International chains not to arrive sooner than 2009

International retailers of electronics and electrical home appliances will not enter the domestic market sooner than 2009, say the major players already present on the market.
The still low sums spent on such products have not encouraged companies like Mediamarkt, Dixons or Tehnomarket to open stores in Romania.
“In Romania average consumer spending per capita reaches 1,780 euros per annum. In Bulgaria, the level is of 1,650 euros, while in the Czech Republic it stands at 4,400 euros and in Hungary at 4,400 euros. From what we’ve noticed on other markets and according to our research, international retailers will come to Romania when the average value gets to 2,500 euros, that is in the next 3-5 years,” stated Dan Ostahie, chairman with Altex group.
The estimate is reasonable given that domestic players put the market at 1.4 billion euros in 2009, compared with almost 900 million euros in 2006, despite the 5% net decrease, the electrical home appliances witnessed, especially on the segment of white goods.
“Most certainly, names from western markets will be the first to arrive in Romania, and this will not happen earlier than 2009-2010. It’s highly unlikely that retailers from southern markets would try and take such a step,” said Dragos Simion, vice-chairman with Flamingo.
While waiting for a European competition to take shape and for know how and capital to be built before crossing the borders, domestic players have started to consolidate their results and their own networks.
“Internally, the market will go back to a 10% to 15% growth pace in 2007, largely owing to consumers’ rising purchasing power and the elimination of lending barriers,” added Simion.
Thus, Altex, after seeing its turnover shrink by 20% last year, to 220 million euros, announced a sales target of 280 million euros for 2007, in parallel with the expansion of sales areas to 100,000 square metres, from 80,000 square metres late last year.
Until last year, Altex had not stated its intention to tap into foreign markets, unlike its domestic rivals Flamingo and Domo.
After EU integration, Ostahie transferred the stock of the main firms of the group to a Netherlands-based holding company, switched to a corporate structure and opened its first large outlet in the western part of the country, in Satu Mare. The group took this step to test Hungarian retailers’ reaction and simulate a real competitive environment, said Ostahie.
Flamingo embraced a similar policy. It opened stores in Bulgaria and is further developing domestically by opening large outlets.
It targets 172 million-euro turnover this year.
Domo resorted to a different expansion strategy, planning to expand on two markets at the same time. It plans to reach 150 million-euro turnover this year.

Home appliances market
The top 3 players, Altex, Flamingo and Domo account for more than 50% of the market together, which is estimated to have reached almost 900m euros in 2006
Is expected to get close to one billion euros in 2007
Market growth will be primarily boosted by the electronics and built-in home appliances segments
The classical market of “white home appliances” will be flat this year, driven forward only by product replacement and construction market