– Waiting for Carrefour – IKEA, Lidl recruiting
A price war among supermarkets is “imminent” according to industry experts who say that the market is waiting for French giant Carrefour to make its first move in the face of competition from discount retailers.
German heavy-discounter Lidl started advertising for job vacancies last week, confirming a Financial Mirror report in August that it is expected to enter the market in early 2006, opening its first store in Limassol.
Swedish budget furniture store IKEA also advertised last week, seeking to recruit senior managers who will be trained in Greece by the franchise operator Fourlis Holdings SA.
The first and probably only IKEA store, taking up 20,000 sq.m., will open within the Shacolas-operated shopping mall on the outskirts of Nicosia just off the Limassol highway, that will be ready by 2007 or early 2008.
Carrefour-Marinopoulos’ recent takeover of the Chris Cash & Carry chain has not deterred plans to open a 8,000 sq.m. store in Limassol to complement the group’s three other supermarkets in the area, close to Orphanides’ two high-revenue earning outlets.
— Elomas-Migro ready for Lidl
Two start-up discount store chains in Nicosia and Larnaca are already cooperating in preparation for the Lidl onslaught.
Elomas, the Cyprus associate of the Greek Group of Supermarket Chains, has opened two stores in Larnaca and plans to open three more very soon.
Its partner in Nicosia is Migro that opened a 400 sq.m. pilot store in the Kaimakli area near SOPAZ three months ago and has just opened a 350- sq.m. store on the central Kennedy Avenue, with plans to open six more.
“We maintain among the lowest prices for mostly branded products,” said a company official, explaining that this was achieved through direct imports. He said that the Elomas-Migro cooperation could see a total of 20 outlets opening islandwide.
— Lidl to open 15 stores
Lidl assembles prefabricated steel-structure stores and needs just three to four months to put up an outlet. It has reportedly secured the necessary permits for its first Limassol store that will have a shop space of 1200-1500 sq.m. and parking spaces for up to 200 cars.
It’s success is based on a low-cost structure, with own-branded products distributed to stores in 26 countries at wholesale prices, while the absence of service staff and employment of counter staff that accept cash only keeps the payroll to a minimum.
Lidl has already recruited 17 Cypriot staff and plans to open 15 stores, half of which in the first phase of ‘overnight openings’.
The company is investing in Cyprus directly and has already secured most of its locations, in addition to a logistics centre and warehouse at the old Bravo factory in Latsia.
Market analysts predict a head-to-head clash between Lidl “and everybody else”, with some retailers preparing themselves with own-label products and focusing more on service counters (butchery, charcuterie, dairy, fresh meat and vegetables, bakery).
The first to be hit by Lidl’s arrival will be nationwide retailers Orphanides, Chris Cash & Carry (recently taken over by Carrefour-Marinopoulos), Papantoniou, as well as local stores such as Athienitis in Nicosia and discount retailers Smart Shops with seven outlets.
— Athienitis supremacy unchallenged
Market analysts, however, believe that Athienitis’ low prices will continue to remain unbeatable as the family-owned company maintains a very low cost structure and is flush with liquidity, giving it enough arsenal to fend off aggressive competition from the discount stores.
Lidl thrives on bulk discounted offers and boxed goods, making its stores attractive to all consumers, living by the adage “Poor people need low prices, rich people love prices.”
Other store chains such as Alfa Mega, Metro and Ermes are expected to take less of a hit, analysts say, because they have a bigger exposure in Nicosia that accounts for 40% of the retail market, but rely on ‘service counters’ as much as on shelf sales.
Metro, that operates a flagship store in Larnaca and two stores in Nicosia, recently acquired a Demos unit in Aglandjia that is being refurbished and should re-open with the new name in October.
— IKEA and sports shops
In addition to its IKEA store, the Fourlis Group plans to open six Intersport Athletics shops on the island, in line with its expansion to Bulgaria and Romania.
Officials at House Market AE, the IKEA franchise operator in Greece, Cyprus and the Balkans, told the Financial Mirror that Intersport Athletics stores will open on high street locations. But work on these stores will get underway parallel to the IKEA opening.
As IKEA enjoys a global reputation of “affordable solutions for better living,” furniture and home products are expected to be at affordable prices to all residents of Cyprus.
All of IKEA’s products are presently imported directly from the company’s depots in Sweden. After the Cyprus opening and a third store operating in Greece, Fourlis will be able to import several items direct from suppliers, lowering costs even further.
