Mixed Retailers Industry In Belgium

TRENDS

• Although all formats and chains were not affected by recovery, marketers were surprised by the relative dynamism of mixed retailers in early 2010. This was exemplified by the premiumisation of Galeria Inno, which continued to remodel its stores and integrate further upmarket brands, such as Kenzo, Givenchy, Armani, Zegna and Façonnable. By the same token, Hema opened new outlets, and more than ever banked on design with accessible prices.

• As a result, mixed retailers posted appreciable current value growth of 3% in 2010. This was not atypical in comparison with the performance of the channel over the review period, which enjoyed a CAGR of 3%. What was surprising was the fact that mixed retailers recorded robust growth while the economic crisis was not over, and also such outlets mainly offer non-essential products such as clothing, home furnishings, cosmetics and toiletries.

• The mixed retailers channel is well-established in Belgium, particularly thanks to the longevity of Galeria Inno, the origins of which date back to the end of 19th century. In addition, Belgium was one of the countries first targeted by the Dutch chains Blokker, CASA and Hema a few decades ago.

• During the last couple of years of the review period, the extensive sales area and upmarket positioning of Galeria Inno enabled department stores to be the most important of the mixed retailers in Belgium in terms of value sales. The premium cosmetics and toiletries and clothing collections of department stores have fared better since the beginning of the review period. Despite a slowdown in 2009, the new marketing strategy of Galeria Inno paid off in these areas, notably thanks an ongoing upgrading movement, mixed with discounts given to consumers.

• Although the first Hema outlets were “25 and 50 cent stores” in the 1930s in the Netherlands, there were no more similar concepts in Belgium, at least within mainstream chained mixed retailers in 2010.

• The number of outlets of mixed retailers witnessed appreciable expansion during the last couple of years of the review period. This contrasts with 2008, when the growth rate logically slowed down, as expansion projects were delayed due to the sluggish economy and the subsequent wait-and-see attitude of players.

• Meanwhile, the average sales area slightly increased in recent years. Whilst variety stores was saturated in terms of number of outlets, department stores gained more sales area in 2009-2010, owing to the expansion of Galeria Inno stores, and to a lesser extent the opening of some Hema outlets in smaller towns. Mixed retailers almost exclusively had an urban profile in 2010, and operated in a saturated environment. The majority of department stores are located in town centres. Variety stores are also concentrated in urban areas, and to a lesser extent in shopping centres on the outskirts of towns.

• Some changes in the mixed retailers channel had an effect on consumer goods manufacturers in 2009-2010. The fact that many Belgians had the feeling that their purchasing power had declined, and the increasingly challenging economic environment, resulted in the further polarisation of the products on offer. Premium brands began to suffer from 2008, and had to make further price concessions. Premium cosmetics manufacturers had to adapt to the new purchasing policy of Galeria Inno. To face the aggressiveness of its competitors in perfumeries, this chain also offered a 20% year-round discount on all premium fragrance brands available in its stores.

• On the other hand, consumers turned away from mid-priced and even economy products, and switched to the extreme discount end of the majority of chains. In order to be able to offer lower prices, these chains, primarily Wibra, increasingly sought out suppliers in the Far East, mainly for furnishings and clothing and footwear. Therefore, other local and European suppliers saw a substantial decline in their sales during the review period due to a lack of competitiveness, whilst survivors often became wholesalers or subcontractors.

COMPETITIVE LANDSCAPE

• In 2010, Blokker Nederland was the leading operator in mixed retailers in Belgium, with a share of 30%. Mixed retailers has one of the most concentrated competitive environments, as the top three players accounted for three-quarters of value sales in 2010. Despite the recession and the resulting gloomy economic climate, its CASA and Blokker brands maintained stable sales in Belgium by exploiting the cocooning trend, with thousands of value-for-money products and a focus on franchised outlets. Nonetheless, the attraction of table arts/decoration (arts de la table) and crockery, small furniture and other decorative items declined in 2009-2010, which could affect the future sales of CASA.

• With an increase of 8% in current value terms in 2010, the Hema chain of department stores from Dutch-owned Maxeda was the most dynamic brand in 2009. This stemmed from its ongoing expansion in Flanders, where it managed to open roughly ten outlets since the beginning of 2009. Whilst most other chains found it difficult to open new stores due the aforementioned saturated urban environment, Hema focused with success on smaller towns. It also expanded its presence by offering a wider range of products and services, including wine, language courses as well as online energy contracts.

• Holding a quarter of value sales in mixed retailers, Galeria Inno remained the leading chain in 2010. After its acquisition prior to the review period, its German GBO invested heavily in Belgium, which paid dividends in recent years. The old German private label products were withdrawn, and merchandising was adapted to local tastes, to the advantage of a growing number of trendy and/or upmarket brands during the review period. Its breakthrough in cosmetics and toiletries was notably thanks to the discounts it offered from 2008, and its focus on lingerie and upmarket clothing also paid off. Combined with the remodelling of the majority of its outlets, it enabled Galeria Inno’s sales to record impressive growth without any openings over the period 2003-2008; the best in the category in Western Europe, according to the company itself.

• Most chains in variety stores, particularly Blokker from Blokker Nederland, were less dynamic, as they faced challenging conditions, leading to value sales growth lower than in department stores in 2009 and 2010. The cheaper image of variety stores allowed it to maintain its growth and fare better than department stores until 2007. Nonetheless, Belgians found small decorative items to be superfluous from 2008. Meanwhile, the economic recession affected the purchasing power of customers of department stores less than the consumer base of the much cheaper variety stores.

• Galeria Inno (Metro Group) is by far the most upmarket chain in mixed retailers. The company stocks hundreds of premium brands, notably in cosmetics and toiletries, clothing, lingerie and jewellery. It also offers a wide range of services, wedding lists and clothing alterations. Galeria Inno was also the top advertising spender in recent years. The retailer produced its own magazine called Sensa, which was advertised on bus billboards, and it strongly capitalised on its in-store advertising.

• Although in the same category, many consider Hema to be a variety store, while it is in fact a discount department store focusing on cheap private label products. Hema’s promotional activities mainly involve posting out catalogues. In 2010 it reaffirmed the main claims of its positioning: “the just right product at the right price, and with a modern design”. The average range offered by Hema is wide, but not too deep, with a particular focus on clothing, housewares and foodservice.

• In variety stores, the main difference between CASA and Blokker is the specialisation of the former in furnishing and housewares, whilst the latter also offers small electrical appliances, leisure and personal goods and other products.

• The dynamism of chains did not particularly rely on the regional coverage of the retailers’ outlet networks. For instance, the dynamic Hema chain is concentrated in the northern part of the country, due to its Dutch origins. For Hema, Maxeda uses mid-sized stores, for which new locations can easily be found in city centres and smaller towns. By the same token, Blokker and CASA seem to focus mainly on Flanders and Brussels, which have more economic potential than Wallonia. Trafic by Sogesma did not seem to suffer from its presence in the south, the poorest region in the country, as it opened new outlets in 2009 and 2010. The 15 Galeria Inno outlets are present in the largest Belgian towns.

• In contrast to grocery retailers, in which local players lead the way, powerful German and Dutch retailers, namely Metro Group, Blokker Nederland and Maxeda, dominate the mixed retailers channel. To suit local consumer tastes, they notably use CRM (Consumer Related Management) methods to better understand consumers, and utilise tailor-made direct marketing advertising and offers. This was the case for Metro Group and its Galeria Inno Loyalty System. This loyalty programme became increasingly generous in the second half of the review period, as the card notably offered more loyalty points than usual, strong discounts and eight Sensa magazines.

PROSPECTS

• Against all expectations, mixed retailers could benefit from further openings in the short term. The fact that some chains, such as Galeria Inno (Metro Group), still progressed in early 2010, and the fact that Hema plans to open new outlets, is promising for the future of the channel. Therefore, outlets, sales area and value sales in mixed retailers are expected to forge ahead in the short term, according to the majority of industry sources. Mixed retailers is expected to post non-negligible growth of 3% in constant value terms over the forecast period, which will be just slightly lower than the growth seen during the review period.

• In the case of a persistent economic slowdown, what could compromise the ongoing development of mixed retailers would be the competition from other channels, such as grocery retailers, parapharmacies/drugstores and even clothing and footwear specialist retailers. The competition from mass premium cosmetics brands sold in supermarkets and hypermarkets will be increasingly tough for department stores. In the case of beauty products, department stores could face difficulties in attracting or even retaining so-called mixed consumers – namely women who usually purchase cosmetics in mass distribution outlets, but sometimes in selective outlets.

• Under the impetus given by Hema and Galeria Inno, department stores, the most valuable channel, is expected to increase by an appreciable 8% in constant value terms over the forecast period. Without the anticipated constant value decline of 5% in variety stores, mixed retailers could enjoy better progression. However, variety stores is expected to continue to suffer, as small furniture and other home decoration items will be considered by consumers as superfluous in a time of slow economic recovery.

• Despite the premiumisation of Galeria Inno, discounting/price competition is expected to become increasingly tough in the channel in the coming five years. Clothing and footwear specialist retailers are preparing for the battle of the best bargains, as illustrated by the decline in unit prices in this channel. Low-cost clothing and footwear chains such as Zeeman are expected to increasingly compete with cheap mixed retailers such as Wibra and Trafic.

• Maxeda plans to continue its pace of investment in the short term. Depending on the availability of commercially attractive locations, it expects to open other outlets in the Flemish market, which still has room for growth, according the Dutch group. It is expected to continue to focus on smaller towns to avoid saturated areas.

• The remodelling of the last Galeria Inno by Metro Group should end before 2015. The company has not given up the idea of opening other outlets, and thus is studying projects of smaller outlets to overcome the issue of available sales area. However, according to L’Echo (local financial trade press), Metro AG is interested in acquiring Karstadt (GBO Arcandor), its direct competitor in Germany. In the case of such an investment, the Belgian subsidiary could be less strategic, and have fewer resources to invest in the country in the short term.

CASA, and mainly Blokker, could be less lucky than Hema in the coming years. Their wide product assortment and their low prices previously encouraged consumers to frequently alter or replace their home decoration. However, a growing threat for these concepts is the popularisation of outlets selling cheap (and almost disposable) home decoration products.

Source:   Euromonitor International