Czech Republic

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Active Member of Professional Group advising various retailers worldwide

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Retail Sales Growth

Year-to-year sales have been down for most retailers. The weak economy, increased competition, and new entrants are influencing factors, as was the summer 2002 flood.
Though consumer spending has been down, sales of food, household furnishings, and mobile phones have been on the rise. Retail sales are estimated at about $20billion USD for 2002.

Mergers and Acquisitions

Most of the M&A activity in the Czech Republic took place during 1990’s.
In 2000, the largest retail chain, Interkontakt Group, filed for bankruptcy. From this breakup, Delhaize (Delvita) acquired 50 supermarkets.
Most activity has been in greenfield hypermarkets, which have approached market saturation.

Top Retailers

A decade ago, the top five retailers in the Czech Republic were in the primarily state-owned Prior chain. The first non-Croatian players were Ahold, Delvita (Delhaize Group) Billa, and Kmart.

The top 10 retail chains today are foreign-owned entities, among them: Makro CR, CZK Revenue (Cash & Carry), Ahold, Rewe, Penny Market, Kaufland, and Tesco. The continued entry of foreign players (especially discount and hypermarket formats) is responsible for the change in leaders. Another reason is the growth and profitability of firms that have global expertise and economies of scale.

Technology Investment

In the Czech Republic, retailers are continuing to build state-of-the-art warehouse and distribution facilities.

Virtually all major retailers now have built a new greenfield facility, typically around the outskirts of Prague.

Also, hypermarkets such as Carrefour, with state-of-the-art POS, security, merchandising, and management reporting systems, are addressing the inevitable shift to market stratification and selling according to lifestyle.

Growth over the Next Five Years

In the Czech Republic, the growth of hypermarkets and supermarkets is slowing and new formats will be somewhat smaller due to large store market saturation and continued consolidation of the market.

Many new shopping centers are sprouting up, with major anchor tenants such as Tesco, Carrefour, and Ahold. The trend will continue, introducing many new foreign retailers and formats while minimizing overhead costs. Dixon’s is an example of a new entrant that will strive for the No. 1 position; Lidl is another.

Shopping centers are turning into social gathering places, and retailers will need to adjust to this change.

Advice for Entrants into Czech Republic

New entrants to the Czech Republic need to focus on a local knowledge of the market place, efficient operations, and niche markets.
Now that the market has matured somewhat, the successful retailers (particularly those with smaller formats) will be those that can address the continued income differentiation and lifestyles of the customers while controlling costs.