Retailing in Romania

Euromonitor International’s retailing research provides market analysis and statistics on the retail industry

Euromonitor International's Retailing in Romania report offers insight into key trends and developments affecting the industry. The report examines all retail channels to provide sector insight. Channels include department stores, food retailers, health and beauty retailers, clothing and footwear retailers, home furniture and household goods retailers, durable goods retailers, and leisure and personal goods retailers. There are profiles of leading retailers, with analysis of their performance and the challenges they face. There is also analysis of alternative selling channels (kiosks, homeshopping, internet retailing, service stations, vending and direct selling, as available).

Buy online to access strategic market analysis and an interactive statistical database of retail value sales, number of sites/outlets, retail surface area and employment in retailing.EXECUTIVE SUMMARYTABLE OF CONTENTSPrint this page  •  E-mail a friend Tables: 177  |  Publication date: Feb 2010 Cost: USD1900.00

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Product coverageNon-Store Retailing; Store-based Retailing

Executive summary

Romanian retail continues to offer opportunities

Traditional stores still dominate the retail market in Romania. However, this is about to change. Increased interest among foreign investors, rapidly developing modern retail formats and rising disposable incomes among consumers will lead to the rapid growth of modern retailing. An important factor contributing to the development of modern retailers is represented by changes that took place in Romanians’ lifestyles. Modern retailing is developing mostly in the non-food industry, while the traditional trade is losing share.

Romanian consumers increasingly adopting Western European’s purchasing habits

Romanian consumers are slowly changing their purchasing habits. Price is no longer the most important consideration when purchasing goods, as it was in previous years, but ways of

accessing shops and the range of products offered are now more important considerations. Consumers also prefer to go shopping to outlets that offer high quality products. Consequently, hypermarkets and supermarkets are increasingly preferred over small grocery outlets.

Malls and shopping centres flourish in Romania

Malls in Romania are in full development, stimulated by increased demand. A rising number of Romanian consumers have developed a taste for shopping as a leisure activity, especially those resident in the capital and a few other large cities. 20 malls opened in Romania in 2008. Currently there are five malls in Bucharest, of which two were opened in 2008. In the years to 2010 seven more malls are expected to be opened in Romania, as they are already in the design stage. Developers have also oriented towards other cities with over 100,000 inhabitants. The total surface covered by malls in Romania is estimated to reach one million square meters at the end of 2008 – double that at the end of 2007.

Split domination of retail industry

Although most retail channels are dominated by multinational players, such as hypermarkets, supermarkets, discounters and DIY, there are still segments dominated by local companies, such as durable goods, pharmacies and leisure and personal goods specialist retailers. In these channels, multinational players are either present for a relative short period of time and did not consolidate their position or they are not present at all. Only very fragmented categories, such as clothing and footwear retail or leisure and personal goods, do not have a clear leader. However, this situation is likely to change in the future, as a large amount of foreign investment, already initiated by a number of European companies, is expected.

Opening HoursThe trading times of Romanian retailers are longer than in other European countries. Shops are generally open from 09:00hrs to 21:00hrs from Monday to Saturday, and from 09:00hrs to 14:00hrs on Sunday. However, the main agent that determines the establishment of opening hours of any given retailer is the level of consumer demand in the area covered. While hypermarkets, supermarkets and stores within commercial centres and malls are open from 09:00hrs to 22:00hrs from Monday to Friday, and from 09:00hrs to 20:00hrs on Sundays, general shops are opened from 09:00hrs to 14:00hrs on Sundays, or some of them are closed during the weekends.

Considering that consumer demand shapes the retailers’ schedule, there is quite a difference between opening hours in larger cities and in smaller towns. In large cities in Romania, particularly Bucharest, the trend is of opening at approximately 09:00hrs and staying open until late afternoon, evening, operating on a 24-hour basis. However, in smaller towns, shops close at around 19:00hrs.

Bucharest leads the way in terms of outlets open on a 24-hour basis. Many small grocery retailers, kiosks and other vendors implement 24-hour opening, as well as a range of supermarkets, and even outlets such as some pharmacies and florists. Forecourt retailers also open 24 hours. Hypermarkets have extended operating hours, excepting special occasions such as Christmas and Easter. There is also one Metro cash and carry store that opens on a 24-hour basis.

As for weekend schedules, the difference between large and small towns remains quite marked. In large towns most retailers make no, or at least no important, distinction between Saturday and

weekdays. On Sunday some retailers prefer to close at the usual weekday hours, while some shorten their opening times by two or three hours, and others close at approximately 14:00hrs. Another important aspect with regard to weekend opening and closing trends in large towns is that only a handful of retailers decide to close on Sundays, and hardly any remain closed on Saturdays. In smaller towns, however, some retailers close the whole weekend, but most are open fewer hours on Saturday, and for even shorter periods on Sunday, or simply close on Sunday.

Employment in RetailingIn 2008, of a total of 9.5 million working individuals in Romania, 778,000 were employed in retail – just over 8% of the Romanian working population. The percentage of employees in the retail industry increased slightly over 2007-8, and since the beginning of the review period the number of people working in retail has increased by 32%.

The number of employees in the retail industry has increased mainly due to openings of commercial centres and malls in Romania, which led to a growing number of outlets in most retail segments, but particularly clothing and footwear, health and beauty and electronics and appliance specialists.

A great contribution to increasing the number of employees in retail was made by large format outlets such as hypermarkets, DIY, large furniture outlets, discounters, cash and carry, which require a large number of personnel per outlet. Furthermore, many people, previously employed within ineffective industrial giants reoriented now to the retail industry.

Since the modern retail industry in Romania is only at the beginning of its evolution, and is growing rapidly, it is expected that over the forecast period employment in retailing should reach significantly higher levels than at present.

Minimum WageOn 1 January 2008, the official minimum wage in Romania became RON500 net (EUR137), and from 1 July 2008 the minimum wage increased to RON540 (EUR148). This figure seems quite low, especially when set against the usual expenditure per household in Bucharest and other large towns in Romania. While retailers in such towns and cities usually offer salaries higher than the minimum wage to employees, in the provinces, especially in small towns and rural areas, the minimum wage is the standard, especially as far as sales agents are concerned.

Moreover, in rural areas there is a large population of black market workers, who are not legally employed. These people may well receive wages that are unlikely to equal RON250. This situation is typical in many rural areas, where monitoring employment is practically impossible, considering the fact that many individuals are unemployed and gain their existence by in-house production (agriculture and cattle breeding) and small commerce.

The general conclusion regarding the remuneration of basic retailing activities (mainly selling agents and cashiers) is that it is low, and sometimes insufficient to cover an individual’s needs. Many employers have developed a habit of offering the minimum wage, yet many of the employers in question offer other facilities as well, such as free or discounted access to many of the products sold, or meal vouchers to cover their employees’ food expenditure.

Since multinational retail chains entered Romania, the main problem with labour was personnel fluctuations, both for management, executive positions and also for basic retailing activities (cashiers, selling agents).

Retail LandscapeStreet locations vs malls and commercial galleries

Lack of available space in the central areas made large retailers to expand in out-of-town areas. Local authorities upheld this as building a shopping mall usually leads to the development of the area surrounding its location.

Fashion retailers prefer malls to street locations, as malls see up to 35,000 visitors per day during weekdays and 40,000 at weekends. However, some retailers choose to open outlets on streets with high pedestrian traffic, such as historical centres.

Other fashion retailers who choose to open on-street locations are high level brands and usually oriented towards areas populated by more affluent consumers.

At the moment there are very few spaces available for retailers on the main commercial streets in Bucharest and other major cities, and rents are high.

The relatively cheaper apparel outlets – stores where products can be bought on manufacturer’s selling price, are placed mostly in the outskirts of large cities.

Shopping Centres and MallsMalls have started to flourish in Bucharest and other major cities in recent years, due to the increased purchasing power of the population and changing purchasing habits. Currently, the main factor influencing consumers’ purchasing decisions is product quality rather than price, which was the case a few years ago. Romanians now want to be able to choose between a wide range of products. They also are more careful with their time, and prefer to purchase as many goods as possible in a single shopping trip. Consequently, commercial parks, malls and commercial galleries have developed very rapidly in Romania.

Currently, there are five malls in Bucharest: Bucuresti Mall, Plaza Romania, City Mall, Baneasa Shopping City and Liberty Centre. The latter two were opened in 2008.

Bucuresti Mall opened in 1999 and is owned by Anchor Group. Due to its tremendous success, in 2007 an extension of this mall was built and it now covers a surface of 72,000 square meters. Plaza Romania was opened in 2004 and proved as successful as Bucuresti Mall. Plaza Romania covers an overall surface area of 100,000 square meters, and includes over 150 stores, of which the following benefit from the most significant surface coverage: books, stationery, audio-visual and electronics store Diverta (3,000 square meters), durable goods retailer Altex (2,000 square meters), and clothing and footwear retailers Zara and Athlete’s Foot (2,000 square meters and 1,000 square meters respectively).

Baneasa Shopping City, situated in the north of Bucharest, is the largest shopping centre in Romania, covering 105,000 square meters. It was opened in April 2008 by Baneasa Development, following investment of nearly EUR150 million. The main anchor stores are: Peek & Cloppenburg, which represented its entry to the Romanian market; Solmar, with the brands Promod, Castro, Jennifer, Parfois, IT+ACC, +IT, Max Mara, Marina Rinoldi, Max and Co, Oasis, Karen Millen; Inditex (Zara, Pull and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho and Zara Home); Azadea Group (Piazza Italia, Oviesse, Salsa Jeans, Xanaka, Colours and Beauty, Sunglass Hut and Andre). 50% of its surface is covered by fashion brands new to Romania. This mall is the first in Romania placed in a retail park – Baneasa Commercial Area, which covers around 450,000 square meters and includes other retailers such as IKEA,

Carrefour, Bricostore, Mobexpert, Motor City and the cash and carry superstore Metro. Baneasa Commercial Area is part of the Baneasa Project, the largest integrated project of urban development from South-east Europe. It covers a surface of 221 hectares, and includes a business park and a residential quarter.

Liberty Centre was opened in the autumn of 2008, and it is situated in the south of Bucharest following investment of EUR70 million, and it is now a leader in the entertainment industry in Romania, with a 3D cinema and a permanent skating rink. Brands present in this mall include Marks & Spencer, Sephora, Next (the second outlet opened in Romania), Reserved, Kenvelo, Tom Tailor and Steilmann.

In Bucharest, another mall project is announced for 2009 – Cotroceni Park – while other seven projects – Sun Plaza, Dambovita Center, Promenada, Sema Park, Park Lake Plaza, Militari Shopping and Grand Arena – are expected to be opened in the next two to three years.

Many other towns in Romania benefit from the presence of shopping centres, most of them transformed by the privatisation of former department stores from the communist period up to the beginning of the 1990s. Up to now, malls have been opened only in Romania’s largest cities, which have a more emancipated target, such as Timisoara and Cluj. In these cities, malls are opened under the brand Iulius Mall, the first in a line of investments made by the only 100% Romanian project developer in the field – Iulius Group.

Other towns that benefit from the presence of malls are Iasi, Brasov, Craiova, Pitesti, Ploiesti, Suceava and Buzau – all of which are the main cities in their respective regions. However, as large cities will soon become saturated, investors will start to focus on cities with populations of between 50,000 and 200,000 which do not yet have a shopping centre. Another tendency is the opening of retail parks featuring, besides a mall or commercial gallery, a DIY store, a furniture store and a cash and carry superstore.

Cash and Carry/Warehouse Clubs

Cash and carry superstores were the first modern retailers to enter the Romanian retail industry, with their presence dating back to 1996. They have developed strong expansion infrastructures ever since, are attracting a wide range of consumers, and benefit from high awareness and customer loyalty.

Considering the fact that at the time they penetrated the Romanian retail industry cash and carry players benefited from absolute novelty, and were the first modern superstores in the country’s retail environment, their success among Romanian consumers was unexpectedly high. Starting in 1996, cash and carry players were constantly expanding and registering impressive figures. Although annual growth is dropping due to increasing maturity, given the impressive performances they have reached their year-on-year growth remains impressive. Overall sales value reached RON9 billion in 2008.

However, given the prime objective of attracting businesses, cash and carry outlets function on the basis of membership cards for companies and institutions only.

Although at the time they appeared in Romania cash and carry chains were targeted by consumers due to lower prices and wide range of products, these outlets have started to focus on a certain niche – horeca and re-sellers – not competing with hypermarkets and supermarkets, as the latter focus on sales to end-consumers. The presence of cash and carry outlets mainly affects

hypermarkets, which represent the most similar retail type to cash and carry outlets in terms of selling surface, product offer, price and location.

The disadvantage of cash and carry outlets among individual customers is that of selling multipack products, giving no option but to purchase greater quantities of a single product. On the other hand, the number of cash and carry outlets present in the country is several times higher than the number of hypermarkets.

From the viewpoint of small grocery retailers, such as vendors and independent food stores, cash and carry facilities are not a direct threat – at least no greater a threat than hypermarkets – their target being to fulfil different consumer needs (small retailers cover consumers’ daily needs, while purchases from cash and carry outlets are of large supplies).

Competitive landscapeThere are currently operating two multinational players in the cash and carry environment in Romania: Metro AG and Selgros. Metro opened its first store in Romania in 1996, near Bucharest, and it proved a great success, as it is now the fourth most profitable company on the Romanian market in terms of sales. The strategy adopted by Metro AG is not based on opening new outlets in the following years, but consolidating existing ones. Selgros Cash and Carry, the second operator in the cash and carry environment, functioning under the ownership of Rewe Group Köln, at the moment has 17 outlets in Romania, and plans to develop its network to 21 outlets in coming years. The investment in one Selgros store increased from EUR15 million to EUR20 million due to higher land costs and construction costs. Besides opening a new store in 2009, Selgros plans to consolidate its existing operations.

The bulk of Metro sales in Romania are represented by grocery products, which account for around 60-70% of the overall merchandise purchased though Metro Cash & Carry outlets, a success in this area being the company private labels Aro, Casa Roma and Metro Quality, which are acknowledged as low-budget, yet good-quality brands.

Both key players Metro AG and Selgros adopted the same sales strategy in 2008, their main orientation being towards horeca and re-sellers rather than consumers. In this respect Metro AG plans to open a training facility for re-sellers, teaching sales and promotional techniques and other aspects regarding the business. The centre is located within a Metro outlet in Bucharest, and will become operational in 2009. If it proves to be a success, such centres will be opened in other locations as well.

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