience stores operated by large retailers increasing their number, concept stores originating from the desire for innovation and for offering customers a more satisfying shopping experience and online shops, the best bet in retail nowadays.