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Crisis changes retail sector

08/01/2014 06:33
The economic downturn has brought about radical changes in the retail sector, reinforcing consolidation trends and changing consumer patterns.

The foreclosure of the Orphanides supermarket chain a year ago along with the problems that smaller supermarkets encountered in 2013, signaled the reconstruction and concentration of the sector.

According to latest figures, the volume of retail trade in the first nine months of the year shows a decline of 7% compared with 2012.

The situation seems to be improving in the last quarter and the losses of hypermarkets are tempered by the redistribution of Orphanides’s market share, which had an annual turnover approaching €200 million - 19% of the market.

After Orphanides, problems other companies encountered problems as well; Sarris and Elomas went into liquidation while other companies are in dire condition as well.

According to executive Chairman of RAI Consultants, Olympios Toumazou, the economic crisis was a catalyst for a change in the consumer behaviour.

"The structural problems in the sector have always existed, but the crisis magnified them”, he stressed.

RAI, which is conducting the retail audit of the sector, tried last summer to record changes in consumer behaviour.

“After the foreclosure of Orphanides, we entered a period of instability in the market shares of supermarkets. This is reflected in a survey conducted by RAI in the summer”, he said.

According to the survey, conducted between June and July, Orphanides’s market share was mainly absorbed by Carrefour, followed by Alpha Mega, Lidl, Papantoniou , Athienitis , Metro and MAS.

The telephone survey sample was 2280 households and according to Mr. Toumazou it is the largest research undertaken in recent years.

As estimated, retailers will continue to face challenges and there will be more shifts in the market share of supermarkets due to the opening of new or the closing of existing supermarkets as well as the increased mobility of consumers due to offers.

The clientele of Orphanides has been distributed to the remaining players and this contributed to the correction of the market, Chairman of Alpha Mega supermarket, Andreas Papaellinas said.

“The changes have contributed to price reductions for the benefit of the consumer”, he added.

Based on the latest available data, the prices for food and non-alcoholic drinks stabilized in 2013 at the 2012 levels.

The distribution of Orphanides clientele has been made partly through the acquisition of some branches by other supermarkets, such as Alpha Mega and Metro.

According to Mr. Toumazou, repositioning of retailers takes place in a period of dropping demand.

Consumption has decreased in all sectors, primarily in markets such as cars, furniture while reductions of 10% have been registered in the food markets.

Based on the confidence indicators published by the University of Cyprus, the estimates among executives in the retail sector seem to be returning to the highest levels of the past two years while these of consumers have significantly improved in recent months.

Despite the partial recovery of the sector, it is doubtful whether consumer behaviour will ever return to pre-crisis levels.

"The increased price sensitivity of Cypriots has led to a decrease in loyalty to designer brands and specific stores," Mr. Toumazou said.

“Consumers pay attention to offers and discount flyers, which now guide most options for specific brands and stores”, he concluded.