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1.5. Time to Fold the Tent: Retail Rivalry in Hungary and its Implication for the Rest of CEE
- Central European University Press
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– 53 – CHAPTER IN BRIEF: The chapter deals with transformation and rivalry of retail chains in Hungary and other Visegrad countries in CEE. Specific attention is paid to Szentendre, a Budapest suburb, which can be seen as a representative CEE microcosm. The overly crowded retail sector of Szentendre highlights the challenges facing the industry in the near future. I f you live in Central and Eastern Europe (CEE), you may have wondered why yet another supermarket, hypermarket, or mall is opening up in a region already well-served by existing stores. I did the same, and the following chapter is the result of my curiosity. This chapter deals with the subject at three levels —at a micro-level in a small region within Hungary, Szentendre (the case study); at the country level for Hungary; and an extrapolation to other CEE countries of the Visegrad Group (Poland, the Czech Republic, and Slovakia). With the opening of CEE to the West, large multinational retailers moved quickly into the region, targeting the Visegrad Group. The purpose of the alliance was cooperation among countries to further their European integration. All four members of the Visegrad Group became part of the European Union TIME TO FOLD THE TENT: RETAIL RIVALRY IN HUNGARY AND ITS IMPLICATION FOR THE REST OF CEE Charles S. Mayer C h a p t e r 1 . 5 . i6 FM.indb 53 2014.06.05. 12:20 – 54 – on 1 May 2004. Some multinationals had entered the Hungarian market before its EU accession. At the end of the 1990s, the Hungarian economy seemed to be slightly ahead of other countries in the region and was more attractive to multinationals . This was particularly true for the extended food retailing sector (fastmoving consumer goods or FMCGs). Hungary, being very central, and having had good economic relations with the West in the past, was one of the more attractive markets to enter. Similar patterns were also true for other Visegrad Group countries, but often on different time frames. From a marketing point of view, it would be difficult to talk about the CEE market as a whole, as each country in the region is unique. However, some countries are more likely to be at similar stages in their retail development than others. In my opinion, the other Visegrad countries are the ones most likely to be similar to Hungary. I can find support for this position by looking at the A.T. Kearney Global Retail Development Index, which shows that the “window of opportunity” is closing for retailers in Hungary.1 The proliferation of retail chains depends on various factors, such as macroeconomic, legal, political, and environmental. One of them is the average disposable income. In 2012, the average disposable income in Hungary was €4,884 per capita, the lowest in the alliance, as reported by GfK Group. In the Czech Republic, with nearly the same population as in Hungary (10.5 million inhabitants) the amount was €7,475 per capita, in Poland it was €5,756 per capita, and in Slovakia , as reported by Trade Monitor, the figure was even higher at €10,980 per capita.2 Similarities between the CEE markets are thoroughly discussed by other studies featured in this book. The CEE countries are, for instance, similar in terms of innovation (see Chapter 1.2), development of the financial sector (see Chapter 1.3), or prevalence of corruption (see Chapter 1.6). One additional obvious unifying force is the fact that many of the same multinational firms operate in the region. Four or five of the top ten players in each Visegrad country (based on Nielsen AC ranking) are the same: Tesco, Metro (called Macro in Czech), Lidl, Spar, CBA, Auchan, and others. My hypothesis is that the players define the market, as much as the market defines the players. Casual observation shows that Hungary is over-populated in the extended food retailing sector. Multinational and local chains and smaller players are competing fiercely with each other in a limited market. Hard data supports this observation. The disposable income of Austrian citizens was nearly four times higher than that of Hungarians.3 Yet, the retail intensity in the FMCG sector in Hungary was, in 2012, at about 60 percent of the Austrian figure.4 It should be noted that despite this value, retail sales per capita is lower in the CEE region than in developed European countries. The smallest expected growth is in Hungary, where the disposable income adjusted per capita retail...