Retailing in Colombia
Euromonitor International's Retailing in Colombia examines whether recent high growth rates can be sustained in an economic downturn. Growth has been boosted by richer consumers spending more and some companies’ decision to sell a wider range of non-food products. Rising sales have supported expansion into new markets, new store formats and moves into private label products. However, the economic downturn has set some of these strategies back, this analysis looks at whether grocery retailers will continue to enjoy similar rates of growth in the future.
Tables: 196 | Publication date: Jun 2009
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Product coverage
Non-store retailing; Store-based retailing
Executive summary
Pace of retailing industry growth slows down in 2008
After some of its best years of performance Colombian retailing industry growth started to slow down in 2008. Although Colombia is still not suffering major effects from the global economic crisis, the country is still affected by a decrease in the number of wire transfers from Colombians living in foreign countries to their families, the rise of interest rates for consumption credits and the rising inflation powered by increasing prices of food and oil. These factors have combined to cause a reduction in disposable incomes of Colombian consumers, which has affected the performance of some of the growth driver sectors of the industry such as hypermarkets, durable goods, home improvement specialists and electronics retailers.
Consumers revert to pre-economic boom habits
Consumers are preparing to face the economic crisis by changing some of the habits they acquired during the good years of the economy. Consumers are giving more priority to groceries and are spending more of their budget on products that meet basic needs. Those who have a very low disposable income are looking for smaller packages for daily consumption; therefore, many consumers are going back to making purchases at small independent stores that offer these types of products. Additionally, a larger number of consumers are paying in cash, bucking the trend that was seen in the prosperous years of the 2003-2008 review period, when credit card payments grew significantly. Manufacturers and retailers also changed their options to cover the needs of consumers.
Dynamism is set in motion by the entrance of foreign companies and M&A
The retailing industry has seen a lot of activity over the period of 2006-2009, with many new players like the Chilean retail groups Sodimac and Cencosud, the Spanish Indetex (Zara, Stradivarius and Bershka) and Mango and the American Collective Brands (Payless ShoeSource), amongst others. Additionally many companies already in Colombia have merged with others in a process of consolidation of the industry, something that has dramatically changed the retail landscape. Now many of the largest retail companies are in the hands of foreign players, which have brought their own sales and distribution policies that consumers see now as innovative.
Non-store retailing grows although it is still underdeveloped
Non-store retailing keeps growing faster than store retailing since most of the non-store channels are still much undeveloped. The only strong channel of non-retailing is direct selling and this is the only channel that presents a threat to store-based retailing. Some of the most important companies in their industry are direct sellers such as Belcorp and Avon in cosmetics and toiletries and Leonisa in clothing and footwear. These companies have the advantage of having a closer relationship with clients than store-based retailers, which enables them to generate successful strategies since they are more in touch with the customers’ preferences.
Industry faces imminent slowdown in the forecast period
Even though the retailing industry already shows signs of decline, manufacturers, retailers and even consumers learned from the economic crisis the late 1990s and therefore are better able and slowly adapting to face the new crisis and keep industry growth constant, albeit slower than it was over the review period. Many retailing companies like Carrefour, Falabella and Almacenes Éxito are keeping their investments to expand over the country and manufacturers are generating new strategies in order to keep sales regular by adapting to the new choices of consumers. Both manufacturers and retailers are routinely offering discounts to consumers and are also selling smaller packages to consumers so that larger or constant volume sales can make up for the loss in unit price and margins.
Pace of retail growth to slow because of reduced credit
Banks and retailers are reducing the amount of credit that they were extending after the boom in 2005-2007. Throughout this period credit for consumers became more accessible, with large retailers like Almacenes Éxito and Sodimac offering store credit cards, even to consumers with a low disposable income (something that regular banks did not do because of the high risk this represented). According to ANIF (Asociación Nacional de Instituciones Financieras) these retailers were the main reason the growth of consumption credit increased from 7% of GDP in 2003 to 11% in 2008. Additionally, banks also increased the amount of credit through the period of 2006 to the beginning of 2008. This helped the retailing industry to grow, but since the central bank of Colombia (Banco de la República) decided to increase the intervention rate in order to control the increasing inflation, consumers were forced to pay much higher credit card interest. Growth of retail sales is going to fall as consumers have started reducing their purchases so that they will not fall down on their payments and face a credit crunch.
Current Impact
Consumers were using credit to make large purchases to replace and upgrade durable goods, as well as to buy discretionary purchases like clothing and footwear. They used so much credit that according to the Banco de la República in 2008, 21.8% of the consumer’s budget was spent in paying debts, a similar percentage to what was seen during the crisis of 1998. Even though most of the demand for durable goods has been satisfied after a long time of lag, consumers still want to acquire technology products like computers and LCD/plasma televisions sets, but because of the high interest rates on credit many consumers have decided not to renew their technology products even when they are now at lower prices because of the low price of dollar.
DIY, home improvement and gardening centres are also affected because consumers are not investing in new homes and are reducing the number of renovations because of the higher interest rates.
Consumer Confidence Index is a relatively faithful indicator of how consumers are feeling about the economy and other aspects like the political environment. This indicator went down from 31% in January of 2008 to 10% in June. As consumers feel more restricted from making purchases they also start to feel more pessimistic about the economy and more insecure about their financial situation. Apparently this consumer drop in confidence had no political or social cause. The main reason is that consumers felt the impact of high rates and they feel more in debt than before; this directly affects retail sales, therefore reducing the industrial production, which slowed down considerably after the second quarter of 2008. Consumers also see the economic problems as a warning of possible firings and job losses.
Supermarkets and hypermarkets benefited from higher levels of credit because consumers could make planned visits and purchase supplies for 10-15 days. Now with restricted credit consumers are forced to go back to the tiendas, the smaller retail formats (independent grocers) that offer the possibility of informal credit and where customers can easily purchase the groceries they need every day.
Outlook
Demand for durable goods and electronics is expected to decline because these products are not replaced frequently in Colombia and those who have already renewed these items are already in debt, which keeps them from making further purchases.
Small, independent retailers should continue to gain share from supermarkets and hypermarkets as long as access to credit is restricted and consumers prioritize purchase of groceries, where the tiendas are leaders and are advantaged compared to hypermarkets/supermarkets because of their convenience, proximity and because of the cultural preferences of Colombians.
As long as inflation continues to rise, the most likely scenario is that the Banco de la República will keep interest rates high to control inflation. Higher interest rates will restrict consumers’ access to credit, inevitably slowing sales of many retailing formats. However, many associations like ANDI and FENALCO are pressuring the Banco de la República to reduce the interest rates, since they are very concerned about how this may affect growth of the Colombian economy. Even more, these actions have had little effect on reducing the inflation because of the increasing prices of food and oil; therefore it is possible that the Banco de la República will reconsider its position, depending on the effect the policy has on the economy.
Future Impact
Manufacturers are likely to face reduced margins as retailers offer more discounts. It is common for large retailers to force manufacturers and suppliers to sacrifice part of their margins in order to offer consumers products at lower prices. However, suppliers will also demand that large retailers place larger orders in order to make up for the price decrease.
Small independent retailers tend to offer smaller pack sizes and sachets. Larger retailers are likely to begin to offer smaller sizes, too as low-income consumers prefer these small packages since they have a restrained budget and have to make daily purchases.
Retail brands like Merquefacil and Q’Precios are going to be successful against other formats like supermarkets because they offer no-frills outlets in order to be able to offer very low prices. With these formats retailers will be able to compete side by side with the small independent stores. Retailers like Carulla and Pomona may lose sales to retailers with a less up-market image unless they keep excellent service policies along with accessible prices.
Consumer habits change to face pending economic downturn
Consumers are making changes in order to face the economic crisis – some because they are already feeling the effects of the economic downturn and others just because they are already pessimistic about the economy and they are more cautious with their spending. Consumers have reduced their consumption of some big ticket items like electronics, durable goods and home products. Furthermore, low-income consumers are more concerned about spending on basic needs products like groceries, but since they have a low disposable income they are only able to make daily purchases anyway. Now there are more consumers making daily purchases than in 2006 and 2007 when the economy was at its peak. Consumers are looking for more economic options; therefore they are switching to cheaper brands, while to a minor extent, some consumers who have the means to do so are also buying large-scale packages with lower unit prices in order to save more money. However, only a few can make bulk purchases, since approximately 60% of families in Colombia live with a Col$600,000 budget a month.
Current Impact
People are changing their consumption habits back to how they were spending after the economic crisis of the end of the 1990s. Now some consumers have kept their credit cards at home and are using more cash. This is because consumers who routinely used their credit reached most of their debt limit. Moreover, because most independent retailers or tiendas do not accept credit cards, most of the groceries are bought with cash.
The tiendas also are used to opening packages and selling small quantities of the products to consumers who do not have money to buy a whole package. That is why they sell a single drinking chocolate tablet, one egg or a single margarine stick. To meet the demands of low-income consumers and the independent grocers, manufacturers like Alianza Team offer the tiendas packages of 125g margarine and 250cc oils and Nestlé is also offering sachets of Klim powder milk and Milo malt-based powder drink. Additionally consumers prefer tiendas because they offer informal credit to the customers they know, because they are very convenient for most people because of their near location and because most of them offer delivery services.
Some companies are locating their distribution systems strategically so that they can supply their products in popular, low-strata areas like El Hueco in Medellín and San Victorino in Bogotá, both high traffic areas where consumers can find all types of products in the informal commerce at very low prices.
Other consumers who have higher disposable income are able to purchase in bulk in hypermarkets/discounters like AlKosto and Carrefour, where consumers can buy a large quantity of products at a smaller compound price than can be found in small retail outlets. However, not many consumers can afford to make large grocery purchases.
Some brands that consumers consider to have low prices like AlKosto, Q’Precios, Merquefacil, Surtimax, Carrefour and Cash and Carry companies like Makro see this economizing trend as an opportunity because consumers go to their outlets with the hope of saving money.
Outlook
As the economic crisis more directly affects Colombian consumers more people are going to be forced to think more carefully about how they spend their money. Some manufacturers and retailers are seeing this as an opportunity to attract a wider consumer base in the low strata as they adapt to the consumers’ new consumption habits. Manufacturers like Nacional de Chocolates, Nestlé and Alianza Team amongst others, are trying to serve the necessities of the traditional retailers because they obtain higher margins with the large chains and also because through the independent retailers they can reach a larger consumer base.
It is likely that more companies will try to apply similar strategies in order to not fall behind the companies that have already taken the lead. Supermarkets are probably going to offer smaller packages and sachets like the ones that the independent stores are offering. Some companies like Carrefour and Éxito have fidelity programs that ensure that every time a customer makes a purchase with the store’s card, the purchasing information is saved on a database so the company can learn the customer’s preferences and then offer them special prices and discounts on their favourite items.
Price will become the most important purchase decision factor; therefore consumers are expected to prefer retail brands like AlKosto and Q’Precios as the economic situation continues to deteriorate. The independent grocers and neighbourhood stores that follow the same strategy are probably going to continue to take share from supermarkets like Carulla and Pomona and even from hypermarkets like Éxito or Carrefour since it is very unlikely that these brands will start offering small packages for consumers of low income.
Future Impact
Independent grocers like the tiendas are going to be the big winners with the development of this trend since they were the retail channels that performed the best over the previous time of economic crisis. After several years of competition with supermarkets and hypermarkets, which tried to take them out of the market, the traditional retailing channels lost few if any share of the market. Discounters and supermarkets/hypermarkets that are able to offer very good prices and discounts are also going to benefit from the trend. Brands like Carrefour have shown interest in gaining share amongst consumers of low strata and this could be the opportunity for companies like that, who are able to solve the needs of consumers who are not only budget constrained but also like convenience and good service.
It is expected that the trend will continue to get stronger over the next few years since the economic downturn is just about to begin in Colombia and it will get deeper over the forecast period. Manufacturers are already innovating to fulfil the needs of consumers, but retailers have done little to face this trend. It is expected that the discounts will increase over the forecast period to attract more consumers but the big chains will also try to implement information systems glean more information about consumers so they can introduce more personalized offers and discounts in order to induce more brand loyalty. It is likely that new mixed formats like supermarkets/discounters will appear over the forecast period in order to give customers low prices, good attention and convenience.
Retailers changing discounting strategies
The new players in retailing have brought their own strategies to face the market, most notably the ones concerning discounting. Discounts are now more common than in the past and malls are now moving away from discounts limited to a single month/season/week toward everyday low prices. This trend is seen more frequently in the stores known as “outlets”, where discounts and low prices are offered throughout the year. Even when there are more discounts over the year there are months of strong discounting like January and February in which retailers are able to move the stock left from the December holidays and also stimulate sales in months that are usually the worst shopping months of the year. Consumers are more aware of these discounting tactics and some of them have learned to program their shopping to take advantage of the low prices.
Current Impact
International players such as Payless ShoeSource, Zara, Falabella and Mango brought the concept of offering several collections in a year, with bimestrial new releases aimed at increasing sales. Because these stores change collections several times in a year, they also tend to give on a discount the past collections when a new one arrives. Stores like Mango can offer their clothing collection from December with a 50% discount in January and February. With this strategy companies can very quickly sell their old collection without really losing much profit. In addition they are able to attract other consumers who cannot afford to pay for the clothing at regular prices but who become loyal to the brands. Before these brands like Zara and Mango appeared in Colombia, retailers used to ask for a lot of conditions to give discounts to clients such as paying in cash only and these offers were not frequently seen. Now many domestic footwear and clothing retailers are also offering discounts regularly and in months like January and February discounts can range from 20-70%.
With consumers on the lookout for constant sales, more “outlet” stores have emerged. These stores focus on giving discounts on clothing and footwear of a past season or collection. This trend is more common in large cities like Bogotá, where there are several of these stores, many of them located in the Americas district. Many of these outlets are from international brands like Nike or Reebok; however, there is also a strong offer of national brands like Armi and Totto. In 2008 Adidas opened a new outlet specializing in this offer. The store is located in a different district, where there are not other similar outlets. The store, which comprises about 344 sq m, offers Adidas clothing and footwear with an average discount of 35%.
This trend is not restricted only to clothing and footwear retailers: supermarkets and hypermarkets, furnishing stores, durable goods retailers and leisure stores have also joined the trend. The bookseller and leisure retailer Panamericana offers discounts from 20% to 50% at the beginning of the school year on January when it makes its largest sales but also when there is the strongest competition for school supplies. Even when brands like Éxito and Carrefour have offered strong discounts on their anniversaries, they are now having exceptional discount days like the “Locos de Remate” sale of Éxito. They are also offering some special weekdays discounts for some products in particular like the “Martes del Campo” from Carulla, which is a special discount on vegetables and fruits on Tuesdays. The day for discounts in fruits and vegetables in Éxito is Wednesday. Consumers have learned about these discount days and they have changed their shopping habits to take advantage of them. For example they buy their meat groceries one day and vegetables on another, whenever the discount is valid.
Malls have also implemented this strategy to attract consumers. It is now common to find signs for sales (in English), offering stronger discounts on every footwear store in one mall. Most malls also promote discount sales like the Uniferia in Unicentro, Bogotá. According to trade press sources, during the time of discount sales, Unicentro receives around 6% more visitors than during the regular times, while Santafé receives 25% more visitors during its discount season than it does at other times of the year.
Outlook
In times of crisis Colombians look to get the best deals possible and now that they have become used to getting clothing, furniture or even groceries at discount prices, some of them just wait for the discount offers before making any purchase. There are new US companies coming to Colombia (Office Depot, Wal-Mart) and they offer the best discounts in the world. This will also force local players to offer discounts throughout the year and run discounts for different products and offer discounts across a wider range of products (e.g., white goods, computers, detergents etc.). European chains (Mango, Zara) are already offering discounts, as are the Chilean companies in other non-clothing and footwear products, and furniture and furnishing stores also take advantage of this strategy to renew their collections and to sell their old products quickly with some profit.
The largest chains like Almacenes Éxito, Olímpica, Homecenter and Carrefour are also implementing different strategies to offer specific discounts for each consumer depending on the purchase habits of the customer. All of these companies offer loyalty cards that track purchases made by the customers in their stores. By gathering customer data about their specific choices, retail chains can offer discount coupons for the products that the customer usually buys and after exceeding his or her normal purchase levels the customer can get special discounts. These discounts are often supported by brands like Samsung, LG, HP and Compaq. Some of these coupons are for specific products that the retailers and manufacturers negotiate. With these strategies, retailers can hold more of their customers and at the same time increase sales for different products they want to take out of stock.
Future Impact
This trend clearly benefits consumers most. They will probably wait until they see a discount in their favourite store. This will likely lead to consumers focusing on the retail brands they like and on the stores where they are accustomed to shop since those retailers stimulate shopping in their outlets by offering benefits and discounts to loyal customers. However, some people might not shop at all until they see strong discounts. For example they will not shop in Mango until they see good discounts.
Manufacturers will have to reduce their margins and will be forced to sell higher volumes to maintain the same level of profits. Retailers in this case will use their negotiating power to obtain lower prices from suppliers in order to give consumers low prices. Large chains are probably going to be more successful with consumers than small retailers because they are able to form economies of scale and purchase large orders to hold their suppliers, while small retailers are forced to absorb the loss in price by themselves. Chains from Chile will have strong financial backing for 1-2 years and will force small independent retailers to go out of business (e.g., Iserra, a small clothing and footwear retailer).
Under these circumstances small manufacturers will see their margins reduced while consumers focus on discounts. This trend will most likely accelerate over the forecast period as the economic situation starts affecting the pocketbooks of consumers. They will expect more and extended discounts and retailers not offering them will suffer.
Retailers adopting social responsibility as part of mission
Retailers are increasingly incorporating programs for social responsibility into their business plans. These programs help boost the firms’ corporate image, and at the same time benefit society at large and their employees. Colombia is not characterized as a country concerned about green causes; however, the perception of the citizens has slowly changed in this matter and they are now more concerned about recycling, waste management etc. Retailing chains have developed several environmental programs like recyclable bags and packaging. The strongest social concern of Colombians, though, is about helping their own less fortunate countrymen. Many retailing companies and manufacturers have embraced social responsibility programs and are investing important resources to developing their projects and letting consumers know about their work.
Current Impact
Colombians’ consciousness of environmental issues is not very high, but it is growing amongst younger consumers. More of these consumers are actually deciding whether to do their shopping or not in a place that shows some environmental concern. The Carulla chain was one of the major retailing brands that began to use recyclable and biodegradable packing bags in 2008.
Companies are also aware that social responsibility is also a strategy to reduce costs. Recyclable packaging is often re-used by the same company and, in the case of employing disadvantaged groups the government gives a subsidy or a tax reduction.
There are several programs that retailers are carrying on as a way to give back to the communities. Many are supported by the government, such as it encourages farmers to switch from cocaine cultivation to legitimate crops like Amazonian fruits (Arazá, Copoazu) sold in Carulla and hearts of palm (Palmito del Putumayo) or support non-profit organizations like the Asociación Tejido Humano, which is a program that asks consumers if they would like to make a contribution for the disabled soldiers of Colombia when the customer makes a purchase.
Some companies carry on specific programs. AlKosto has an important program of employment for the mentally challenged. In 2008 it had 190 in this program, making the company the one that employs more people with this condition in the world. In 2008 Almacenes Éxito invested nearly Col $4.3 billion in 153 nutrition programs in for children, it donated Col$650 million for the Colombians affected by the floods in 2008 and it had 150 handicapped employees in its labour force. Belcorp offered entrepreneurship training taught 958 low-income women in Bogotá techniques to manage and maintain their own businesses, such as hair salons. Carrefour, along with the much known Colombia es Pasión brand, gave resources and supplies to 42 elementary schools in order to help educate around 500 children.
News of several programs like these has been released in the press. This without a doubt helps to improve the corporate image of these companies. Many consumers choose the retail brands that are committed to a social cause of their preference; therefore companies make sure to publicize their social programs to make consumers aware of them.
Outlook
Even though social responsibility programs are financially beneficial and are an extraordinary PR tool, many retailers do not start such programs. Many small retailers do not know about the benefits of these programs, do not trust them or are simply unaware of them. Because of this, social responsibility programs are limited to large chains. Most small retailers that do not participate in such programs think that these projects are unaffordable and that only large chains have sufficient funds with which to fund them. However, in most cases it is easy to implement one of these projects since the government gives aid and advice to the companies, for example to those interested in employing workers with some kind of disability.
In the meantime large chains are likely to gain acceptance for having a good sense of social responsibility and consumers will note actions and will pay them back by showing preference for the socially responsible companies.
Future Impact
Large companies have made clear that having a social responsibility program is a way to establish the loyalty of tomorrow’s consumers. Even though these programs are of great importance now for large chains, in Colombia there is a lot of room for initiating environmental conservation programs as well. In this area Colombian retailers are lagging, but it is a matter of shared responsibility with consumers. When the Dutch cash and carry Makro came into the country, most consumers could not accept that the company does not provide bags for their purchases, and assumed that Makro was a cheap company because of this. This is mostly the perception of the older consumers. As younger consumers begin to gain more importance in the market as they grow old, green programs will become more important and the retail chains will begin implementing more of these projects, which not only are good for the environment but also are financially sustainable since they help to reduce costs. As a result these companies will become more efficient in their activities as they improve their logistics and their policies in the supply chain so that they reduce their amount of waste.
At the end of the review period there were a lot of good programs that consumers acknowledge. However, there are some that should become more advanced and be more sustainable in order for them to make meaningful contributions to society. According to some trade sources, some of these programs are just set into motion for a short time and then discarded after they are publicized; as a result consumers see them as a publicity stunt which offers no real help for society.
Strong dynamism in the retail pace is set by mergers, acquisitions and new players
One of the most important events in the retailing landscape took place recently, in 2006, when Almacenes Éxito acquired a 20% stake in Carulla-Vivero. A year later, Almacenes Éxito increased its stake in Carulla-Vivero to 72%. However, this has not been the last merger or acquisition in the country – quite the opposite, large players have acquired smaller ones and some others have merged in order to keep alive and compete with the heavy weights. In addition, new international players have entered the market, with important retail groups like the Chileans Sodimac (Homecenter and Falabella) and Cencosud (Easy), the Spanish Indetex (Zara, Stradivarius and Bershka) and MNG (Mango), and the American Collective Brands (Payless ShoeSource), amongst others. All of this corporate activity has been responsible of many of the changes in consumer habits, construction of new retailing outlets and malls, and in general an increasing dynamism of the industry.
Current Impact
The retail landscape in Colombia has changed dramatically since 2006, with a large number of mergers and acquisitions and an important number of new players interested in the market. Besides the remarkable acquisition of Carulla Vivero by Almacenes Éxito, there have been other small yet important mergers and acquisitions. Carrefour acquired Mercadefam, a local retail chain from the Santander region, which currently owns three hypermarkets, three drugstores, and one supermarket. This retail chain has a regional importance that Carrefour plans to exploit in order to become more popular in the region and to have access to an important consumer base at the same time with some specific knowledge of the customers. Carrefour also started a joint venture along with Colsubsidio to manage drugstores. In 2008 the Venezuelan Farmatodo acquired the Argentinean Farmacity drugstore business in Colombia. With this acquisition the company already enters to compete with 12 outlets in Colombia, without needing to build outlets from scratch.
A large number of international players have entered recently, like Sodimac (Homecenter, Falabella) and Cencosud (Easy), the Spanish Indetex (Zara, Stradivarius, Bershka) and MNG (Mango) and the American Collective Brands (Payless ShoeSource). These retail chains have important financial backing, which enables them to build large and appealing outlets within a very short time; they offer strong discounts to attract consumers and they also bring a different product mix, which is unusual in Colombia. In addition, when Sodimac entered the market it brought new services to Colombia like the in-store credit cards that offer customers not only in-store credit but also important discounts for the purchases made with the store cards.
Retail chains also started investing decisively in new outlets and outlet remodelling (Olímpica and Éxito) in order to be more competitive and attract consumers to their stores. New retailers brought more appealing and comfortable outlets and the retailers already present had to step up and offer the same to their customers. The retailers also started new training of personnel in customer service. The competition has also brought lower prices for consumers, as the large chains are trying to use every kind of strategy to get new customers (i.e. discounts and promotions). This has also led to the augmentation of private labels. The new competitors have brought products of great quality and low prices, and the retailers already present like Carrefour, Éxito and Olímpica have increased their number of brands and also improved their quality. These large chains now have more negotiating power and now buy from their suppliers at lower prices but on a larger scale.
In addition to these changes, retailers have also started offering new services and products that it is very rare for a retailer to offer in Colombia. Some retailers like Carrefour, Éxito and Homecenter offer things such as travel services (travel agencies), insurances, pet stores and trading of vehicles, and some of them (Carrefour) even offer self-service gas stations on the premises of their outlets. This has brought more and stronger competition to the specialized retailers (and companies) on each of these services and products.
Outlook
The industry is already very dynamic and it is going to keep making changes with every new player that enters the market. Even though most of the retailers that had announced their entrance are already in the market (Payless ShoeSource, Easy and Falabella) there are some other large ones that are still expected to enter (Wal-Mart and Office Depot). Office Depot has already decided to enter with its Mexican partner Gigante while the entrance of Wal-Mart is still unclear, although it has confirmed its interest in the country. With the entrance of these and other companies, it is likely that the retailing landscape will keep presenting changes, where the most benefited will be the consumer.
The companies will have to keep offering more services and products of high quality at affordable prices in order to attract more consumers. Over the forecast period, most large retail chains will have nicer and larger outlets, offer better customer service and offer constant discounts; it is very likely that some of the top brands’ share will be affected as private label will keep taking chunks by offering products of good quality at better prices.
Retailing outlets including Colsubsidio and Cafam that are operated by the Cajas de Compensación, which are non-profit compensation funds, are likely to be acquired by larger retailers. If not, they will need to continue to offer low prices and improve customer service. They are also expected to improve and increase their product offering to compete with private retailing chains.
Future Impact
This trend is very strong amongst all of the larger retailers that are going to compete strongly against each other. Independent retailers are not being affected as much as the large chains, which are going to have to make large investments and are going to sacrifice some margins in order to hold their position in the market as they compete. Small chains (Romi, El Trigal), however, are going to have to improve their stores and customer service to compete with the large chains. These small chains are the ones that are at larger risk since they do not have the financial strength to re-build or remodel all their stores and also do not enjoy the degree of consumer preference as the tiendas do because the latter benefit from the traditional relationship between the store owner and the customer.
On the other hand, consumers will be the most benefited with this trend because the companies are fighting to offer them better products and services at lower prices. This trend will remain strong throughout the forecast period, with the larger chains improving and innovating services. The chains that are not able to meet the new expectations of consumers are likely to disappear or be absorbed by larger retailers.
Table of contents
RETAILING IN COLOMBIA : MARKET INSIGHT
EXECUTIVE SUMMARY
Pace of retailing industry growth slows down in 2008
Consumers revert to pre-economic boom habits
Dynamism is set in motion by the entrance of foreign companies and M&A
Non-store retailing grows although it is still underdeveloped
Industry faces imminent slowdown in the forecast period
Pace of retail growth to slow because of reduced credit
Consumer habits change to face pending economic downturn
Retailers changing discounting strategies
Retailers adopting social responsibility as part of mission
Strong dynamism in the retail pace is set by mergers, acquisitions and new players
MARKET INDICATORS
Table 1 Employment in Retailing 2003-2008
MARKET DATA
Table 2 Sales in Retailing by Sector: Value 2003-2008
Table 3 Sales in Retailing by Sector: % Value Growth 2003-2008
Table 4 Sales in Retailing by Grocery vs Non-Grocery 2005-2008
Table 5 Sales in Store-Based Retailing by Sector: Value 2003-2008
Table 6 Sales in Store-Based Retailing by Sector: % Value Growth 2003-2008
Table 7 Sales in Non-store Retailing by Sector: Value 2003-2008
Table 8 Sales in Non-store Retailing by Sector: % Value Growth 2003-2008
Table 9 Retailing Company Shares: % Value 2004-2008
Table 10 Grocery Retailers Company Shares: % Value 2004-2008
Table 11 Grocery Retailers Brand Shares: % Value 2005-2008
Table 12 Non-Grocery Retailers Company Shares: % Value 2004-2008
Table 13 Non-Grocery Retailers Brand Shares: % Value 2005-2008
Table 14 Non-store Retailing Company Shares: % Value 2004-2008
Table 15 Non-store Retailing Brand Shares: % Value 2005-2008
Table 16 Forecast Sales in Retailing by Sector: Value 2008-2013
Table 17 Forecast Sales in Retailing by Sector: % Value Growth 2008-2013
Table 18 Forecast Sales in Store-Based Retailing by Sector: Value 2008-2013
Table 19 Forecast Sales in Store-Based Retailing by Sector: % Value Growth 2008-2013
Table 20 Forecast Sales in Non-store Retailing by Sector: Value 2008-2013
Table 21 Forecast Sales in Non-store Retailing by Sector: % Value Growth 2008-2013
APPENDIX
Operating environment
Cash and Carry/Warehouse Clubs
Table 22 Cash and Carry/Warehouse Clubs: Sales Value 2003-2008
Table 23 Cash and Carry/Warehouse Clubs: Sales by National Brand Owner: Sales Value 2005-2008
Table 24 Cash and Carry/Warehouse Clubs: Number of Outlets by National Brand Owner: 2005-2008
DEFINITIONS
Summary 1 Research Sources
LOCAL COMPANY PROFILES - COLOMBIA
ALMACENES ÉXITO SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 2 Almacenes Éxito SA: Key Facts
Summary 3 Almacenes Éxito SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
Summary 4 Almacenes Éxito SA: Private Label Portfolio
COMPETITIVE POSITIONING
Summary 5 Almacenes Éxito SA: Competitive Position 2008
BELSTAR SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 6 Belstar SA (Belcorp): Key Facts
Summary 7 Belstar SA (Belcorp): Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
Summary 8 Belstar SA (Belcorp): Private Label Portfolio
COMPETITIVE POSITIONING
Summary 9 Belstar SA (Belcorp): Competitive Position 2008
CACHARRERíA LA 14 SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 10 Cacharrería La 14 SA: Key Facts
Summary 11 Cacharrería La 14 SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
COMPETITIVE POSITIONING
Summary 12 Cacharrería La 14 SA: Competitive Position 2008
CARULLA VIVERO SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 13 Carulla Vivero SA: Key Facts
Summary 14 Carulla Vivero SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
Summary 15 Carulla Vivero SA: Private Label Portfolio
COMPETITIVE POSITIONING
Summary 16 Carulla Vivero SA: Competitive Position 2008
COLOMBIANA DE COMERCIO SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 17 Colombiana de Comercio SA: Key Facts
Summary 18 Colombiana de Comercio SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
Summary 19 Colombiana de Comercio SA: Private Label Portfolio
COMPETITIVE POSITIONING
Summary 20 Colombiana de Comercio SA: Competitive Position 2008
COMERCIALIZADORA DE COLECCIONES SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 21 Comercializadora de Colecciones SA: Key Facts
Summary 22 Comercializadora de Colecciones SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
COMPETITIVE POSITIONING
Summary 23 Comercializadora de Colecciones SA: Competitive Position 2008
CONFECCIONES LEONISA SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 24 Confecciones Leonisa SA: Key Facts
Summary 25 Confecciones Leonisa SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
Summary 26 Confecciones Leonisa SA: Private Label Portfolio
COMPETITIVE POSITIONING
Summary 27 Confecciones Leonisa SA: Competitive Position 2008
CUEROS VELEZ SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 28 Cueros Velez SA: Key Facts
Summary 29 Cueros Velez SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
Summary 30 Cueros Velez SA: Private Label Portfolio
COMPETITIVE POSITIONING
Summary 31 Cueros Velez SA: Competitive Position 2008
GRANDES SUPERFICIES DE COLOMBIA SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 32 Grandes Superficies de Colombia SA: Key Facts
Summary 33 Grandes Superficies de Colombia SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
Summary 34 Grandes Superficies de Colombia SA: Private Label Portfolio
COMPETITIVE POSITIONING
Summary 35 Grandes Superficies de Colombia SA: Competitive Position 2008
MAISON RIVIèRE SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 36 Maison Rivière: Key Facts
Summary 37 Maison Rivière: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
COMPETITIVE POSITIONING
Summary 38 Maison Rivière: Competitive Position 2008
MECANELECTRO SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 39 Mecanelectro SA: Key Facts
Summary 40 Mecanelectro SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
Summary 41 Mecanelectro SA: Private Label Portfolio
COMPETITIVE POSITIONING
Summary 42 Mecanelectro SA: Competitive Position 2007
PANAMERICANA LIBRERíA Y PAPELERíA SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 43 Panamericana Librería y Papelería SA: Key Facts
Summary 44 Panamericana Librería y Papelería SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
COMPETITIVE POSITIONING
Summary 45 Panamericana Librería y Papelería SA Competitive Position 2007
SODIMAC COLOMBIA SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 46 Sodimac Colombia SA: Key Facts
Summary 47 Sodimac Colombia SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
COMPETITIVE POSITIONING
Summary 48 Sodimac Colombia SA: Competitive Position 2007
SUPERTIENDAS Y DROGUERíAS OLíMPICA SA - RETAILING - COLOMBIA
STRATEGIC DIRECTION
KEY FACTS
Summary 49 Supertiendas y Droguerías Olímpica SA: Key Facts
Summary 50 Supertiendas y Droguerías Olímpica SA: Operational Indicators
COMPANY BACKGROUND
PRIVATE LABEL
Summary 51 Supertiendas y Droguerías Olímpica SA: Private Label Portfolio
COMPETITIVE POSITIONING
Summary 52 Supertiendas y Droguerías Olímpica SA: Competitive Position 2007
HYPERMARKETS IN COLOMBIA
OVERVIEW
SECTOR DATA
Table 25 Hypermarkets: Value Sales, Outlets and Selling Space 2003-2008
Table 26 Hypermarkets: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 27 Hypermarkets Company Shares by Value 2004-2008
Table 28 Hypermarkets Brand Shares by Value 2005-2008
Table 29 Hypermarkets Brand Shares by Outlets 2005-2008
Table 30 Hypermarkets Brand Shares by Selling Space 2005-2008
Table 31 Hypermarkets Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 32 Hypermarkets Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
SUPERMARKETS IN COLOMBIA
HEADLINES
OVERVIEW
SECTOR DATA
Table 33 Supermarkets: Value Sales, Outlets and Selling Space 2003-2008
Table 34 Supermarkets: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 35 Supermarkets Company Shares by Value 2004-2008
Table 36 Supermarkets Brand Shares by Value 2005-2008
Table 37 Supermarkets Brand Shares by Outlets 2005-2008
Table 38 Supermarkets Brand Shares by Selling Space 2005-2008
Table 39 Supermarkets Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 40 Supermarkets Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
DISCOUNTERS IN COLOMBIA
HEADLINES
TRENDS
COMPETITIVE LANDSCAPE
PROSPECTS
SECTOR DATA
Table 41 Discounters: Value Sales, Outlets and Selling Space 2003-2008
Table 42 Discounters: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 43 Discounters Company Shares by Value 2004-2008
Table 44 Discounters Brand Shares by Value 2005-2008
Table 45 Discounters Brand Shares by Outlets 2005-2008
Table 46 Discounters Brand Shares by Selling Space 2005-2008
Table 47 Discounters Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 48 Discounters Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
CONVENIENCE STORES IN COLOMBIA
HEADLINES
OVERVIEW
SECTOR DATA
Table 49 Convenience Stores: Value Sales, Outlets and Selling Space 2003-2008
Table 50 Convenience Stores: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 51 Convenience Stores Company Shares by Value 2004-2008
Table 52 Convenience Stores Brand Shares by Value 2005-2008
Table 53 Convenience Stores Brand Shares by Outlets 2005-2008
Table 54 Convenience Stores Brand Shares by Selling Space 2005-2008
Table 55 Convenience Stores Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 56 Convenience Stores Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
FORECOURT RETAILERS IN COLOMBIA
HEADLINES
OVERVIEW
SECTOR DATA
Table 57 Forecourt Retailers: Value Sales, Outlets and Selling Space 2003-2008
Table 58 Forecourt Retailers: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 59 Forecourt Retailers Company Shares by Value 2004-2008
Table 60 Forecourt Retailers Brand Shares by Value 2005-2008
Table 61 Forecourt Retailers Brand Shares by Outlets 2005-2008
Table 62 Forecourt Retailers Brand Shares by Selling Space 2005-2008
Table 63 Forecourt Retailers Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 64 Forecourt Retailers Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
MIXED RETAILERS IN COLOMBIA
HEADLINES
TRENDS
COMPETITIVE LANDSCAPE
PROSPECTS
SECTOR DATA
Table 65 Mixed Retailers: Value Sales, Outlets and Selling Space 2003-2008
Table 66 Mixed Retailers: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 67 Mixed Retailers Company Shares by Value 2004-2008
Table 68 Mixed Retailers Brand Shares by Value 2005-2008
Table 69 Mixed Retailers Brand Shares by Outlets 2005-2008
Table 70 Mixed Retailers Brand Shares by Selling Space 2005-2008
Table 71 Mixed Retailers Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 72 Mixed Retailers Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
HEALTH AND BEAUTY SPECIALIST RETAILERS IN COLOMBIA
HEADLINES
TRENDS
COMPETITIVE LANDSCAPE
PROSPECTS
SECTOR DATA
Table 73 Health and Beauty Retailers: Value Sales, Outlets and Selling Space 2003-2008
Table 74 Health and Beauty Retailers: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 75 Health and Beauty Retailers Company Shares by Value 2004-2008
Table 76 Health and Beauty Retailers Brand Shares by Value 2005-2008
Table 77 Health and Beauty Retailers Brand Shares by Outlets 2005-2008
Table 78 Health and Beauty Retailers Brand Shares by Selling Space 2005-2008
Table 79 Health and Beauty Retailers Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 80 Health and Beauty Retailers Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
CLOTHING AND FOOTWEAR SPECIALIST RETAILERS IN COLOMBIA
HEADLINES
OVERVIEW
SECTOR DATA
Table 81 Clothing and Footwear Retailers: Value Sales, Outlets and Selling Space 2003-2008
Table 82 Clothing and Footwear Retailers: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 83 Clothing and Footwear Retailers Company Shares by Value 2004-2008
Table 84 Clothing and Footwear Retailers Brand Shares by Value 2005-2008
Table 85 Clothing and Footwear Retailers Brand Shares by Outlets 2005-2008
Table 86 Clothing and Footwear Retailers Brand Shares by Selling Space 2005-2008
Table 87 Clothing and Footwear Retailers Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 88 Clothing and Footwear Retailers Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
FURNITURE AND FURNISHINGS STORES IN COLOMBIA
HEADLINES
OVERVIEW
SECTOR DATA
Table 89 Furniture and Furnishings Stores: Value Sales, Outlets and Selling Space 2003-2008
Table 90 Furniture and Furnishings Stores: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 91 Furniture and Furnishings Stores Company Shares by Value 2004-2008
Table 92 Furniture and Furnishings Stores Brand Shares by Value 2005-2008
Table 93 Furniture and Furnishings Stores Brand Shares by Outlets 2005-2008
Table 94 Furniture and Furnishings Stores Brand Shares by Selling Space 2005-2008
Table 95 Furniture and Furnishings Stores Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 96 Furniture and Furnishings Stores Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
DIY, HOME IMPROVEMENT AND GARDEN CENTRES IN COLOMBIA
HEADLINES
OVERVIEW
SECTOR DATA
Table 97 DIY, Home Improvement and Garden Centres: Value Sales, Outlets and Selling Space 2003-2008
Table 98 DIY, Home Improvement and Garden Centres: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 99 DIY, Home Improvement and Garden Centres Company Shares by Value 2004-2008
Table 100 DIY, Home Improvement and Garden Centres Brand Shares by Value 2005-2008
Table 101 DIY, Home Improvement and Garden Centres Brand Shares by Outlets 2005-2008
Table 102 DIY, Home Improvement and Garden Centres Brand Shares by Selling Space 2005-2008
Table 103 DIY, Home Improvement and Garden Centres Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 104 DIY, Home Improvement and Garden Centres Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
ELECTRONICS AND APPLIANCE SPECIALIST RETAILERS IN COLOMBIA
HEADLINES
OVERVIEW
SECTOR DATA
Table 105 Electronics and Appliance Specialist Retailers: Value Sales, Outlets and Selling Space 2003-2008
Table 106 Electronics and Appliance Specialist Retailers: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 107 Electronics and Appliance Specialist Retailers Company Shares by Value 2004-2008
Table 108 Electronics and Appliance Specialist Retailers Brand Shares by Value 2005-2008
Table 109 Electronics and Appliance Specialist Retailers Brand Shares by Outlets 2005-2008
Table 110 Electronics and Appliance Specialist Retailers Brand Shares by Selling Space 2005-2008
Table 111 Electronics and Appliance Specialist Retailers Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 112 Electronics and Appliance Specialist Retailers Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
LEISURE AND PERSONAL GOODS SPECIALIST RETAILERS IN COLOMBIA
HEADLINES
OVERVIEW
SECTOR DATA
Table 113 Leisure and Personal Goods Specialist Retailers: Value Sales, Outlets and Selling Space 2003-2008
Table 114 Leisure and Personal Goods Specialist Retailers: Value Sales, Outlets and Selling Space: % Growth 2003-2008
Table 115 Leisure and Personal Goods Specialist Retailers Company Shares by Value 2004-2008
Table 116 Leisure and Personal Goods Specialist Retailers Brand Shares by Value 2005-2008
Table 117 Leisure and Personal Goods Specialist Retailers Brand Shares by Outlets 2005-2008
Table 118 Leisure and Personal Goods Specialist Retailers Brand Shares by Selling Space 2005-2008
Table 119 Leisure and Personal Goods Specialist Retailers Forecasts: Value Sales, Outlets and Selling Space 2008-2013
Table 120 Leisure and Personal Goods Specialist Retailers Forecasts: Value Sales, Outlets and Selling Space: % Growth 2008-2013
VENDING IN COLOMBIA
HEADLINES
TRENDS
COMPETITIVE LANDSCAPE
PROSPECTS
SECTOR DATA
Table 121 Vending: Value 2003-2008
Table 122 Vending: % Value Growth 2003-2008
Table 123 Vending Company Shares by Value 2004-2008
Table 124 Vending Brand Shares by Value 2005-2008
Table 125 Vending Forecasts: Value 2008-2013
Table 126 Vending Forecasts: % Value Growth 2008-2013
HOMESHOPPING IN COLOMBIA
HEADLINES
TRENDS
COMPETITIVE LANDSCAPE
PROSPECTS
SECTOR DATA
Table 127 Homeshopping: Value 2003-2008
Table 128 Homeshopping: % Value Growth 2003-2008
Table 129 Homeshopping Company Shares by Value 2004-2008
Table 130 Homeshopping Brand Shares by Value 2005-2008
Table 131 Homeshopping Forecasts: Value 2008-2013
Table 132 Homeshopping Forecasts: % Value Growth 2008-2013
INTERNET RETAILING IN COLOMBIA
HEADLINES
TRENDS
COMPETITIVE LANDSCAPE
PROSPECTS
SECTOR DATA
Table 133 Internet Retailing: Value 2003-2008
Table 134 Internet Retailing: % Value Growth 2003-2008
Table 135 Internet Retailing Company Shares by Value 2004-2008
Table 136 Internet Retailing Brand Shares by Value 2005-2008
Table 137 Internet Retailing Forecasts: Value 2008-2013
Table 138 Internet Retailing Forecasts: % Value Growth 2008-2013
DIRECT SELLING IN COLOMBIA
HEADLINES
TRENDS
COMPETITIVE LANDSCAPE
PROSPECTS
SECTOR DATA
Table 139 Direct Selling: Value 2003-2008
Table 140 Direct Selling: % Value Growth 2003-2008
Table 141 Direct Selling Company Shares by Value 2004-2008
Table 142 Direct Selling Brand Shares by Value 2005-2008
Table 143 Direct Selling Forecasts: Value 2008-2013
Table 144 Direct Selling Forecasts: % Value Growth 2008-2013