changes
Retail in Transition – Case Study Prague
Sunday, December 14th, 2008 | University | No Comments
In terms of my thesis, which is in process right now, I`ll introduce the theme to you in this new series of upcoming posts!
During the economic transition in the Czech Republic since 1990 there`ve been started reforms on several levels. Restructuring processes in policy, economics, society as well as administration have been initiated by Vaclav Klaus and the so-called “Shock-Treatment”. This transition methodology should guarantee a fast transition from a centrally planed- into a market economy.
A significant role played the restructuring of the retail sector, which is very sensitive to economic changes. It`s sudden expansion had several impacts on real estate markets as well as the city structures. Most important processes if the transition in retail are first, a creation of a estate market, second, a diversification of city functions, third, a scarcity of land in the city. The logical consequence of this development is a dislocation of retail to the periphery of the city (“Greenfield Site”) and therefore a declining buying power in the city.
Parallel to structional changes in the retail sector, an alteration process started also on the state-administration level. The abolishment of socialistic planning ministries and the formation of new governmental bodies led to several administrative gaps, which diminished just years later. Deficiency of competence and force of achievement as well as the absence of a city development plan gave international investors plenty of rope in their location decision strategies.
In the course of reform consolidation and elaboration of a strategic city development plan for the next two decades until 2020, the line-up of stakeholders in Prague retail began to change.
In the context of those developments the exiting question of distribution of power and competence in terms of location decision processes in Prague retail sector will be analyzed and partly answered in my theses.
By means of 4-5 retail projects out of different phases of transition (break, growing, orientation, modernization) shall be exemplified the formation and change of stakeholder line-up as well as their location decision processes.
Changes of the spacial retail allocation structure (city vs. periphery) and its importance in terms of city planning strategies are further aspects of transition of retail in Prague.
Retail in Eastern Europe – Czech Republic
Tuesday, October 28th, 2008 | University | No Comments
From the mid-1998 the Czech retail market showed a continuous growth which speeded up sharply in 2005. Retail sales increased by 4,9% in 2007. Since then, this dynamic growth has apparently slowed down and the market especially for shopping centres and hypermarkets reached saturation at least in cities like Prague.
The allocation of retail area is dominated by the metropolitan region of the capital Prague, the Moravian-Silesian Region, Ustecky Region and South Moravia (see fig.1) with 120-150m²/ p.c.
It is not so long since 1998 there have been just 7 hypermarkets in Czech Republic, whereas the number increased to 231 hypermarkets in 2008. By now the penetration of hypermarkets is the highest in the Central Europe region (16 per 1 Mio. inhabitants). An important reason for this continuous expansion is the high preference for large-area shopping places for grocery by the Czech. With 38% market-share hypermarkets dominate the grocery shopping, followed by the discounters (25%) and supermarkets (16%). Especially in the category of durable food products hypermarkets retain their top position (33-39%). Generally, large-area food retailer (hyper-/supermarket, discounter) have got high preferences with 75-83%. Smaller specialized stores have an inferior position but play a big role at the fresh-food market segment.
Consumer Market Trends
In future increasing per-capita incomes will change the demand situation at the retail market in Czech Republic. The needs and motivations of customers will become more and more diversified. Their increasing interest in “life quality” products such as bio-food and generally quality fresh food (bread, pastry, meat etc.) will strengthen the position of specialized shops with more service and personnel quality. Approximately one half of Czech prefers to purchase those goods in small non-self-service stores or smaller groceteritas (e.g. butchers`s). The growing request for “new/affordable luxury”, covering also the higher interest in health-conscious life, and the preference for specialized drugstores, contribute to the withdraw of hypermarkets at those sensitive good categories. The change for better, in terms of smaller store formats, a more diversified range of products, better service and performance characterize the main brand change strategies of big retail chains in the near future.
The concentration of trade will go on and a small group of three or four retail chains will get segregated. In 2005 the competitive Czech market pulled out major retail chains (Carrefour, Edeka, Delhaize) hence about 45% market-shares are held by just a few retailers (Metro, Ahold, Schwarz, Globus). Besides the consolidation of the existing retailers many experts anticipate the entry (through acquisitions) of retail giants, as Wal-Mart or Aldi.
According the project “Retail Vision 2010” by INCOMA Research and Blue Strategy, the fastest growth is expected with discount stores from current 13% to 17% in 2010 and small-scale hypermarkets (up to 4 000 m²). Several retail chains build new hyper-/ and supermarkets in smaller versions to make it possible to operate in areas with a smaller number of customers or in city centres. A shift of destination for new openings of hypermarkets is expected. Townships below 50 000 inhabitants and even with only 15 000 inhabitants are targeted on by big retail companies as Kaufland, Hypernova or Tesco.
Retail Market – Slovakia
Wednesday, October 15th, 2008 | University | No Comments
Slovakia records one of the fastest growing rates of retail sales in Europe. An increase of 5,5 % in 2007 (7,5% in 2006) shows the dynamic development at the retail market in Slovakia. Most activity in country is still concentrated in the capital Bratislava. The International Survey 2007 ranked Bratislava at the forth position right after Moscow, St. Petersburg and Prague in terms of the attractiveness for international retail companies (inside CEE). The two NUTS2 regions Bratislavskiý Kraj (around Bratislava) and Stredné Slovensko (Košice, Žilina) will experience most of the investments in retail in the next ten years (see Fig. 1). Retail planning environment remains favourable, with currently no size limits or restrictions on retail development, albeit with bureaucratic intervention from public bodies.
There are three main groups of retailers in the country: co-operative societies, international players and domestic independents (small shops/kiosks). Western grocery retail companies like Tesco, Rewe (Billa) and Schwarz Group (Kaufland) expand in Slovakia since 2000. By now there are about 293 outlets in Slovakia. Most of them are large-area hyper-/supermarkets or discount stores. None the less the Slovak retail market is still dominated by a Slovak co-operative Jednota Slovensko with 2 318 small format outlets (mostly supermarkets / cash & carry). The dominant preference position of self-service stores with 35% market-share, followed by the supermarkets (29%) and hypermarkets (23%) mirrors the scheme of the retailer market-shares. Although the number of hypermarkets increased from 10 in 2000 to 91 in 2006, many customers still prefer grocery shopping at small-format stores. For reasons of time-saving especially smaller households favour self-service outlets which offer a sufficiently wide range of foodstuffs and basic non-food products.
Market Trends & Retail Formats
Though smaller supermarkets remain a very strong sales channel at the Slovak retail market, mainly because they meet the demand of smaller towns and municipalities, the latest trend indicates a change in purchasing behaviour of Slovak households. The preference for shopping in large-scale shopping centres and hypermarkets, particularly in the capital Bratislava is to be anticipated. Galleria shopping centres in the city centre, anchored by a hyper-/supermarket, and four western-style shopping malls at the “Greenfield-side” of Bratislava build the starting-position for the further retail development in the country. The year 2006 marked a significant turning point in terms of the number of newly-opened shopping centres. Four middle-sized (up to 24 000m²) were built in Tranava and Martin. Six large-scaled (up to 88 000m²) shopping malls will be opened until 2010 in the vicinity of Bratislava and one in Žilina.
Transition of Moscow and the Retail Sector (Part I)
Wednesday, April 9th, 2008 | University | 1 Comment
In 2007 Russia`s capital counts more then 14 Mio. inhabitants, the city ranks first in terms of expensiveness and offers the most dynamic investment activity in the country. This exceptional position of this Megapolis is due to Moscow`s history and the specific spacial structure of Russia. For Moscow is a very complex subject of study, this article picks out just one field to show some (partial) main difficulties of city. The urban management deals with typical changes (and problems) of cities in transition – formation of a real estate market, gentrification, residential-to commercial-conversions, growing of the Tertiary sector, growing traffic volume and the weakness of state authorities to name some of them. On the basis of retail the question of a possible implementation of western patterns will be exemplified.
The historical core forms the 
Kremlin (fortress), the old slawistic word for ring fence, which was build in the 15th century. The wooden basic fabric of the city (100 000 inhabitants) has been burned down first time by the Tartars in the 16th century and second time by the army of Napoleon in 1812. The reconstruction, which started in 1813, included modernization and expansion of Moscow. The revolutions in 1902 and 1917 entailed that St. Petersburg has been replaced by Moscow as Russia`s capital city in 1918. The socialistic centrally planned economy of the Soviet Union conducted Moscow an outstanding status in terms of political, economic and social role model.
The urban planning which played an important role of the socialistic ideology and was implemented to influence the co-habitance of people demonstrates a very interesting example in the Transition process from plan to market economy. Closely related to the estate market and retail industry, urban planning in Moscow has experienced the most impressive visible change during the past two decades. The privatization of government property contributed to the building of a real estate market where people now are able to buy and sell flats and Dacha’s without the usual counter trading. The privatization of real estate had also a very strong effect in the transitional society for it out marked and opened a gap between the winners and the losers of the transition. The new price level for flats in the city raised at a 1000-fold (gentrification) but also in the suburbs as well as the vicinity of Moscow rents grew exuberantly.
Gated communities for the rich high class (“New Russians”) are built near the central district or in the western part of Moscow e.g. Vorob’evy Gory or Kvartal 75. The poorer (and major) part of Moscow`s inhabitants lives in Komunalkas (flat sharing), small flats or just in the vicinity, oscillating between the city and home by Metro.
In line with the change in housing situation, the growing importance of commerce especially in the city (defined by the Garden Ring) is worth to be mentioned as it is actually a response to the changing demand situation. This theme will be explained in detail in Part II.
Retail in Eastern Europe
Friday, March 7th, 2008 | University | No Comments
The transitional countries of Eastern Europe experienced a Big Bang with the transition from plan to the free market economy in the 90ies. The retail was one of the most important industries which responded to those changes very quickly. The two most important impulses out of this restructuring process have been the Modernisation and New Types of Business. The last named relates to large-area retail and a decreasing number of employees per business unit. Large shopping areas in the Greenfield Side on the periphery of metropolitan areas predominated the new retail areas. In parallel the modernisation of business flows and sales area design took place.
Since the 90ies a lot of shopping centers have been build in the Greenfield side. 15 years later, local authorities are confronted with problems like desolation of cities, unoccupied sales areas and therefore sinking tax incomes especially in smaller townships. Now the regulation from the city authorities has become stronger and more target-oriented than it was in the beginning of the 90ies. The integrated areas in the city are gaining in importance. Large scaled areas for retail in the city are accounted from the authorities. Shopping centers as well as high price galleries in best location are built directly in the city.
Exemplary for this development is the new opened shopping mall “Palladium” in Prague. Centrally located the “Palladium” is now part of the inner city commercial district which starts at VaclavskeVaclavskeNamesti Namesti, cPrikopes in Na Prikope and leads directly to the Palladium. The accessibility afoot is about 10min in the Old Town. The very modern inner design contrasts the historic outside facade (19th century).
This new shopping magnet for tourists and people with above-average income working in the City are the main target groups. Besides the most purchased goods like fashion, accessories and gifts a whole Gourmet Paradise is located in the upper floor. The strategy contains no entertainment as cinema or bowling (on the contrary to the Greenfield side) and no bulk buying, but fashion dining and meeting spots for business people working in the offices, which are also integrated in this complex.
This rapid development in the retail industry has already caught up and overtaken the one in the West. The generations of shopping centers in Eastern Europe are changing very fast and soon will reach the US standard certainly.