The hypermarket phenomenon
In the mid-1990's a new player entered the Czech retail sector - hypermarkets. Hypermarkets, or warehouse stores as they are referred to in North America, are massive retail spaces where shoppers can purchase anything from food, clothes, CD's, sporting equipment, electronics, and even insurance policies in some cases. Hypermarkets have been springing up like mushrooms in the Czech Republic as they have become extremely popular with consumers. During the communist era Czechs were limited to small state owned stores where the selection was poor and the service often unsatisfactory.
I spoke with Tomas Drtina from Incoma Research who is head of regional and retail research. He has conducted research and written a number of papers on hypermarkets in the Czech Republic. I began by asking him how the hypermarket phenomenon has developed in the Czech Republic since the fall of communism.
"Well the first hypermarket appeared only at the end of 1996, but then it went very fast. In fact, now we have already 135 hypermarkets. So the boom was very rapid and I don't think there is no other country in Europe where the speed of expansion was so quick."
Because of the sheer size of these massive retailers they can adversely affect the smaller, often family owned stores. Hypermarkets can undercut prices because of their immense purchasing power. Furthermore, hypermarkets often develop on the outskirts of towns and cities affecting the retail markets in the core. I asked Mr. Drtina what he thought about this.
"Of course it has an effect in the centre's of towns, there are various reasons for that. First of all in Western Europe, in most of the countries of the European Union there are regulations, there are some legislative tools designed to control retail development. In our country, it was quite clear that this problem might happen no laws or no legal conditions were prepared so in fact the only break for the speed of development is market saturation."
Do you think any laws will be developed in the Czech Republic?
"I think there will be but it will be quite late for retail. Already at the moment we are monitoring the level of retail supply and many cities are already more developed with hypermarkets then some regions in Western Europe, but the purchasing power is lower here in the Czech Republic."
What do you say to the fact that hypermarkets could negatively effect small retailers?
"Well I think it's natural that it must have some effect on small retailers. In the past there were only small and medium sized retailers in the Czech Republic, at the moment when the first hypermarkets appeared people started to like them. At the moment we can see that the majority of the Czech population really like this type of store, so they switched from the small ones to the large ones so the medium sized store lost two-thirds of their sales in favor of hypermarkets. Now I think since 2001 we can say that we are in the second period. Now it is the fight and struggle between hypermarkets because those who wanted to stay with the small ones now stay with the small ones."
Why do you think Czechs like hypermarkets so much?
"Twice a year we conduct research on shopping preferences and respondents evaluate the thirty largest retail chains in the country regarding price, assortment, shopping atmosphere, and every year hypermarkets get the best values. People who shop in hypermarkets also feature the biggest satisfaction with their shopping place, so they really like hypermarkets more then any other type of stores."
Hypermarkets contributed to the drastic change in the retail landscape in the Czech Republic during the mid-1990's. I spoke to Ian Hutchens from Tesco in Britain who offered this short explanation of why hypermarkets have made such an impact on the Czech retail market.
"A number of important innovations such as the introduction of 24 hour opening, the launch of over 700 own brand products, and the focus on price. I think its great news for shoppers and I set to continue."
Foreign companies make-up the overwhelming majority of the retail market in the Czech Republic, I asked Mr. Drtina if any hypermarket chains are Czech owned.
"There used to be two chains, in the very beginning. In the beginning there were ProntoPlus and Intercontact who wanted to start with hypermarkets but they failed, they stopped quite soon because of two reasons. One of them was the lack of finance and the other a lack of know-how, how to operate hypermarkets."
Do you think its strange that all the hypermarket firms are foreign owned?
"We have monitored the presence of foreign chains in the Czech Republic and only in Poland is the presence of foreign operators is so frequent as it is in the Czech Republic. But we are small times smaller so really this is the place where most of the foreign operators want to present."