Because of the centralistic economic structures before 1989 it has been a radical turn towards the market economy during the period of transition. The relative stable economical situation as well as the high acceptance in the population made Vaclav Klaus (financial minister of Czechoslovakia from 1989-1992) to choose the radical strategy of the so called “shock therapy”.  One in all the liberalization of the prices and markets showed a positive development of the GDP especially in the end of the 90ies and 2000 (see chart).

The main reform in the economic restructuring plan has been the privatization. Private ownership should be replaced by public ownership to get the basics for market competition. Coupons and restitution made sure to involve every Czech into this process.  By the end of 1992 there have been about  100 000 units of small and medium-sized enterprises being privatized (so called “small privatization”), mainly enterprises of the retail, gastronomy and hotel sectors. Therefore the part of the tertiary sector rose to 68%.

Privatization reform in the retail sector had a strong impact on the commercialization and formation of a  city in Prague (in terms of a CBD). The demand of foreign companies for modern office and retail estate in the old town center grew steadily from the beginning of the 90-ies. To preserve and to avoid the modernization of the old city structures the old town has been declared as UNESCO world cultural heritage by the city administration.

In these times the „ decisions of the central government as well as local politicians have been grounded in a neo-liberal approach, which has seen the free, unregulated market as the only mechanism of allocation of resources, that would generate a wealthy, economically efficient and socially just system” (Sykora).  This reserved point of view in terms of market regulation as well as the lacking competence of this stakeholder group   is typical for the institutional reorganization during transition, which will be discussed in the next posts.

The collaps of the old socialistic system ushered the former Eastern Bloc states in a new era. The transition from the command towards a free market economy has been a tour de forces which ment a radical social and political change.
This thesis focuses on the transitional process at the retail market which is supposed to be “most sensitive to changes”.
Due to the political and economical changes in the Czech Re-public in the beginning of the nineties, this market underwent significant re-structuring, which had an impact on the real estate market, the supply and demand situation as well as on the spatial structure of the city of Prague.
The co-operation between the major stakeholder groups – urban planning, developer, real estate and trading companies – is of primary importance for the empirical analysis of the thesis. Several experts have been interviewed concerning the above mentioned context in Prague.

In the first place it`s intresting to look at the theory, which I`ll introduce to you in the first part of this post-series.
Then we`ll have look at some examples of retail projects in Prague to visualize the current situation.
In the third part, I`ll analyse the stakeholder co-coperation as well as the impact on the urban planning in Prague.

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.

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.

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.

The internationalization of the Polish retail market compelled domestic food retail companies to a consolidation process. Emperia Holding is one of the largest Polish retail/wholesale companies which is at market since 1990 and ranks on the 7^th position (by profits) among the Top ten retailers at the Polish retail market in 2006.The market leaders are represented by well-known international retail companies Metro (1), Tesco (3), Carrefour (4) and Auchan (5). A Portuguese retailer Jeronimo Martins Dystrybucija (JMD) is the second-largest retailer with more than 1100 outlet-stores across Poland. As the research of GfK indicates, Biedronka (store-chain name of JMD) is the most deeply rooted chain of stores in the customers’ awareness. As small-format supermarkets with an area below 100m² still dominate the Polish market, the Biedronka remains the most popular shopping place for over 55% of the customers.

At the moment, about 94% of total retail outlets have still a trading area below 100m². The greater part of the people (36%) prefers still small stores to make their shopping. On the other side about 24% of Poles prefer the hypermarket as the main shopping place for food. The strong competition from modern (western) companies is continuously weakening the position of traditional distribution channels. Statistics indicate that more shoppers are turning to hypermarkets and the number of people who visit a hypermarket more than once a week doubled compared to 2000 from 19% to 40% in 2005. The number of hypermarkets increased in 2006 by 12 % as well as the amount of supermarkets with an 11% increase. Concerning big retailers as the Metro AG (Real) , Tesco or Carrefour who represent the retail market mostly by hyper-/supermarkets the future development at the Polish market will certainly be positive.
Consolidation among foreign retail chains already straightened the market position of Metro AG, through acquisition of Geant (Casino) and Carrefour of Ahold (NL) in 2006.

The next five years will see very dynamic structural changes in retail trade. Hyper-/supermarkets and discounters will become the leaders in food-retail. The two last-mentioned distribution channels are predicted to develop quicker than other shops. The number of specialized stores will decrease as well as corner grocery stores. Especially, the increasing competition in larger cities from foreign chains will contribute to the withdraw of domestic small-area shops. In rural areas the trend is in contrary the growing number of small shops by domestic retailers. In response to this, foreign companies adjusted their strategies and introduce also smaller shop formats outside urban areas. So the French purchaser Carrefour set up mini-hypermarkets and Carrefour Express with sales-areas of 800-2000m² and announced to continue its expansion.The intense competition adds to more diversity of marketing strategies in terms of quality, brands, efficiency and service.

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.

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.

This Prague trip has been something special! This time I went to Prague not to make some sightseeing with the usual tourist attractions like the Karlsbrücke, Prague Castle, Apostel`s Clock and the Jew Quarter. This time it was completely different!

Our group of 10 students ( all prospective Dipl. Geographers) plus our supervisor Mr. Dr. Waibel went to Prague to make some scientific research about the effects and structural changes the transitional process, which started with the Velvet Revolution in 1989, had caused in tourism, retail and industry.

The first weekend we were running through the city and the Metro stations with an average speed of 9km/h (our Navi proved it!). For Mr. Waibel didn`t look back very often to check if everybody is still on board, some of us who couldn’t`t or wouldn`t run, walked through the old City of Prague and admired the historism and art nouveau fassades of the old buildings or just enjoyed the great weather! Our “city guide” Veronika emerged as a former hotel executive who made guidance in the “Top Hotel” but not in the city…Does`t matter! In the evening on Sunday we had our first meetings in our “conference room” at Pension “Lucie”. It was now we noticed how much work it would be the next week!!! The tourism-group had to change their concept completely and worked now on the business tourism in Prague. The retail-group was also a little bit rattled by the unexpected criticism of Mr. Waibel. Only the IT-group had already its first two interviews on Monday. The next days we decided to meet in the evening and talk about the results of the day. Already on Thursday some of us got ill. The hypothermia while running in and out into hotels and shops doing surveys was the one of the reasons for illness. Nevertheless, our timetables were getting full. We ran from one interview appointment to another, just the IT-group had a temporary shortage and wrote about 200 emails to get some appointments. They hit all records, sitting about two days and half nights in their room in the same position with their laptops, typing and googling! On Friday evening we went to “Pravek”, a restaurant at the Metro station “Andel” which we noticed already on Saturday. The interior decoration of “Pravec” looked like the a stone-age cave with mammoth tusks and old paintings at the walls. The dishes` names like Jurrasic Globe, Mammoth or Pangeasteak are also quite funny, cause you don`t really know what you get , but it was really tasty!! After dinner some of us, Mr. Waibel (or by now just Michael) inclusive, walked over the Karlsbrücke to Stare Mesto to a night club named “Bombay”. It was OK, but nothing spectacular besides high prices and the dancing part on top the podest. Just the Taxi afterwords exceeded our budget! Next time no taxi!

On our second weekend at Prague we planned to go to Pilsen on Saturday and to visit the Jew Quartal on Sunday. Of course we went almost directly to the famous Plsen brewery. Before we could taste the beer we had to endure a exergerated media show about beer and then an incompetent guidance for about an hour. We looked forward to sit down in the brewery pub to drink more Pilsen beer but it wasn`t our day. Two wedding parties have been celebrating in both of the brewery Pubs! The toughest of us, this was Michael, walked in and sat down in the vestibule. We drank our beer but soon the staff noticed the uninvited guests and we were booted out:) In the evening nobody of us had the power to go out in the City neither fancied to to sit in the “Lucie” Bar with the unfriendly barmen, who was badly tempered because “the Germans” didn`t get wrecked every evening at “Lucie”. So everybody went to bed. On sunday all groups should finish their final presentaions and to report to the other groups. Especially the tourism-group which contained five persons had to struggle for an agreement. The conclusion of their work was, that tourism plays an important role for Prague but there are many difficulties at different levels. Here are some (incomplete) results of our group-workes:

Tourism (Jonas,Klaus, Margit,Gunnar,Dagmara)

First, there is no visible superior strategy for tourism development on the part of the state authorities. Second, the categorization of hotels in Prague has no common basement, that means every hotel tenant acts on his own discretion e.g. the stars-categories differ enourmously. Third, the trend for the future indicates the growing importance of family tourism and not as estimated of congress tourism. And there is no noticable crowding out in the backpacker sector.

Retail (Betty, Paulina, Martin)

The market for shopping center is full. There is a strong tendancy for building shopping malls in the City and not like in the end-90ies at the periphery. The location decision is dominated by the location and not by landprice. The choice of the right marketing strategy learning from the competitor is predominant. There is no direct competition between the shopping malls on the greenfield side, neither between the greenfield and the city. The new build city shopping mall “Palladium” has generated positive effects on the retail in the near vicinity. The role of the city authorities is marginal and constrained.

IT-Sector (Sakura, Simon)

The IT-sector in Prague is not developed very much yet. There exist no networkes between the IT-companies.

(I hope you`ll complete my short summary

All in all we did a good job, I think. Everybody of us learned a lot for the future and especially for the work on our diplomas.

Sunday evening most of us left the Pension “Lucie” to spend a pleasant evening in the famous Cafe “Slavia” at the Moldau opposite the Opera house. This cafe is famous for its Absinth (this is the green high proofed stuff). The interior design is art deco, elegant but strict. Famous is also the Viktor Olivia painting we called “The Absinth Woman” (actually it calls “The Absinthe drinker”), it shows a drunken old man with his Absinth glass on the table and a young, naked, green and transparent woman sitting on the table. Maybe some of us would have seen green, naked women after drinking some more glasses but it was already 11p.m. and the cafe closed. We decided to go somewhere else but had to leave also the next bar at 2 p.m. Now nothing was left besides the “Bombay”. The night ended after a couple of Bloody Marie`s, beers, Absinth`s and dancing at 5 o`clock in the morning. The right time to take the metro and not the taxi.

This was our somehow different Prague trip! I hope you enjoyed to read!

I`m waiting for your comments and for some good photos for I don`t have any!