Retailing in Belgium

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Overview

Discover the latest market trends and uncover sources of future market growth for the Retailing industry in Belgium with research from Euromonitor's team of in-country analysts.

Find hidden opportunities in the most current research data available, understand competitive threats with our detailed market analysis, and plan your corporate strategy with our expert qualitative analysis and growth projections.

If you're in the Retailing industry in Belgium, our research will save you time and money while empowering you to make informed, profitable decisions.

When you purchase this report, you also get the data and the content from these category reports in Belgium for free:

• Clothing and footwear specialist retailers
• Convenience stores
• Direct selling
• Discounters
• DIY, home improvement and garden centres
• Electronics and appliance specialist retailers
• Forecourt retailers
• Furniture and furnishings stores
• Grocery retailers
• Health and beauty specialist retailers
• Homeshopping
• Hypermarkets
• Internet retailing
• Leisure and personal goods specialist retailers
• Mixed retailers
• Non-grocery retailers
• Non-store retailing
• Supermarkets
• Vending

The Retailing in Belgium market research report includes:

• Analysis of key supply-side and demand trends
• Detailed segmentation of international and local products
• Historic number of stores, selling space and values, company and brand market shares
• Five year forecasts of market trends and market growth
• Robust and transparent market research methodology, conducted in-country

Our market research reports answer questions such as:

• How big is the grocery/non-grocery/non-store channel in Belgium?
• Who are the leading retailers in Belgium?
• How is retailing performing in Belgium?
• What is the retailing environment like in Belgium?
• Which channels are winning or losing in the fight for consumers’ money?

Why buy this report?

• Gain competitive intelligence about market leaders
• Track key industry trends, opportunities and threats
• Inform your marketing, brand, strategy and market development, sales and supply functions

This industry report originates from Passport, our Retailing market research database.

Sample Analysis

Slight recovery in retailing in 2010

During the global financial crisis, and in 2010, the economic situation did not seem to be too disastrous in Belgium in comparison with other countries. Despite the threat of unemployment, the purchasing power of Belgians did not really decline, notably thanks to the indexation of salaries to inflation. Even so, most Belgians still had the feeling that the cost of living was increasing more than their wages. Coupled with worrying signs of political instability, this resulted in positive but still sluggish current value growth in retailing in 2010.

Internet retailing is the big winner

Fuelled by the cocooning trend, the need for convenience and the lower prices offered by a growing number of web stores in Belgium, non-store retailing performed much better than store-based retailing in 2010. With double-digit growth in current value terms, internet retailing enjoyed the widening of both its offer, with hundreds of new entrants in 2010, and demand. In addition to men, women and older consumers are now increasingly trusting and using the internet for their purchases. This was at the expense of homeshopping, although specialised brands such as La Redoute and 3 Suisses managed to transfer their sales from catalogue to the internet. Whilst vending reached saturation, direct selling recruited more workers and consumers in 2009-2010. For women, the party plan was a perfect means to conciliate family life and work; women are also the dominant consumers in this channel.

Grocery retailers fare better than non-grocery retailers

Grocery retailing fared marginally better than non-grocery retailing in 2010. Belgians wanted more control over their expenses, and put off buying some non-essential purchases. The hardest hit areas were interior decoration, furniture and furnishings, beauty products, media products, and, to a lesser extent, clothing and footwear and consumer electronics. Both grocery and non-grocery retailing paid for the growing cannibalisation by internet retailing, but particularly non-grocery retailing. Indeed, web stores for grocery products were much less well-established and dynamic than those specialised in leisure and personal goods, clothing and footwear and electronics and appliances.

Local retailers forge ahead in a fragmented competitive environment

The overall competitive environment remained fragmented in 2010, having long been in the hands of independent retailers and small local chains. Chained outlets maintained a relatively modest presence in Belgium. The top five NBOs accounted for a quarter of value sales in store-based retailing in 2010, with all other players holding individual value shares of 1% or less. Local retailers such as Etn Franz Colruyt, Louis Delhaize and Delhaize Group saw a stronger performance than foreign operators such as Carrefour Belgium; the latter faced growing difficulties in operating in Belgium, particularly in hypermarkets.

Slight improvement in the medium term

Due to weak economic recovery and the absence of a real improvement in unemployment, there is still uncertainty amongst players about the future performance of retailing in the coming five years. As a result of a lack of financing for independents and franchisees, the total number of outlets in retailing is predicted to decline over the forecast period. However, overall value sales in retailing are expected to slightly increase over 2010-2015. Many Belgians will have to make choices, and prioritise some product types. Non-store retailing is expected to continue to post dynamic growth. The fastest growth channels in store-based retailing are expected to be convenience stores, supermarkets, traditional toys and games stores and sports goods stores.

KEY TRENDS AND DEVELOPMENTS

Economic conditions – fragile signs of recovery

The economic situation in 2010 did not seem to be too disastrous in Belgium in comparison with other countries, with GDP growth projected to stand at 1% according to the European Commission. The unemployment rate in Belgium was lower than in most advanced countries. It was 8% in 2009; however, it edged upwards in 2010. In addition, economists calculated that despite the threat of unemployment, the purchasing power of Belgians did not really decline, thanks to the indexation of salaries to inflation, the decline of real estate prices and transportation costs, and the stabilisation of prices of fmcg products.

Even so, most Belgians had the feeling that the cost of living was rising, and that it increased more than their wages until the end of 2009. The economic crisis made Belgians save more than usual, which was not good news for consumption. Whilst it was 11% on average for the whole EU, the saving rate in the county was 17% in 2009. Consumers only began to be reassured in mid-2010, according to a survey led by CRIOC, a consumer trade union.

Lastly, the country’s long-running and divisive constitutional debate, which has seen the unitary state transformed into a much more federal system, continued in 2009 and 2010.

Current Impact

The health of the economy, and thus consumer confidence, has a direct effect on traffic and sales in retailing. A non-favourable GDP growth rate and higher unemployment usually act as a drag on this market. Helped by the ongoing inflation of raw materials and energy, value sales continued to increase steadily in 2008, but suddenly declined in early 2009, and only began to slightly recover at the end of 2009. Although the recession seemed to have less of an effect in Belgium than in most other European countries, its effect was such that there was strong pressure on consumer expenditure. Retailers even spoke about a wind of panic in winter and spring 2009, when Belgian consumers realised that there really was a recession.

In 2010, the recovery of consumer confidence, and thus consumption, was still weak. Although the crisis had a less detrimental effect on the Belgian economy than on the economies of most other Western European countries, the psychological effect of the recession and the threat of unemployment were such that consumers still tightened their belts. Although the purchasing power of Belgian consumers probably did not decline, they sensed that the cost of living was rising, and was increasing by more than their wages. Combined with a weak level of inflation, retail sales posted positive but still sluggish growth of 1% in current value terms in 2010.

Consumers became increasingly price-sensitive, and began to weigh up what they considered to be more crucial or value-for-money products, and which were actually superfluous. This acted in favour of sales in grocery retailing, which fared slightly better than non-grocery retailing in 2010. Without the decline of Carrefour hypermarkets, sales in grocery retailing could have posted much stronger growth in 2010.

Regarding investment, the last couple of years were marked by a growing dichotomy between retailers which had to close outlets (such as Carrefour, Morgan, Intersport and Sonica) or did not have sufficient resources to invest, and those which took the opportunity of remodelling and opening new outlets, or even creating new concepts. In grocery retailing, Delhaize Group put the soft discounting experience of Red Market up against the smart discounting concept of Colruyt. Multipharma Groupe seemed to start a success story with its new iU parapharmacies/drugstores. Looking like a spa centre, iU is positioned as a standard/premium parapharmacy, with a wide range of cosmetics brands. Lastly, after a difficult first half of the review period, Free Record Shop strongly recovered, with the complete remodelling of its concept and design, with more interactivity with consumers, limited stocks and total rebranding.

Outlook

After a difficult period in 2009 and early 2010, the European Commission gave new estimates for the short-term. GDP growth is expected to jump from 1.3% in 2010 to 1.6% in 2011, and the deficit should remain stable, in the region of 5%. The country’s economy, which is export-oriented, should enjoy a marked recovery in international trade, enabling it to increase more than the average for the euro area (1%). CRIOC observed for the first time since 2008 signs of recovery in the consumer confidence index, and in purchasing behaviour in 2010. In addition, Belgians are more confident than most Europeans about the future; at least about their pensions, accordion to a survey by AXA in 2010. Six Belgians out of 10 are sure that their future pension should be sufficient, while only 46% of Europeans are so optimistic, according to the same survey.

Even so, economists still worry about the Belgian recovery. According to economists and the European Commission, Belgian exports lost market share in products and services during the economic crisis and the recovery, notably because they are specialised in areas which are easy to copycat, such as chemistry or steel. Rising labour costs, which were more pronounced than in the euro area, also negatively affected the competitiveness of Belgium. Exports were also directed mainly towards the euro area, while they did not find many opportunities in emerging countries with higher growth.

The European Commission expects an increase in the unemployment rate from 7.9% in 2009 and 8.8% in 2010 to 9.0% in 2011. On unchanged policies, the budget deficit would also not fall in 2011, which the government expects to reach 4%. The debt should reach 99% of GDP in 2010, and again exceed the threshold of 100% in 2011; a level it has not reached since 2002.

Lastly, uncertainty associated with the major political crisis which opposes the two main communities in the country will further complicate the situation. Flanders, home to Belgium’s Dutch-speaking majority, will continue to crave more regional power to reflect its prosperity. It also resents subsidising the poorer, French-speaking Wallonia region in the south. If Belgians will not find consensus, some constitutional experts fear that it could gradually become a confederation of two largely autonomous states.

This will not restore the confidence of foreign investors. In 2010, a survey by IBM Global Business observed that 2009 was the worst year for the number of new investment projects by foreign companies in many years. Whilst this number remained stable in Wallonia, it dropped in Flanders. This can be attributed to a still low level of competiveness in the country, although the risk of separation between the two communities is also frightening investors.

Future Impact

Thus, there is still uncertainty amongst players about the future performance of retailing in the coming five years. As a result of a lack of financing for independents and franchisees, the total number of outlets in retailing is predicted to decline by 4% by the end of the forecast period. However, sales are expected to increase by a slight 2% in constant value terms over 2010-2015, in line with the performance of the market over the review period.

According to a survey published by Fedis in mid-2010, around 90% of retailers expect stabilisation or even an increase in their profitability in the short term, and 28% will invest more. However, this is much better than the previous survey in 2009, in which only 24% were ready to invest more, and 37% declared that they wanted to invest less. In addition, 88% of food stores and supermarkets had expansion plans in Belgium at the end of 2010, according to a survey by CB Richard Ellis. This rate was 73% for clothing, shoes, sport and leisure chains, and 71% in home furnishings. Players at a standstill or on the decline, such as Carrefour Belgium and Di, are expected to concentrate on rejuvenating their stores and closing less profitable outlets.

However, the risk of a new global recession is expected to have a strong effect on consumer spending in retailing. During periods of economic slowdown, consumers generally allocate less of their budget to areas of expenditure such as clothing, transport, leisure and foodservice. The polarisation observed over the review period is expected to continue, with growing demand for the discount end of the market on the one hand, and the fragile loyalty of upper-middle-income groups to luxury and indulgence products on the other. This should result in the better fate of grocery retailers, which is expected to increase by 3% in constant value terms, than non-grocery retailing, which is expected to decline by 1% over the forecast period 2010-2015. Both are expected to bear the brunt of growing cannibalisation by the growth in internet retailing, more particularly non-grocery retailing. Indeed, web stores specialising in grocery products are much less well-established and dynamic than those specialised in leisure and personal goods, clothing and footwear or electronics and appliances.

Internet retailing – ongoing explosion of demand and the offer

Again, many factors acted in favour of the development of alternative channels to traditional store-based retailing. Conditions were still favourable for the development of internet retailing; primarily the extensive development of demand and the offer.

Belgians were much slower than many of their counterparts elsewhere in Europe to embrace the internet. Nonetheless, they quickly made up for their delay in this area towards the end of the review period. About 60% of Belgian households owned an internet-enabled computer in 2010, while more than 95% of internet subscriptions were broadband. One of the priorities of the Belgian government for many years has been to boost internet use, and mainly broadband access.

In addition, the internet benefited from a wider audience in recent years, notably amongst women and older people. Whilst the first internet purchasers were often men who went on an adventure in search of new gadgets or new books”, women have grasped the internet for their shopping during the last couple of years, such as forums and clubs for fashion, lifestyles or organic food. The same applied to older people who had more confidence in the stores they knew, rather than websites overseas. These consumers have also become increasingly acquainted with the internet, and now use internet retailing.

The real awakening of internet retailing in the middle of the review period attracted a growing number of players. There were 5,000 web stores in Belgium at the end of 2009, and 6,000 are expected by the end of 2010.

Current Impact

Therefore, in spite of constraints such as the small Belgian population, its three official languages and the high retail density in the country, internet retailing increased by 15% in 2010 in current value terms. This was the best progression in overall retailing, but was at the expense of homeshopping, which saw a current value decline of 8% in 2010.

The most dynamic products were media products, housewares and home furnishings, clothing and footwear, consumer electronics and consumer appliances internet retailing in 2010. The only product types which were not as dynamic in 2010 were beauty and personal care and consumer healthcare internet retailing. This stemmed from the slowdown of premium brands in the former, and vitamins and dietary supplements in the latter, as they were considered less crucial products in the context of economic recession.

Although it does not account for a large share of sales (only 2% of value sales in 2010), the effect of internet retailing is important. It makes it easier to compare prices, widens choice and enables retailers to compete in product areas in which they have not traditionally been involved. Other than convenience, price and promotions drove growth in 2009-2010. In clothing and footwear internet retailing, for instance, thanks to the efficiency and originality of La Redoute, and mainly 3 Suisses, promotional sales seemed to be run almost permanently, and women sought the best bargains. This “discount hunt” was also evidenced by the impressive emergence of “private sales” in 2009-2010 in Belgium, notably Vente-Exclusive. This online outlet store organises sales of mid-priced and upmarket brands exclusively for its members, with interesting discounts of between 30% and 70% compared with the consumer retail price.

Store-based retailers could see internet retailing as both a competitor and an opportunity. On the one hand, strong franchised networks were reluctant to develop online sales, as it would directly cannibalise the store-based sales of their members. On the other hand, other well-established store-based retailers became “bricks and clicks” players in 2009-2010. After the success of Brantano in 2008-2009, Eldi and Carrefour entered internet retailing in 2010. In fact, other than Amazon.com, “bricks and clicks” retailers enjoyed the most interesting progression in actual value sales. Indeed, new internet customers frequently opted for a “bricks and clicks” retailer for their first internet purchases in order to be reassured. Pure internet retailers often experienced the most dynamic progression in percentage terms, although they started from a low base, such as Newpharma and Vente-Exclusive.

Outlook

The context should remain favourable for the ongoing development of internet retailing in the forecast five years. The share of the population expected to have home internet access could easily surpass two-thirds of the country by 2015. At the time of writing, more than four million Belgians already had conducted an internet purchase.

More and more first-time internet shoppers will become acquainted with this new channel, shop online more often, and become more confident paying online. Whilst some Belgians will continue to use traditional methods (cash on delivery or bank order), others are expected to increasingly trust complementary online payment methods such as credit cards (Visa, MasterCard and American Express), MisterCash, or PayPal, along with the growth of online bank accounts, the development of the BeCommerce label and the safety guarantee of Ogone.

Lastly, experts predict a continuous progression of advertising and direct marketing via the internet. A comparison with other Western European countries shows that the internet is still an under-utilised medium by manufacturers and retailers in Belgium, according to IAB Europe, the European trade association of internet marketing. Even so, whilst traditional media were affected by the crisis, online advertising expenditure nearly tripled from 2006, to reach €129 million in 2009. This was proportionally lower than in bordering countries, however. Once Belgian companies have better identified the possibilities of this channel, internet sales should benefit from better marketing support.

Future Impact

This should translate into a still impressive constant value increase of 55% over the forecast period 2010-2015 in internet retailing. Despite the absence of strong economic recovery, local experts are confident about internet retailing, as per capita consumption is still much lower than in France or the Netherlands, which leaves substantial room for growth. In 2009, for instance, the Netherlands already had 23,000 web stores and 3.5 times higher turnover in internet retailing (including services), according to local trade press.

This rise in internet retailing will be at the expense of other sales channels, including homeshopping, which is expected to see sales decline by 36% in constant value terms over the forecast period. However, the future gains of internet retailing will offset the losses in homeshopping; for instance in the sales of brands such as 3 Suisses and La Redoute.

The increasingly wide product offer and improved online payment solutions are also expected to fuel growth for internet retailing. The economic crisis does not seem to have severely affected sales on the internet, as this channel enables consumers to save time and money.

Pricing will also have a key role, albeit with disparate effects on various channels. Thanks to the cut prices of players such as Vente-Exclusive, Amazon.com and Coolblue, media products, clothing and electronics should become even cheaper than store-based retailers, and thus forge ahead. However, consumers still have to pay for delivery or collect from the retail store in food and drinks internet retailing, which should hamper growth in this area.

The development of internet retailing could encourage some consumers to shun store-based retailing in the long term, but the majority of consumers are expected to remain loyal to “bricks and clicks” players, mainly in grocery retailing. Pure internet players, such as Vente-Exclusive and its followers Snapstore and outlet-avenue.be, and the “social shopping” specialists (Groupolitan, Groupon and Promocity) will remain the fastest growing operators, but still from a low base. Instead, the most dynamic players in absolute value terms will be “bricks and clicks” companies, as most Belgians still need the reassurance of the “bricks” players (or the reputation of a homeshopping specialist such as 3 Suisses or La Redoute) for their first purchases on the internet.

Government regulation – pragmatism remains law

During the review period, the Belgian retail environment came close to saturation, with too many stores per inhabitant compared with the majority of European countries. In terms of total sales area, there were 2.4 sq m per capita in Belgium in 2010, which was much higher than in the majority of countries in Western Europe.

Even so, the Belgian government’s attitude was not slanted towards more regulation during the review period. From 2005, it tried to relax restrictions on the retail environment in Belgium in order to provide it with greater stimulus. It passed a law simplifying the procedure for registering new businesses and gaining licences in order to spur competition. This law was soon called the Ikea law, because trade unions and independent retailers said it would favour the larger chains, and make it more difficult for independent shops with sales area below 400 sq m to open. Not all experts agreed, but many said that smaller outlets faced more hurdles getting authorisation, thus leaving the field clear for the big chains, which are more established and experienced in areas such as legal issues and lobbying.

Current Impact

Experts have different opinions when it comes to the question of to what extent the Ikea law has contributed to the decline of small independent retailers and the rise of large, often multinational retail chains. Channel saturation, increased competition and the fact that larger chains often have more experience and power when it comes to acquiring licenses for opening new outlets has led to a rise in chained retailers and a decline in small and independent shops over the last few years. For projects of more than 1,000 sq m, municipalities take the opinion of the National Socio-Economic Distribution (members of which include officials, social partners, Fedis and the Union of the middle classes), but this opinion is not binding.

As a consequence, many large retailers were able to gain value share at the expense of smaller and independent players. Whereas most large chained operators were able to maintain their strong positions in the Belgian retail landscape, independent and/or small retailers suffered from having less stable financial positions. Accounting for the majority of “others”, these small independent retailers dropped from 78% of the total sales area in 2004 to less than 75% in 2010. Meanwhile, the value share of “others” fell from 58% in 2004 to 54% in 2010.

Outlook

From the beginning of 2010, with the door opened by the Bolkenstein directive, trade unions and politicians propose to make the legislation more locally-adapted and pragmatic. Indeed, from then onwards, the opinions rendered by the National Committee further lost relevance, since the entry into force of the European directive “services” (or Bolkenstein) now prohibits taking into account the criteria of economy or employment to justify a decision. A project cannot be refused because it could have a negative impact on existing businesses. Therefore, trade unions and politicians want to regionalise legislation and give more power to provinces and municipalities. A new balance has to be found between supermarkets and hypermarkets, which are generally located on the outskirts of towns, and traditional stores in city centres.

Pragmatism should also dominate in the area of the fight against piracy. Against illegal downloading, Belgium is not expected to adopt tough legislation, such as Hadopi in France.

Future Impact

As a result of ongoing discussions and regulatory changes, many retailers adopted a wait-and-see strategy when it came to expansion before 2010. However, this was already changing at the time of writing. The number of projects for big commercial infrastructures, which tended slow down in 2008-2010, strongly recovered in 2010, according to local experts.

Outlets specialised in leisure and personal goods and clothing and footwear should stay in and even come back to city centres, while the periphery will be more devoted to shopping for furniture or appliances. However, although independent stores and small local chains have long characterised retailing, and should still dominate in 2015, their share will continue to fall. Less profitable than chains, the majority of independents will have lower financial resources to survive. Therefore, as in 2010, 2011 and 2012 are anticipated to see a wave of closures amongst independent players, notably in non-grocery channels such as clothing and footwear specialist retailers.

Lastly, illegal downloading will continue to be a serious direct threat to media products internet retailing. There will also be continuing scepticism amongst many Belgians about paying online. However, rather than repressive legislation such as Hadopi, which does not seem to be efficient in France, Belgians will still prefer the pragmatism of their softer approach, and mainly the development of the offer. Sales of CDs, DVDs and books should forge ahead in coming years thanks to more accessible prices and dynamic players such as Fnac, iTunes, and, more particularly, Amazon.com.

Private label – the road roller speeds up

The context was obviously ideal for the development of private label during the last couple of years of the review period. According to Fedis, the overall value share of private label jumped from 30% in 2005 to more than 32% in 2010, with an acceleration in 2009-2010 due to the growing price-sensitivity of Belgian consumers.

Private label, with cut prices on economy products, or conversely with strong efforts in mid-priced to upmarket products, was often the lethal weapon of the supermarket chains against discounters, but also against A brands. In many categories, private label was the great winner of the economic crisis; logically in basic products such as home care, nutrition and staples and meal solutions, but also surprisingly in impulse and indulgence products such as chocolate confectionery. Given that Belgians place a strong emphasis on quality, and given the strong brand equity in chocolate confectionery, this shows the ability of private label to question A brands even in their core business.

Private label was not widespread in products with a high level of sophistication, such as electronics and appliances or leisure and personal goods, however. In clothing and footwear private label progressed thanks to the development of mono-brand franchised concepts such as Zara and H&M (if considering their own brands to be private label), at the expense of multi-brand outlets, which are often independent stores in this channel, or department stores.

Current Impact

Therefore, private label was increasingly able to convince Belgian consumers, even within the upper-middle classes in 2009-2010. Already, prior to the review period, Delhaize Group was the main specialist in upmarket private label products, notably with organic packaged food and drinks and gastronomic ready meals, cheeses and wines.

However, the majority of retailers, including Delhaize Group, increasingly focused on low-cost private label products in recent years, even before the credit crunch. The impressive breakthrough of discounters until 2008 forced other retailers to counter-attack with better value for money private label products. Without forgetting its focus on quality, Delhaize widened its Delhaize 365 low-cost private label range, and further reduced its prices from 2008. As a result, Test-Achat (a local consumer association), which put Delhaize in 10th position in September 2009 in terms of price-competitiveness, put it in second place in the middle of 2010. Lastly, Carrefour Belgium further cut prices on thousands of products and created the Carrefour Discount private label brand in 2009. It was aligned to discounter prices or low-cost products, but with slightly higher quality, such as the Tesco Value range in the UK.

Obsessed by the focus on low prices and the fight against discounters, other retailers chose to replace the most challenging or most expensive branded products with their own private label products. Thus, many small and mid-sized brands declined in fmcg markets in 2009 and 2010.

Outlook

Now that it already accounts for almost a third of value sales in store-based retailing, private label could reach a share of 40% by 2015. Its progress is expected to be more important in actual value sales in grocery retailing, in which it is more prominent than in non-grocery retailing. In supermarkets, private label could take advantage of the slow recovery to spread to under-exploited areas, such as indulgence products.

Although an upgrading movement is possible within private label, notably thanks to organic products in beauty and personal care, for instance, the main priority for grocery retailers in the short term will be to widen and improve their low-cost offering. Even though retailers’ purchasing power has increased, and has enabled them to offer ever more sophisticated private label ranges, the forecast entry of the Dutch chain Ahold is expected to trigger a new price war in the short term.

Future Impact

Again, the main victims of the expected upsurge in private label will be brands, primarily B brands and small and mid-sized manufacturers which do not have sufficient resources to defend their place on store shelves. In fmcg products, retailers are expected to allocate more room for their private label and low-cost products, at the expense of the leading brands in the category (such as Kellogg’s in breakfast cereals in 2009). To support the efforts on prices and promotions, retailers are likely to be further demanding of their suppliers, which will result in more conflicts, such as the Delhaize vs Unilever duel in 2009. While mainstream brands which are available in all chains should not be affected by the changing distribution environment, small and mid-sized players could benefit from or regret the choices they make in terms of distribution. For instance, operators which succeeded in entering Lidl’s shelves could consequently face issues with other retailers, while some others could lose feathers with the fall of Carrefour. By the same token, the progression of private label should be indirectly fed by the success of mono-brand chains in clothing and footwear, and the expected breakthrough of superstores such as Decathlon in sports goods stores.

The ongoing development of private label should not obstruct the performance of the market in the coming years, however. A brands will remain the drivers of retail value sales, and even soft discounters such as Colruyt will never renounce their power of attraction. While manufacturers were less active in advertising, and reverted to tactical promotional in-store support in 2008-2009, they had already dedicated more budget on average to strategic above-the-line campaigns in 2010. Nonetheless, in order to face the upsurge of private label, players still focused on coupons, displays, games, discounts and BOGOF (buy-one-get-one-free) promotions.

Back to roots at home

During an economic downturn, more than ever consumers feel the need to withdraw into the “cocoon” of their home, a place where they can spend time with their families or with video games, the internet or television. Home is also a place where they can find protection from external factors and offset their increasingly hectic lifestyles during the week. Research by INS (National Institute of Statistics) recently revealed that the favourite activities of Belgians were lying down and sleeping, with considerable time dedicated to watching television. Accordingly, Belgians still frequented cheap fast food restaurants, but increasingly tended to replace traditional restaurants with home cooking and a dinner with friends at home at the weekend.

Current Impact

Belgians often switched to essential, economic and durable activities such as home cooking; this was, for example, reflected in the positive performance of grocery retailers overall. Sports goods stores also benefited, mainly thanks to the impact of the Belgian government’s efforts to communicate the need for healthy eating and physically active lifestyles. Increasing by 3% in current value terms, sports goods stores was one of most dynamic categories in leisure and personal goods specialist retailers in 2010.

As in 2009, retail channels which are related to activities at home, with family or friends, did not suffer particularly badly from the sluggish economic environment. This was exemplified by the slight recovery of DIY, home improvement and garden centres, which increased by 3% in current value terms in 2010, although it remained slightly under the CAGR in the review period. The cocooning trend, the popularity of barbecues and the growing importance of designing one’s own home encouraged men, and increasingly women, to participate in home improvement and garden beautification. Belgian parents also refused to sacrifice their children’s toys and games. Whilst industry sources were already surprised by the positive performance of traditional toys and games stores in 2008, they enthused about the 6% current value growth of the channel in 2009, which was almost repeated in 2010.

Lastly, the cocooning trend acted in favour of non-store retailing, which increased by 9% in current value terms in 2010. It benefited internet retailing, obviously, but also direct selling, another alternative to store-based retailing. More particularly, for women the party plan was a perfect means to conciliate family life and work; women were also the dominant consumers in this channel. The crisis paradoxically had a positive effect on direct selling, as it enabled this channel to recruit a larger sales force and it was able to maintain a growth rate of 4% in current value terms in 2010.

Outlook

The trend towards cocooning is expected to benefit at-home leisure and sports activities. Before the credit crunch, the average amount of time taken to prepare a meal was expected to decline to just eight minutes by 2010 in Europe, according to research conducted by the Economist Intelligence Unit. However, the recession questioned this forecast; Belgians are rediscovering the need to cook at home, and are buying fresh products and ingredients, according to Euromonitor International.

Belgians are also expected to continue rediscovering their gastronomic roots and the pleasure associated with cooking at home. In the first two years of the forecast period at least, kitchens are expected to be the centre of life in Belgian households, whilst good home cooks have become stars in the media. This is exemplified by the hit television show “Un Diner Presque Parfait” (the Belgian equivalent of Come Dine with Me), which features ordinary people inviting each other for dinner – and giving a mark to their host after each meal.

Given the high unemployment rate, which is expected to last throughout 2010, consumers are likely to keep tightening their belts. They are forecast to keep postponing larger purchases such as cars, and shorten the distance of their holidays. Many of them will remain at home more often during their holidays.

Future impact

As Belgians stay at home more due to the cocooning trend, they are expected to dedicate more time and money to DIY and gardening. The cultivation of vegetable gardens allows consumers to save money, and at the same time eat more authentic and natural fruit and vegetables, which is in itself a developing trend in Belgium. Thus, sales in DIY, home improvement and garden centres are expected to enjoy modest but still positive constant value growth of 5% over the forecast period 2010-2015.

Sports goods stores is expected to see an increase of 8% in constant value terms over the forecast period. Decathlon, for instance, has ambitious projects for Belgium, as it plans to reach 80 outlets in Benelux by 2017. Buoyed by dynamic chains such as Fun (FUN Belgium), traditional toys and games stores is expected to increase by 9% in constant value terms over the forecast period.

The cocooning trend also proved favourable for electronics and appliance specialist retailers. However, sales in this channel are expected to level off in constant value terms over the forecast period, notably due to growing cannibalisation by internet retailing.

This explosion of purchases for the home should also fuel sales in non-store retailing, which are expected to increase by 30% over the forecast period 2010-2015. Other than internet retailing, direct selling is also anticipated to increase, by 10% in constant value terms over the forecast period. The ongoing recession and growing unemployment should ease the recruitment of a sales force which is mainly comprised of women, who mix family and job obligations.

Growing need to save time and money

The high degree of urbanisation and population density, and the growing number of DINKs (couples with double income and no children) created opportunities for marketers to emphasise convenience, which is greatly appreciated by people living in cities. Single-person households, more particularly young singles, are relatively affluent and particularly numerous in the country. Their number is also rising, growing from 29% of all households in 1990 to more than 33% in 2010, equating to 1.5 million households, according to Euromonitor International. In addition to upper-middle class senior citizens, single-person households are more open than others to buying products or services offering more convenience.

Couples without children also account for an increasing proportion of households in Belgium, showing a robust growth rate of 6% over the review period. Many couples are not starting a family until later in life, whilst others are choosing not to have children at all. The growth of the middle-aged population, and especially of baby-boomers, is accompanied by a high proportion of households without children, as they have already left home.

Current Impact

These urban consumers tend to be less likely to frequent hypermarkets, which are positioned more as one-stop shopping destinations for big families. Price, proximity and convenience are amongst the major requirements of Belgian consumers. The continued busy lifestyles of consumers resulted in an increased desire to shop at times and places which suited them. The feeling of declining purchasing power amongst Belgians, the success of Delhaize, and mainly Colruyt, were instrumental in the still healthy growth of 4% in current value terms in supermarkets in 2010.

Convenience and proximity also contributed to good levels of growth for operators of convenience stores, and outlets which open late in urban locations. Thus, despite a slowdown in growth compared with the early years of the review period due to the poor economic climate, convenience stores saw current value growth of 2% in 2010. Belgium is characterised by a dense network of shops positioned between small supermarkets and convenience stores.

The demand for convenience should theoretically have bolstered vending sales. Technology has recently evolved, and now fruit, ice cream, pizza and ready meals can be sold through vending machines and paid for by various methods. However, sales in the channel levelled out in 2010 due to the declining interest of teenagers in snacking and drinking products, and the lack of new locations.

Outlook

Population density is projected to increase further to 2015, reaching 323 inhabitants per sq km, according to Euromonitor International. Urban communities will slowly but inevitably replace rural areas. Simultaneously, the rural population is shrinking, and is expected to fall to 264,000 in 2015, down from 283,000 in 2005.

Despite the expected decline in the cost of property in the short term, many Belgians will continue to live on the cheaper outskirts of towns in order to offset their declining purchasing power. Although the time spent at work is not expected to increase, the time travelling and spent outside the home from Monday to Friday is not predicted to decline. In fact, in order to avoid increasingly frequent traffic jams, Belgians are expected to increasingly use public transport in the coming five years.

By 2015, single-person households are expected to account for 35% of all households, or 1.6 million households, according to Euromonitor International. For the period 1990-2015, the growth rate of single-person households is estimated at 39%. Lastly, there will be 1.1 million couples without children in Belgium, representing 24% of the total population. Of all households, DINKs have the most significant spending power in terms of consumer groups in Belgium, and especially households in which both partners work.

Future impact

In the forecast five years, the main selling points are expected to be value-for-money and convenience. The decline of large families will not act in favour of hypermarkets. Combined with the ongoing difficulties of Carrefour, this is expected to result in a decline of 12% in hypermarkets in the forecast period.

Instead, Belgians should continue to favour convenience stores, and mainly supermarkets. The latter should benefit from the preference of Belgian consumers, particularly thanks to the competition between Colruyt, Delhaize and probably soon Ahold. More profitable and less developed than supermarkets, convenience stores is expected to increase by 13% in constant value terms in the forecast five years by better suiting singles, and older consumers with limited mobility.

The outlook is less favourable for vending, which is expected to stagnate over the forecast period. Before 2009, there was general consensus that vending had important assets, such as high quality products at an excellent price, which could help it to resist economic and financial pressure. Mainstream players could attempt to trigger more impulse purchases by launching more convenient and technologically-advanced machines, and finding more profitable locations. However, due to declining sales and a risk of saturation, more operators are expected to disappear in the short term. Even though consumers are less sensitive to price when they buy products from automated shops or vending machines, an increasing number of consumers will have to tighten their belts, and could try to limit non-essential purchases.

MARKET INDICATORS

MARKET DATA

APPENDIX

Operating environment

Foreign direct investment in retail

• No special laws governing foreign direct investment in Belgium are in place in the retail market.

• Attitudes towards international retailers with major projects seem to be negative when they pose a threat to local independent shop operators. Nevertheless, according to international retailers, the launch of a shopping centre or major store usually creates more employment than the jobs such projects take away from the closure of small retailers in their catchment area.

• Despite the success of its first stores in Belgium and its strong potential in the country, Decathlon Belgium still finds it difficult to obtain authorisation to open new superstores in sports goods retailing. Some local authorities tried to limit its development in order to protect independent stores in recent years. Nonetheless, Decathlon finally got the upper hand in 2010, and opened new outlets. Three new stores are already planned in 2011-2012 in Belgium.

Informal retailing

• Informal retailing is almost a taboo topic in Belgium, and one of the only available figures is given by Friedrich Schneider of the Austrian university of Linz. According to this source, the grey economy accounted for 18% of national GDP in 2009. As in other European countries, which are witnessing a comeback of “shadow economies” due to the crisis, this rate recovered from 2008.

• Informal retailing appears to be less important in retailing than in consumer foodservice, in which many nightclub owners and bartenders illegally purchase drinks using cash. However, although it concerns lower amounts than in bars and nightclubs, a substantial share of small, independent convenience stores and bakeries also buy products such as confectionery with cash in supermarkets.

• Another trend was seen in retail sales of wine. Rising interest in such products was such that some Belgians created their own private business in this area. They imported hundreds of bottles from France, creating stores in a garage, for example, and resold this wine at a margin to neighbours, friends or colleagues.

• However, the most important phenomenon was the ongoing development of cross-border purchases. Belgium is particularly concerned, given its location at the centre of the EU, between countries with high levels of taxation on alcoholic drinks, such as the UK, and lower levels of taxation, such as France. The French Federation of Cognac Producers estimated that more than 10% of the cognac consumed in Belgium was purchased in France in 2007. Many Belgians bring bottles of still wine and champagne back from trips to France. Luxembourg is a popular stopping-off place where Belgians often buy petrol when they go to France or Germany, as it is much cheaper. With the money gained due to the price differential of petrol with Belgium, they can afford to purchase one or two bottles of spirits, which are sold at a lower price.

• During the review period this phenomenon increased due to high taxes on packaging and the high Belgian sales tax rate of 21%. According to Fedis, cross-border purchases increased by almost 50% over 2004-2008. According to the same source, one Belgian family in four made cross-border purchases during 2004-2008.

Opening hours

• There were two separate laws governing retail opening hours in Belgium in 2010; one for a mandatory rest day every week and the other covering evening opening hours. These will be harmonised in the forecast period. The new laws will not change the overall number of hours that a shop can open, but will give retailers greater flexibility regarding when they open.

• In 2009, shops could stay open for 91 hours per week in Belgium, although the average was 67 hours per week, which was 11 hours longer than the European average. Most stores generally open from 09:00hrs to 18:00hrs, although supermarkets are commonly open from 08:30hrs to 21:00hrs. Some stores close at lunchtime, from 12.00hrs to 14:00hrs.

• Retailers such as florists and newsagents can open outside normal shop hours, and in principle may open 24 hours a day.

• Petrol stations can open their shops 24 hours a day, as long as petrol and oil sales represent a minimum of 50% of total turnover.

• The Royal Act of 29 November 2007 gave authorisation to open six Sundays per year, instead of the previous three. Convenience stores, bakers and butchers in tourist and seaside locations are commonly open on Sundays.

Retail landscape

• Although discounters and superstores often seek cheap locations on the outskirts of towns, retailing in Belgium is primarily dominated by urban stores. The population of Belgium is overwhelmingly urban, with urban areas home to 97% of all inhabitants in 2010.

• The country has a strong tradition of small supermarkets and convenience stores, which has led to mixed results for hypermarkets. Despite the ongoing decline of independent stores due to cannibalisation of sales by branded outlets, (the majority of which were located in towns) they remained dominant in 2010.

• Luxury retailers, independent or not, are generally located in downtown areas, often pedestrian zones and high streets.

• According to UNIZO (“Unie van Zelfstandige Ondernemers” – association of independent entrepreneurs), the Ikea law resulted in an explosion of large stores and shopping centres, often at the expense of traditional retail destinations. In fact, according to Fedis, although it acted in favour of large stores such as Ikea (Ikea Belgium) and Media Markt (Media Markt-Saturn Belgium), located on the edge of towns, one of the effects of the law was to increase the replacement of independent convenience stores with chained outlets.

• In addition, Fedis argued that shopping centres were still underdeveloped in the country, given that there was 92 sq m of shopping centre per 1,000 inhabitants in 2007, compared with an average of 176 sq m in Europe as a whole.

Cash and carry

• Cash and carry were still under-represented in 2010 in comparison with border countries such as Germany or France. This stemmed from the persisting dominance of small and mid-sized independent wholesalers, which continued to deliver products to foodservice outlets.

• The main trend in 2009-2010 was a decline in sales in consumer foodservice. The economic crisis, and the collapse of consumer confidence, resulted in the impressive decline of traffic in full-service restaurants and most independent horeca outlets. Although cash and carry was generally better buffeted against this decline than wholesalers due to sales to non-professional consumers, sales in cash and carry outlets also declined in 2009-2010.

• Even so, according to industry sources, the field was still clear and under-exploited for well-organised cash and carry. Belgium was one of the leading countries in Western Europe in terms of the number of foodservice outlets per 1,000 inhabitants, at less than five outlets in 2010, while the average number for Western Europe was three. Small and medium independent wholesalers which offered logistics services to foodservice outlets were too specialised or lacked competitiveness in comparison with chains such as Makro, and mainly Metro, operated by Metro AG. There is still substantial scope for growth of one-stop-shopping cash and carry concepts such as offered by these two chains in Belgium.

• Small businesses remained the core target of cash and carry; however, the share of individual consumers was so important in Makro stores that this chain was often included in local retailing figures, for instance in Nielsen data.

• Individual consumers represent a strong consumer base for cash and carry, owing to the ease with which a Makro card can be obtained. Theoretically, Makro’s clients need to be buying for a company, institution or association. However, being an employee, an independent worker or a member of an association was a sufficient condition to become a cash and carry client. With a membership card, individual consumers can buy items for themselves in cash and carry outlets.

• Current trends will shape the future of cash and carry operations. Despite the optimism of some sources, the scope for development in cash and carry is not bright, due to the current economic downturn in consumer foodservice. Independent cafés/bars and small restaurants, which are crucial clients for cash and carry, suffered in 2008-2009 and saw a further decline in 2010. The recession and an excessive number of foodservice outlets in Belgium may see hundreds of independent bars and small restaurants close during the early part of the forecast period. Leading foodservice chains, which were less affected in 2009-2010, should continue to perform better than independent outlets. However, as manufacturers or large wholesalers directly supply these companies, they will rarely frequent cash and carry outlets, and thus will not necessarily counter the downturn seen amongst independent operators.

• Another threat is likely to stem from direct and indirect competitors to cash and carry. Large chained wholesalers such as Conway and Sugro-Caritas, both operated by Lekkerland Deutschland, as well as operators such Trendy Foods, are expected to continue to cannibalise the sales of small and mid-sized wholesalers. Owing to their well-organised and profitable logistics operations, they are likely to gain a growing and loyal base of small retailers and foodservice outlets. Indirect competition from some supermarkets and discounters is also expected to become tougher. Yet at the time of writing, many nightclub owners continued to pay cash for their drinks in Colruyt (Etn Franz Colruyt), to disguise their revenue. If inflation continues to increase in the short term, Colruyt should see a further expansion of its consumer base amongst foodservice operators.

• Metro AG monopolised the competitive environment of chained cash and carry in 2010. With only six Makro and five Metro outlets, it achieved a turnover of EUR1.3 billion in 2009. After entering Belgium in 1973, the German group discovered a market with many independent wholesalers, but no real direct competitors. Makro established its presence by targeting particular consumers and behaving almost as a supermarket chain. In order to better target foodservice outlets, it opened its first Metro outlet in 2003.

• During the last couple of years, Metro fared better than Makro, and even scored a hit according to the company itself. Other than the absence of strong competition, the new “customer management” of Metro paid off, notably thanks to CRM (Consumer Related Management) and the reorganisation of its staff. One of its main assets is its wide assortment of 60,000 food and non-food items and the freshness of its products. The German chain also tries to adapt to local tastes, for instance by offering Dutch mussels, a much appreciated product in Belgium, with stringent quality control. Hygiene and security are strong assets for Metro, offering clients ice and special containers to maintain the cold chain.

• Due to these assets and the under-exploited potential of the Belgian market, Metro AG hopes to open one or two Metro outlets per year during the forecast period, and reach a total of 15 outlets in the long term.

• Makro should fare better in the coming years than over the period 2008-2010. Although included in cash and carry, the chain seemed to decline as a result of its positioning close to hypermarkets – a format which does not perform very well in Belgium. In order to recover, Makro wishes to meet the needs of underexploited targets, such as professionals, and better exploit its 1.8 million consumer database. For instance, whilst it already satisfies the private needs of a lawyer, for instance, it should try to offer stationery/office supplies solutions and professional furniture to such a target in the short term. To achieve this aim, Makro is expected to launch better targeted folders and promotional offers.

DEFINITIONS

This report analyses the market for retailing in Belgium. For the purposes of the study, the market has been defined as follows:

Store-based retailing

• Grocery retailers

• Hypermarkets

• Supermarkets

• Discounters

• Small grocery retailers

Convenience stores

Forecourt retailers: Chained forecourt retailers; Independent forecourt retailers

Independent small grocers

• Food/drink/tobacco specialists

• Other grocery retailers

• Non-grocery retailers

• Mixed retailers

Department stores

Variety stores

Mass merchandisers

Warehouse clubs

• Health and beauty specialist retailers

Chemists/pharmacies

Parapharmacies/drugstores

Beauty specialist retailers

Other healthcare specialist retailers

• Clothing and footwear specialist retailers

• Home and garden specialist retailers

Furniture and furnishings stores

DIY, home improvement and garden centres

• Electronics and appliance specialist retailers

• Leisure and personal goods specialist retailers

Booksellers and stationers

Audio-visual stores

Toys and games stores

Sports goods stores

Pet shops and superstores

Other leisure and personal goods specialist retailers

• Other non-grocery retailers

Non-store retailing

• Vending

• Homeshopping

• Internet retailing

• Direct selling

Sources used during research include the following:

STRATEGIC DIRECTION

• With 445 stores, Aldi was the leading chain in terms of number of outlets in Belgium in 2010. Even so, the German player began to bear the brunt of this leadership, as some Aldi stores in Belgium seriously cannibalise sales of others within the chain. There are simply too many Aldi outlets, too close to one another. Therefore, when opening new stores, Aldi will have to focus on smaller towns in order to avoid further cannibalisation.

• Another priority for Aldi is expected to be to counterattack in the area of pricing in the short term. First, after Colruyt, its biggest rival, began highlighting unit price comparisons from 2008, Delhaize also began to put “cheaper than in Aldi” stickers on some of its products. Lastly, the Dutch chain Ahold, which has an aggressive reputation in the area of pricing, is said to enter the Belgian market in 2010. Given that adoption of a soft discounting strategy in the short term this is unlikely, mainly due the mixed results of Lidl in this area, Aldi should focus on its core business of cutting prices, proximity and “in and out” product operations, and capitalise on its greatest asset; the strong brand-loyalty of its consumers. At the time of writing, eight out of 10 Belgians had already frequented an Aldi store at least once in the year.

KEY FACTS

INTERNET STRATEGY

• At the time of writing, there was no Aldi web store in Belgium, and no sources had heard about future plans in this area. Aldi uses its aldi-bf.aldi.be site as a shop window, and mainly to enhance its “in and out” promotional operations.

COMPANY BACKGROUND

• The Aldi brand is part of the German Aldi Group, which is a private company owned by the Albercht brothers. It is divided into two companies – Aldi South and Aldi North. The Belgian operation is part of the Aldi North company.

• Aldi’s Belgian operation is managed by six regional divisions, located at Erpe, Rijkevorsel, Gembloux, Roeselare, Vaux-sur-Sûre and Huesder Zolder.

• Aldi entered Belgium in 1966, but did not really begin to expand its presence until 1980. It was during the 1990s that it really started to see significant growth.

• Aldi’s outlets tend to be 800-1,200 sq m, situated on land which provides enough space for a car park which can accommodate 100 cars, as well as deliveries by lorry. Generally located on cheaper land on the edges of towns, it builds cheap warehouses, employs a skeleton staff (on average only three to four people work in each outlet at any one time), and displays its private label products on pallets rather than on shelves.

• Aldi’s strategy is to provide a limited range of products, with a maximum of two brands per product, and 70% of the products it offers in the country are of Belgian origin, while 90% of stocked food items are dried goods. Although Aldi claims to place an emphasis on fresh produce and high quality, it is positioned at the low end of the market. It aims to keep costs low by maintaining a spartan, unfussy appearance in its outlets, and carrying a much smaller range of products.

• From the middle of the 1980s, the German discounter led an astonishing breakthrough in the country, owing to its simple discounter business model and the opening of dozens of outlets every year. To generate regular traffic, one of its strongest assets is its “in and out” product policy, whereby an item is made available for a short period of time, until it sells out. These promotions cover non-food items such as bicycles, clothes, toys, consumer appliances and even computers.

• According to a survey conducted during the review period by McKinsey consultants in Belgium, consumers perceive little difference in quality, range or service at Aldi compared with traditional retailers, although they rate Aldi as better value.

PRIVATE LABEL

• Aldi mainly sells private label products, claiming that this allows it to maintain high quality, whilst also keeping its prices to a minimum. It carries a range of around 700 strongly discounted products, compared with the 2,500 discounted items stocked in a standard supermarket. The limited selection it carries also simplifies shipping and handling.

• Aldi carries a broad private label portfolio. It uses a different private label name for every product category, with the result that it has hundreds of private label brands.

• Although Aldi’s products are positioned at the discount end of the market, the International Food Standard certifies most of its suppliers; this is a quality system which exceeds accepted international standards.

• Aldi launched the Trader Joe’s private label range in Belgium in 2008.

COMPETITIVE POSITIONING

• Aldi is the most important company in discounters in Belgium, and this is the only category in which it is present. In 2010 its sales accounted for a 72% value share in discounters.

• Aldi claims that two-thirds of Belgian households regularly shop at Aldi. Therefore, it is the fourth-largest retailer in Belgium, and the largest discounter. Within the grocery retailers channel, the Aldi brand had the highest number of outlets in the country in 2010, at 445.

• Despite a slowdown in recent years, Aldi still enjoyed slight growth in the second half of the review period, and thus strengthened its leading position. It benefited from the disappointing result of Lidl in 2009, and mainly in 2010.

• Even so, although its actual value sales did not decline, Aldi lost some ground to supermarket chains such as Delhaize and Lidl in terms of value share. This can be attributed to the possible saturation of the German leader in Belgium, and a subsequent strong slowdown in its number of openings. Although its profitability is amongst the highest in retailing, it slowed down in recent years, according to trade press.

• A strong threat to Aldi is Etn Franz Colruyt with Colruyt, which is printing the price differences between its own products and those of Aldi and Lidl (Lidl België) on its receipts. For a similar level of quality, Colruyt claims that its stores are at least 10% cheaper than the two German discounters. As previously mentioned, Delhaize started to do the same thing at the end of 2010.

• In Belgium, Aldi still benefits from strong brand loyalty amongst its customers. There is one Aldi for every 20,000 people in Germany, compared with 8,000 in Belgium. However, the share of discounters in Belgium will always be much lower than in Germany due to local habits and the preference for small supermarkets.

STRATEGIC DIRECTION

• AS Watson (Health & Beauty Europe), the retailing arm of Hutchison Whampoa Ltd in Belgium, is expected to forge ahead in the coming five years, owing to its bipolar strategy. First, it should reach saturation in terms of potential openings, although its Kruidvat low-cost chain should continue to gain ground in cosmetics and toiletries thanks to its value-for-money exclusive brands. It should remain true to form in the area of discounts and pricing; nonetheless, the beginning of upgrading is possible in this chain. Indeed, Kruidvat began to test smarter outlets at the end of 2010, and developed its ability to offer advice. In continuation of its long-term diversification policy, it also offered more services, such as the ability to buy bus tickets and book trains.

• At the upper end of health and beauty specialist retailers, ICI Paris XL is expected to continue the trend seen over the review period, by applying a 20% automatic discount on every product sold in its outlets of ICI Paris XL. This should deter many potential foreign candidates from questioning the leadership of this chain. The luxury chain is also expected to invest more in media advertising, and mainly its recently launched web store.

KEY FACTS

INTERNET STRATEGY

• From the middle of the review period, some selective cosmetics brands tried to develop their sales through the internet (often across the French border). This enabled them to better control their distribution and avoid the discounting policy of ICI Paris XL and Planet Parfum. However, the ICI Paris chain has just joined them, by launching its own web store at the end of 2009 (included in others in internet retailing). For the moment, ICI Paris is the only “bricks and clicks” player within beauty specialist retailers, and should benefit from this situation in the short term.

COMPANY BACKGROUND

• AS Watson (Health & Beauty Europe), which belongs to Hutchison Whampoa Ltd of Hong Kong, owns Kruidvat and ICI Paris, having acquired them in 2002 to form part of its retailing operations, which span 33 countries, and it operates 7,400 stores. Kruidvat entered the Belgian market in 1992, and by 2009 had 166 outlets throughout the country.

• As well as its Kruidvat health and beauty specialist retailers and ICI Paris beauty specialist retailers, Hutchison Whampoa also owns and operates seaports in Belgium.

• ICI Paris was founded in Belgium in the late 1970s, and has become the leading chain in beauty specialist retailers in the country. In 2010, there were 109 ICI Paris outlets in Belgium. A discount policy is always applied in Belgium, with its products averaging 20% below the prices in other outlets. ICI Paris would prefer to position itself as a high-end retailer, but customers tend to consider it as a discount beauty specialist retailer.

• The strategy of Kruidvat has been to concentrate on more local locations, moving away from the high street. Its strategy is to provide high quality with competitive prices.

• Kruidvat and ICI Paris stores are spread throughout Belgium.

• At the beginning of the review period, AS Watson (Health & Beauty Europe) built a new distribution centre for Kruidvat and ICI Paris. Costing €40 million, the centre provided 100 new jobs, and is situated just outside Brussels.

PRIVATE LABEL

• The vast majority of Kruidvat’s product range consists of Kruidvat private label products or minor A brands. High-end labels are not present, in line with its image as a low-end health and beauty specialist retailer.

• ICI Paris carries a wide range of national A brands, although it does not offer super-premium products.

COMPETITIVE POSITIONING

• AS Watson (Health & Beauty Europe) held a value share of 6% in health and beauty specialist retailers in 2010. It was the most important player within chained health and beauty specialist retailers, first with its Kruidvat format, and then with ICI Paris. The latter relies on its chic Parisian image, but only has a dozen self-service shops, preferring instead to display its cosmetics products behind a counter or glass windows in order to facilitate an advice service to customers. It launched a web store in 2009, and rejuvenated its communication with a new magazine, My Beauty, which replaced the previous Beauty & You magazine in 2010.

• Kruidvat was the leading brand in parapharmacies/drugstores in 2010, positioned at the low-end of the market, as it does not carry any high-end brands, with the exception of some premium fragrances imported from the Netherlands.

• Kruidvat considers itself to be an innovator, by expanding the range of products offered beyond traditional health and beauty specialist retailers to include fast-moving non-cosmetic items such as low-priced CDs, toys, housewares and a photo service. Kruidvat offers a wide and varied range of drugstore products, as well as confectionery and premium fragrances, with consistently low prices. During the last couple of years, its offer even included electronics, appliances and audio-visual products, and even booking services in order to create traffic.

• One of the most important challenges for Kruidvat in the short term will be the deregulation of the distribution of OTC products, which the government intends to carry out in 2010-2011. However, many consumer healthcare experts consider that OTC registered medicines should not gain a foothold on drugstores’ shelves during the forecast period.

STRATEGIC DIRECTION

• In the coming years Blokker Nederland’s Blokker and CASA brands are expected to further face the high concentration of outlets which sell cheap (and almost disposable) furniture and furnishings products, and the consequent adverse impact on the image of variety stores. In addition, Blokker, CASA and Leen Bakker will have to defend against the increased competition from grocery retailers and Ikea (Ikea Belgium).

• However, owing to the smaller size of its stores, Blokker is likely to continue to develop in towns in which Ikea cannot establish a foothold, as Blokker outlets require a much more modest consumer catchment area than the Swedish stores. In addition, Blokker outlets are able to benefit from the flexibility of the franchise system. Lastly, Blokker and CASA focus mainly on Flanders and Brussels, which have more economic potential than Wallonia.

KEY FACTS

INTERNET STRATEGY

• Bart Smit (included in “others” in internet retailing) was one of the first “bricks and clicks” retailers in Belgium with a Dutch speaking webstore, bartsmit.com. Blokker and CASA were still not present in internet retailing in the middle of 2010, and there are no plans for a possible diversification in this area in the short term. However, Blokker has already proposed an online photo development service with Kodak images.

COMPANY BACKGROUND

• Blokker Nederland is a large Dutch family-owned concern which was first formed in Hoorn in the north of the Netherlands in 1896.

• The various businesses operated by Blokker Nederland are all within non-grocery retailing. With three large distribution centres, the company can supply thousands of products to hundreds of outlets in the Netherlands and Belgium.

• In 2010, Blokker Nederland operated 207 Blokker branded shops in variety stores in Belgium, selling a range of products for the home and garden. Most outlets also sell gift items, while some outlets also sell gardening equipment. Some outlets are even dedicated to the sale of gardening items. Blokker Nederland also owns the CASA chain of housewares products in variety stores. The first CASA shop opened in the Ottingies shopping centre in Belgium in 1975, although it was not until CASA was taken over by Blokker Holding in 1988 that expansion began in earnest. With its headquarters in Itegem in Belgium, there were 95 CASA outlets in the country in 2010, two-thirds of which were owned and operated directly by CASA.

• In terms of traditional toys and games stores, Blokker Nederland operates 52 Bart Smit and 16 Intertoys outlets. Its Bart Smit outlets are mainly situated in Dutch-speaking Vlaanderen. These outlets offer games, multimedia items and fashionable consumer electronics such as mobile telephones and digital cameras. Most recently, Bart Smit has been developing an E-Plaza format, focused on the sale of electronic games software and hardware. These are situated in prime retail locations, but are generally small, with just 100-120 sq m of sales area. There were three E-Plazas in Flanders and two in Wallonia in 2010. All E-Plazas are company-owned and operated, while all distribution for E-Plaza shops is handled centrally from Volendam in the Netherlands. These shops are more upmarket than others owned by Blokker Nederland; designed to appeal to fashionable young consumers. Blokker also operates Intertoys stores, featuring both traditional toys and electronic games. In larger outlets, a separate room is set aside for electronic items.

• Blokker Nederland tried to establish a more fashionable image for its toys and games stores in order to attract younger consumers in the second half of the review period. It broadened the range of goods carried to reflect the latest developments in these categories, focusing particularly on electronic and multimedia items.

• In Belgium, Blokker also operates 59 Leen Bakker home and garden specialist retail outlets, offering furniture as well as accessories for the home, in addition to seasonal items.

• With the exception of Bart Smit, which is mainly concentrated in Flanders, Blokker’s retail outlets are generally located throughout Belgium.

PRIVATE LABEL

• In its variety stores Blokker offers a wide range of unbranded merchandise, all of which is supplied centrally. Some branded merchandise is always available on promotion at Blokker branded stores. Its traditional toys and games stores offer a wide range of national A brands.

• The private label goods offered by Blokker in its variety stores are generally positioned at the low, discount end of the market.

• In its Leen Bakker furniture and furnishings stores, all products offered are under the Leen Bakker private label.

COMPETITIVE POSITIONING

• Blokker Nederland is active only in non-grocery retailing; more specifically in variety stores, which it led with a value share of 79% in 2010. It is also active in furniture and furnishings stores, in which it was second after Ikea in 2010 with a 2% share, and in traditional toys and games stores, in which it was third in 2010 with a share of 9%. Its success notably relies on the franchise system, which enables it to establish a presence almost anywhere in the country.

• Blokker Nederland outlets are generally positioned at the lower end of the market, offering strongly competitive prices; this includes its traditional toys and games stores. Both its CASA and Blokker brands led variety stores in Belgium during the review period by exploiting the cocooning trend, with thousands of value-for-money products. Until 2007, their growth was fed by the growing attraction for table arts/decoration, particularly by the sale of crockery, small furniture and other decorative items.

• However, the attraction for table arts/decoration (arts de la table in French) and, more particularly, crockery, small furniture and other decorative items, declined in recent years, which could affect CASA’s sales. In general, CASA and Blokker outlets are cramped and untidy, and much of the merchandise is unbranded. Some marketers do not see Blokker as a particularly innovative retailer, as little seems to change in terms of the products offered. The exception to this is in its development of the E-Plaza/Bart Smit format, which is designed to attract younger consumers.

STRATEGIC DIRECTION

• 2010 interrupted the previous strategy of C & A België in Belgium. Indeed, international chains such as C&A and H&M, which often develop through the opening of new outlets, are very close to saturation in Belgium. Therefore, C & A België had to benefit from diversification of its flagship brand and develop further brand extensions, such as C & A Kids, and mainly Avanti, a budget brand which was launched in 2009. Such a strategy enabled it to avoid internal cannibalisation, and to follow the trend for a new generation of low-cost chains.

• However, the C&A Shoes test store was a failure locally in 2009-2010. Also, despite a promising start, Avanti was stopped in 2010 due to its failure in Germany. Maintaining four outlets in Belgium was not profitable. The solution could be to develop other C&A Kids, which has already benefited from the transformation of some Avanti and C&A Shoes outlets. However, it remains to be seen whether this will be sufficient to give a new impetus to C & A België in Belgium.

KEY FACTS

INTERNET STRATEGY

• C & A België has already attempted to sell online, in 1999, but suddenly decided to give up its activities after the bankruptcy of Boo.com in 2000 in the Netherlands. While Inditex - Industria de Diseño Textil could launch its Zara web store in the country in the next two years, no other diversification plans in the area of internet retailing have been seen by C & in Belgium.

COMPANY BACKGROUND

• C & A België is a family concern dating from 1841, owned by the Brenninkmeijer family. It is present in 13 countries across Europe. The company claims that two million people visit a C&A store every day.

• The company is present only in clothing and footwear specialist retailers.

• C & A aims to increase its share through a programme of renovations across its stores, which it began in 2004. It is focusing on the expansion of its presence in smaller towns in Belgium. To speed up its development, it acquired 30 ex-Marca outlets from Superconflex in 2005, which it converted to C&A stores in 2006.

PRIVATE LABEL

• Focused on the low to mid-price range, C & A België exclusively sells private label products, and offers 12 private label brands.

COMPETITIVE POSITIONING

• Holding a value share of 7% in 2010, C & A België was the leading company in clothing and footwear specialist retailers. Its main selling points remain offering good quality products at the “right price” and adapting its range to local demand. Like H&M, C & A België aims to choose strong store locations in downtown areas or large shopping centres, and then capitalise on low prices and fashionable designs to stimulate traffic.

• Its rapid development, based on the acquisition of more outlets during the first half of the review period, ensured impressive current value growth before 2009. As in other countries, C & A België tested C&A Kids stores, included in the C&A brand in 2008.

• Some of its competitors observed that the progression of C & A in Belgium was primarily attributed to its extensive strategy of openings. In fact, its sales per outlet declined after 2008. With a presence in the main towns in Belgium, C & A is now concentrating on penetrating smaller towns in the country. Its priority is to further modernise its outlets and concepts.

• C & A België is facing growing competition from players focusing on the low-end of the market with increasingly low prices, notably within grocery retailers. It also has to compete against dynamic operators such as Hennes & Mauritz (H&M) Belgium, which are further moving into family, children’s and more upmarket segments.

• Thus it launched Avanti in 2009, a new low-cost format which had similar prices to low-cost specialists such as Zeeman (included in clothing and footwear specialist retailers), Wibra and Trafic. However, the company also had to reposition C&A Shoes, the test store for which was already a failure in 2009.

• In 2010, Avanti by C&A was stopped, despite a promising start due to the acquisition of Go Sport (which is leaving the country). In fact, the failure was mainly in Germany, where the concept has been stopped. However, maintaining four outlets in Belgium was not profitable.

STRATEGIC DIRECTION

• After hitting rock-bottom, Carrefour Belgium could recover soon in Belgium. 2010 was a bad year for the subsidiary of the French retailer, which had to close 14 hypermarkets and some supermarkets during the year. For many years, Carrefour Belgium had to face increasingly aggressive and dynamic competitors, such as Colruyt, ageing real estate assets, the decline of its non-adapted hypermarkets and the uncertain positioning of its supermarkets.

• However, Carrefour Belgium has not had its last word. The end of 2010 witnessed some signs of improvement for the French chain in Belgium, according to local trade press. In addition, the fact that Group Mestdagh is expected to transform its Champion outlets into Carrefour Markets should give more presence and power to the French chain in Belgium. Carrefour Belgium also plans to invest €300 million in the coming years to rejuvenate its supermarkets and hypermarkets. Lastly, like in France and Spain, the Belgian subsidiary is now testing the new concept Carrefour Planet.

KEY FACTS

INTERNET STRATEGY

• Unlike in France, Carrefour Belgium still did not have a web store with a delivery service in 2010. Like Delhaize a few years ago, in 2009 it launched an internet retailing service (ordering via the internet and collecting at the retail store). Due to the short distances and the high density of retailing in the country, most grocery retailers were still reluctant to launch a web store with a delivery service in the country.

COMPANY BACKGROUND

• Carrefour is a publicly-traded company, with its headquarters in France. In Belgium, a quarter of its stores are owned by Carrefour SA, with the rest operated as franchises. Purchasing is carried out centrally from Brussels for outlets in Belgium.

• Carrefour originally entered the Belgian market in 2000, and initially focused on hypermarkets under the Carrefour brand. In 2001 it took over the GB brand from GIB, allowing it to enter the supermarkets and convenience stores channels.

• In 2010, Carrefour continued to experiment with self-service checkout facilities for its customers in Belgium. However, its stated intention is that no more than 20% of its checkouts will be self-service, in order to maintain personal contact with customers.

• In line with its aim of contributing to sustainable environmental development, Carrefour began to experiment with the sale of products derived from “responsible fishing”, selling fish products which meet the criteria of allowing ecosystems to renew the fish stock.

• After the “together with our customers” plan, Carrefour launched the “my clients first” programme in 2009 in some pilot outlets to improve its image. Its Carrefour GB supermarkets and GB Express supermarkets became Carrefour Market and Carrefour Express respectively in 2009.

PRIVATE LABEL

• Since its acquisition of GB, Carrefour has slowly replaced GB products in order to maintain customer loyalty to the old private label range. It placed emphasis on its private label products in the review period, and reduced the prices of many of its private label products, as well as national A brands, in order to boost sales.

• Carrefour offers a wide portfolio of private label products, ranging from low-priced products to value-added offerings, emphasising freshness at the high end of the market.

• Aiming to counter the strategies of Aldi (Aldi Group) and Lidl (Lidl België), Carrefour introduced the leading private label brand N°1 towards the end of the review period, positioning these products as offering the lowest prices available in Belgium.

• From 2009, Carrefour Belgium further cut prices on thousands of products, and created the Carrefour Discount private label brand in 2009. It was aligned to discounters prices or low-cost products, but with slightly higher quality, such as the Tesco Value range in the UK.

• At the other end of the price scale, Carrefour also focused on expanding its range of private label products in rather sophisticated packaged food and drinks, particularly in the area of fresh and organic products.

COMPETITIVE POSITIONING

• Carrefour concentrates on food retailing in Belgium, although its stores also offer non-food items, particularly its hypermarkets. It offers products catering to a wide variety of customers, with products ranging from budget goods to high-end products.

• While Carrefour’s share was within reach of the leaders Delhaize Group and Etn Franz Colruyt in grocery retailing in Belgium in 2004, the company continuously lost ground to these competitors towards the end of the review period.

• During the review period the company found it difficult to build a homogenous and attractive image which was an alternative to its competitors. A local expert perfectly summarised the situation with this sentence, “We know we go to Colruyt because its prices are the lowest in the market. We also know that at Delhaize we find higher quality. But why do we go to Carrefour?”. To remain competitive with Colruyt it dropped the prices of products across the board, which did not prove to be a successful move, as Colruyt could afford to drop them lower.

• Carrefour’s recent strategy in Belgium has been to gain share through a strong pricing offensive, reducing the prices of national brands as well as Carrefour and GB products. It launched the new Carrefour Discount brand, focused on food, and particularly on fresh products, and replaced the old GB name with the Carrefour Market brand.

• The supermarkets of Carrefour Belgium still ranked amongst the lowest in terms of satisfaction and brand image in 2009-2010, and continued to yield ground to Colruyt and even Delhaize, since the latter was perceived as cheaper than one or two years ago. It lost the image battle against Delhaize, and mainly Colruyt (included in supermarkets), in terms of the best value for money chain in grocery retailers. Despite its huge international purchasing power, it was more than 8% more expensive than Colruyt in 2009.

• Despite its restructuring plan, most sources agree that Carrefour has not yet found the solution to enable it to overcome its difficulties in Belgium. The French retailer inherited the social conflicts of GB, and still faced poor industrial relations in 2010. Its labour costs increased more rapidly than turnover, placing increased pressure on margins.

• Nevertheless, the French retailer has some major assets. In order to better adapt to local consumer tastes and utilise tailor-made direct marketing advertising and offers, the French retailer improved its CRM methods (Consumer Related Management). Whilst two-thirds of Belgian households held its Happy Days loyalty card in 2008, it replaced it with the more generous Carrefour Bonus Card in 2009. It decided to dedicate a budget of €50 million to improve customer loyalty with promotions, coupons, discounts and gifts.

• Carrefour Belgium is a good performer in the modest but still promising category of convenience stores. Many Carrefour Express convenience stores are in fact small supermarkets, and are very highly profitable, with a strong neighbourhood strategy.

• Carrefour could achieve a surprising recovery later in the forecast period, if the test for Carrefour Planet is successful. This new concept of hypermarkets has numerous assets, such as more specialised shelves, greater collaboration with famous non-grocery brands, and the enhancement of fresh and local products. However, experts have doubts about such premiumisation of its positioning (while consumers are focusing on price), and the ability of Carrefour staff to provide services and advice in outlets other than the current Carrefour Planet pilot store.

STRATEGIC DIRECTION

• Years after its launch, the XL plan Delhaize Group set up to recover its sales paid off in 2010. This should encourage the Belgian retailer to forge ahead in the same direction. Without forgetting its attachment to quality, gastronomy and lasting development, it will probably focus on further improving its image in the area of pricing and developing new concepts. A new price war is dangerous and hopeless, given that Colruyt will always have the capacity to offer lower prices. Therefore, Delhaize Group will try to hunt on the lands of its competitors with a different strategy. Innovation will remain a priority, as illustrated by the success of the Red Market concept, a new low-cost chain which also tests new self-scanning.

• Even so, its competitors contend that the better fate of Delhaize Group in 2009-2010 just coincided with the decline seen by Carrefour Belgium. In the case of the entry of Ahold into the country, maybe the Belgian retailer could lose the ground it gained recently, mainly if there is a new price war. However, by putting “cheaper than in Aldi” stickers on its products at the end of 2010, by further improving the quality of its low-cost private label products, and by opening more Red Market outlets, Delhaize Group could definitely manage to get rid of its “expensive” image.

KEY FACTS

INTERNET STRATEGY

• Delhaize Group has a strong reputation of being a forerunner, for instance in organic products (it introduced such products 25 years ago), but also in new technology. Whilst self-scanning and quick scan are spreading into its supermarkets, it celebrated 20 years of its Delhaize Caddyhome service in 2010. Even so, like other grocery retailers, due to the short distances and the high retail density in the country, Delhaize Group has long been reluctant to launch a web store with a delivery service in the country. While Delhaizewineworld.com was launched in 2001, and is now considered the “online bible” and store for wine, it recently improved Delhaize Caddyhome with Delhaize Direct in 2009. However, customers order via the internet and collect at a retail store for the time being.

COMPANY BACKGROUND

• Delhaize Group was founded in Belgium in 1867. It still has its headquarters in Belgium, and it operates in eight countries across three continents. It is a publicly-traded company. In 2007 it celebrated the 140th anniversary of its creation, and the 50th anniversary of its first supermarket.

• In 2010, Delhaize operated 211 AD Delhaize supermarkets in Belgium, of which the company directly owned the majority. It also operated 145 Delhaize ‘Le Lion’ supermarkets and most recently also Red market supermarkets. It also has three convenience store formats, Proxy mini-markets, company-owned City convenience stores and Shop‘n’go small convenience stores, sometimes located in Q8 gas stations (included in forecourt retailers in this case. In addition, it also operated 138 franchised or company-owned Tom & Co pet shops and superstores in 2010.

• Although Delhaize has outlets throughout Belgium, it is slightly under-represented in the Flemish-speaking northeastern region. This changed in 2005, however, when it acquired 43 outlets from the concern Cash Fresh. In 2008 it transformed the remaining Cash Fresh outlets into AD Delhaize and Proxy stores.

• Delhaize offers its Caddyhome service in Belgium, providing greater convenience to its customers, allowing them to place orders by telephone, fax or on the internet for home delivery.

• During 2005, Delhaize marked the 30th anniversary of the Di health and beauty specialist retail chain by completely restyling all company-owned and some franchised stores. In 2007, it opted to sell this chain to Albert Frère in order to concentrate on grocery retailing.

• To enable increased cost reduction, self-scanning was introduced in more than a dozen supermarkets and some convenience stores in the middle of the review period. After successful tests, this system is now spreading in many supermarkets. Self-service is also being introduced for fish counters and deli products, including sandwiches, pizzas and salads, and grilled and seasonal products.

• For many years, Delhaize has placed an emphasis on increased environmental-awareness. It has cut its energy consumption to a level lower than it was in 2003, and opened a new store containing environmentally-friendly innovations such as organic products, which it hopes will be extended to more stores.

• During the second half of the review period, Delhaize began to work on being the most modern grocery retailer in the forecast period, “the store of future”. In 2007, it participated in Living Tomorrow 3 with Suez and Brussels Airlines, which should bear fruit during the forecast period. In this project, Delhaize tested in a pilot store RFID (Radio Frequency Identification) and “smart codes”, which are likely to replace bar codes in the future. It has also tested self-scanning and self-payment tools, and automatic weighing scales which immediately identify different fruit and vegetables.

• It also began to establish new technology such as self-scanning, self-payment tools, automatic weighing scales and “smart codes” to replace bar codes. After the success of Food Lion’s (the US subsidiary of Delhaize) methods in the US, Delhaize is expected to set up a new segmentation model which allows each supermarket to adapt to local demand.

PRIVATE LABEL

• Delhaize’s strategy with regard to private label is to offer more than 5,000 different products. Private label products represent more than half of its total sales in some categories, such as ready meals, and even up to 90% in chilled processed fish/seafood.

• Delhaize aims to offer private label products which are at least 10% cheaper than national well-known brands of the same quality. On average, private label products accounted for almost 30% of total sales in 2010.

• In terms of price, it positions 365 selected private label brand products in line with those of hard discounters. This private label range contributed to the success of Delhaize in 2009-2010.

• Private label products are heavily emphasised in its convenience stores. Its Proxy convenience stores are located in local neighbourhoods, and are positioned as mini-markets, featuring fresh produce and private label products. At City convenience stores only private label products are carried. The Shop‘n’go forecourt retailers feature a mix of products, including private label, but the primary emphasis is on convenience, with longer opening hours offered.

• Delhaize aims to be an innovator in private label products, focusing on ready meals, packaging and health solutions, as well as organic and fair trade products.

COMPETITIVE POSITIONING

• Including franchised stores and chains such as Tom & Co, Delhaize Group was ranked second in terms of value sales in the grocery retailers channel and retailing overall. It considers itself to be an innovator, particularly in the area of private label products and in the implementation of new technology. With the aim of positioning itself as the leading food specialist in Belgium, Delhaize’s strategy continues to focus notably on differentiating its offer through an emphasis on taste, quality, health and convenience, as well as on fresh products.

• Delhaize reinforced its focus on health and wellness products over the review period, with the rollout of lines designed to cater for people with specific dietary requirements, such as low-sugar or gluten-free foods, as well as athletes. In 2006, after being a forerunner in this area, it admitted that organic food was no longer a strong priority due to the surprisingly mixed results of this niche in Belgium. However, sales in this area strongly recovered in 2008-2009, thus Delhaize banked on this trend once again. Along with expanding its range of health and wellness food products, Delhaize has made efforts to better inform customers of health issues through flyers, posters, its monthly magazine and its website.

• Delhaize aims to offer products to suit every budget, from national well-known brands at the top, through Delhaize private label products in the mid-priced segment, to its selected 365 private label products, which are priced comparably with products available in hard discounters. A key part of Delhaize’s strategy is to improve consumers’ perception of its prices through aggressive advertising in newspapers and other media – and more recently its price comparisons with Aldi.

• In fact, at a time when consumers are increasingly price-sensitive, its image as the freshest, cleanest, the most natural/organic but never the cheapest outlet acted as a drag on its potential, despite its endeavours to align and reduce its prices. Hence it made huge efforts to convince consumers that it could be the best in the area of good wine and food, but also offer low prices. It even became aggressive with its providers in terms of price discounts, which resulted in the exclusion of all Unilever brands from its shelves for several weeks.

• All its efforts paid off in 2010, as Test-Achat (a local consumer association), which put Delhaize in 10th position in September 2009 in terms of price-competitiveness, put it in second place in the middle of 2010.

• The other success of Delhaize Group was the launch of Red Market in 2009, a chain which had already reached six stores at the end of 2010. This new format is revolutionary, as it mixes low prices such as in hard discounters (it theoretically offers the cheapest shopping list in the region), but with more harmonised merchandising, which uses well-known brands as in a supermarket chain, and uses mainly self-checkouts. The 5,600 products on offer are almost exclusively grocery and food products.

• At its Tom & Co pet shops and superstores, the emphasis is placed on quality products, personal service, tailored advice and a broad selection of products at competitive prices.

STRATEGIC DIRECTION

• Despite rumours of the saturation of Belgian grocery retailing and its leading position, Etn Franz Colruyt has more room for growth than its competitors, according to the majority of industry experts. Like other players, it is expected to soon face the entry of Ahold, which is likely to start in the Dutch-speaking northern part of the country.

• It could be tempted to prevent the invasion of Ahold with acquisitions. However, converse to what was expected in some rumours, this will not come through the acquisition of Carrefour outlets or development in the Netherlands. Etn Franz Colruyt should remain true to form and focus on its own brands with new openings. According to Jef Colruyt himself, there is still room for the opening of 40 Colruyt supermarkets, 100 Okay supermarkets and 50-100 new Spar convenience stores.

KEY FACTS

INTERNET STRATEGY

• In internet retailing too, Etn Franz Colruyt is far ahead of its competitors. It was the only “bricks and clicks” grocery retailer with a web store with an actual delivery service. Due to the short distances and the high retailing density in the country, Delhaize and Carrefour most grocery retailers were still reluctant to offer a delivery service in the country, and thus still only offered their customers ordering via the internet and collecting at the retailer’s store .

COMPANY BACKGROUND

• Etn Franz Colruyt is an independent, family-owned business. It is primarily active in grocery retailing, but also in other channels, such as foodservice, traditional toys and games stores and petrol distribution.

• It operates stores throughout Belgium. However, all distribution is centralised, and undertaken by its own lorries. The distribution centre offers more than 200,000 sq m of storage space. Individual stores do not have their own stockrooms, but are replenished as and when required.

• In terms of its retail operations, Colruyt (excluding some Spar outlets) opened 28 stores in 2008,14 in 2009 and 15 in 2010, some of which were existing stores which were relocated to new premises, whilst others were existing stores which were rebuilt or enlarged.

• In non-grocery retailing, Dreamland progressed in 2008, mainly due to investment made in new stores and store concepts; however, it was less dynamic in 2009-2010, notably due to its focus on opening new stores in France. To ensure future growth opportunities, Colruyt has invested in the expansion of its administrative and logistical functions for this brand.

• In addition to its core retail business, Colruyt operates Colruyt Export, which exports 7,000 food products, which are primarily its own private label goods, and 23,000 non-food products worldwide. It also distributes to more than 100 Alvo supermarkets in Belgium, and operates self-service petrol stations under the DATS 24 brand.

• During the second half of the review period, Colruyt made efforts to strengthen the positioning of its Spar outlets, including slashing some prices. In terms of internet sales, over the review period Collivery from Colruyt became one of the most important home delivery services in the country.

• Regarding logistics and prices, Colruyt co-founded the Coopernic purchasing group in 2006, which includes Colruyt, Leclerc, REWE, Coop and Conad, which proved helpful in terms of cutting costs.

• Etn Franz Colruyt hired 3,109 people in 2009, which meant the creation of 2,000 new jobs, and it should theoretically have hired an additional 3,000 people in 2010. Nonetheless, it still has difficulty in finding technicians, computer operators and butchers, especially in Antwerp and Brussels.

PRIVATE LABEL

• Colruyt offers its Basic line of food and non-food products in its stores, which it claims are the cheapest of their kind, and offer the lowest prices in Europe, covering items such as toilet paper, coffee and biscuits. These products have red labels to distinguish them from other offerings.

• More than 20% of Colruyt’s sales were generated by private label products in 2010.

• Its private label products are positioned at the low end of the market, with its Basic brand, and at the high end of the market, with its Bio-Planet offerings.

• All the meat products offered by Colruyt are sourced from its own meat processing centre, and offered under the Vlevico label. Thus, Colruyt can be sure of the provenance of all the products offered for sale.

• Colruyt has offered its Graindor private label coffee since 1937.

COMPETITIVE POSITIONING

• Etn Franz Colruyt became the leading grocery retailer in NBO terms in 2008, and even captured leadership from Carrefour SA as a GBO in 2009. Its quality service policy and soft discounting strategy, both in private label products and branded goods, allowed it to enjoy positive development over the review period.

• The Colruyt supermarket chain was the most popular brand in the whole retail environment according to a survey led by Q&A Research & Consultancy in Belgium in 2009. This ranking did not change in 2010. More than ever, Colruyt was seen as a soft discounter (but is still included in supermarkets) and took advantage of the challenging retail environment in Belgium in 2009-2010. Local trade press often observe that crisis and competitors often stimulate the growth of Colruyt.

• Colruyt’s strategy is to offer highly discounted products in simply designed stores, where customers can shop quickly and efficiently for products at lower prices. It offers steeper price discounts for products bought in large quantities. Through preference, it chooses older existing buildings and converts them into outlets which are integrated into the existing neighbourhood – rather than luxurious buildings featuring a lot of glass windows. The company positions its Colruyt stores at the discount end of the market, and routinely presents food items in the packaging in which it was transported, although customers can unpack products and purchase in lower volumes if they wish. Lower prices are offered for bulk purchases. It is thus able to keep prices down.

• Another clear differentiator for Colruyt is its checkout system. Rather than using the classic conveyor belt system, cashiers scan products in the shopping trolleys at payment posts. They are then given a bill to present at a central payment point. An added advantage of this system is that customers can benefit from the latest price discounts, due to direct coupling with Colruyt’s computer system.

• Colruyt’s Okay stores are positioned as small supermarkets for daily requirements, generally with sales area of around 400 sq m. These neighbourhood stores saw impressive growth during the second half of the review period. The ongoing success of its Okay supermarkets also contributed to the success of Etn Franz Colruyt in 2009-2010. This brand’s success relied on tailored local marketing, a wide but not deep assortment, the freshness of its food and drinks, and welcoming and cheap prices, as in Colruyt supermarkets.

• During the review period Colruyt renovated its Spar convenience stores. While Spar’s share did not rise significantly, the investment paid off in terms of brand image, and benefited its sales in 2009-2010. During the last couple of years of the review period, Colruyt tested the new formula of Spar Express in Antwerp railway station – a concept focusing on chilled ready meals, sweet and savoury snacks and drinks.

• At the higher end of the market Colruyt owns several Bio-Planet stores, which are positioned as organic supermarkets which offer 100% organic products, as well as non-food items sourced from ecologically-friendly or recycled materials. These outlets offer the full range of products seen in standard supermarkets, including a delicatessen counter and bakery. At each outlet, at least one qualified herbalist is employed. Bio-Planet products can be ordered via the internet from locations throughout Belgium. In addition, a fast food outlet or a full-service restaurant is being opened next to each Bio-Planet supermarket, where consumers can enjoy cold or warm pasta dishes, ready meals and sandwiches which are all 100% organic. More than 250 products are offered, of which 190 are private label products.

• In an effort to gain ground in a highly competitive environment in terms of prices and discounts, Etn Franz Colruyt took a radical step from 2007, by opting to indicate on cashier receipts the price differential with its competitors, namely Delhaize (Delhaize Group) and GB (Carrefour Belgium) supermarkets, and even Lidl (Lidl België) and Aldi (Aldi Group) discounters.

STRATEGIC DIRECTION

• In the middle of 2010, Hennes & Mauritz (H&M) AB increased to €40 million the share capital of its subsidiary H&M Hennes & Mauritz (H&M) Belgium SA to raise it to €51 million. However, the aim of the manoeuvre was not to support the development of the activity of H&M in Belgium. This is a financial transaction within the group, which is part of the financing of its subsidiaries.

• In fact, although H&M is a low-cost concept which is in demand in the current context of economic slowdown, similar to C&A and Zara, the Swedish chain has reached saturation point in Belgium. Therefore, a new strategy is brand extensions such as COS (Collection Of Style), which offers higher-quality and smarter clothes, and avoids cannibalising already existing H&M outlets. After a slow beginning, the company enjoyed a better fate in 2009-20010.

KEY FACTS

INTERNET STRATEGY

• At the time of writing, there was no H&M web store in Belgium, and no sources had heard about future plans in this area.

COMPANY BACKGROUND

• Hennes & Mauritz (H&M) AB launched its Belgian subsidiary in 1992. In Belgium, the company is purely in retail; more particularly in clothing, and to a lesser extent footwear.

• It theoretically has national coverage; nonetheless, a deeper analysis of its outlet network shows that it is mainly concentrated in Flanders and Brussels, the regions with the best potential.

• The Belgian subsidiary of Hennes & Mauritz (H&M) AB usually applies the same strategy as applied in other countries.

• In the last couple of years, the most notable event was the setting up of a distribution centre for all of southern Europe in Belgium in the middle of 2008. It chose the industrial zone of Ghlin-Baudour in Wallonia, and created 300 jobs. The company already had a national distribution centre in Puurs.

PRIVATE LABEL

• With the exception of some limited collections by well-known designers, or with celebrity endorsements, all products in H&M are private label. Thus, the company markets a wide private label product portfolio which covers women, men, children and accessories.

• Its private label products are positioned between the mid-priced range and the budget end of the market. Its products have a low-cost reputation, but are often perceived as trendy and fashionable.

COMPETITIVE POSITIONING

• With a 5% value share in 2010, Hennes & Mauritz (H&M) Belgium ranked second in clothing and footwear specialist retailers. The positioning of its H&M brand in Belgium is consistent with its positioning in other countries. For instance, it tends to choose excellent store locations in downtown areas or large shopping centres, then capitalise on low prices and fashionable designs in order to create strong traffic. It relies on celebrity endorsements for the promotion of its products. Its H&M magazine has become a real fashion magazine, with supermodels, advice and articles. Thus, with its cut prices, H&M is perceived by local experts as a forerunner in the new generation of low-cost chains with low prices, but always fashionable and young designs.

• H&M launched a COS (Collection Of Style) store in 2007, as part of its strategy to offer higher-quality and smarter clothes, but with the same value-for-money offer as in H&M stores. A second store was opened in 2008. In the middle of 2009, COS paid too high a price for its store location for the initial target of the new chain. However, the end of 2009 and 2010 witnessed better results for this new chain.

• Hennes & Mauritz (H&M) Belgium could not invest a lot in 2009-2010 in terms of advertising or new openings due to the global economic crisis and the following slowdown. Even though it performed relatively well in the country, multinational chains such as C&A, Zara and H&M suffered from the poor results of other subsidiaries in the world, which were not as dynamic. Therefore, foreign chains often received less financial resources from their headquarters. This was not the case with local chains such as JBC and Torfs, which are not connected to other subsidiaries, and thus benefited from a proportionally higher marketing budget.

STRATEGIC DIRECTION

• Ikea Belgium began to record limited growth in 2009-2010 for the first time over the last decade. In addition, it could face competition from new entrants after 2010. According to Fedis, some foreign retailers are waiting for the establishment of the legislation regarding planning and retailing before entering the country or expanding their networks. This could be in other channels, but also in furniture and furnishings stores. These competitors will require smaller geographic coverage areas than Ikea, and could thus establish more stores.

• However, the Swedish chain has numerous assets to enable it to expand steadily again in 2011 or 2012, including the end of the tough strikes which hampered its sales in 2009 and early 2010. It is expected to focus on specific segments, such as bedrooms, and will continue to concentrate on low prices and improve consumer experience, for example by remodelling its stores. It could enjoy the opening of a seventh shop in Mons in the long term. Given that its penetration rate in terms of Belgian households surpassed 50% in 2009, there is still room for growth for new stores. The chain’s aim is for the majority of Belgians to be able to visit an Ikea store within 45 minutes.

KEY FACTS

INTERNET STRATEGY

• Although shopping from home with Ikea is available in Belgium via email, telephone and fax, with delivery services available, orders cannot yet be placed via the internet, although the company intended to offer this service during the review period. However, the Swedish chain was one of the top spenders in the area of advertising through internet retailing. In 2009, it invested 10% of its communication budget on internet advertising, while this rate was only 1% for Coca-Cola Belgium. Ikea goes far beyond most of its competitors, as it website enables online verification of stock at different stores, interactive exploration of the products, advice and suggestions, and planning tools which allow the customer to play architect. There is also, Anna, a virtual assistant who consumers can ask questions.

COMPANY BACKGROUND

• Inter Ikea Systems BV, based in the Netherlands, is the holding company for Ikea stores. All Ikea outlets are company-owned. Ikea stores are located in the largest towns in Belgium, with three outlets in the Brussels region.

• During the second half of the review period, Ikea in Belgium focused on kitchens; it claims to be the second largest provider of kitchens in the country, selling 9,500 kitchens on an annual basis, which amounts to 10% of its total annual sales in Belgium. To stimulate sales, it has broadened the range it carries by 30%, and reduced prices by an average of around 6%. It offers kitchens for self-assembly, as well as offering the services of third-party assemblers. In addition, Ikea has extended the range of kitchen accessories available by 70%, including textiles and pots and pans.

• Ikea reports that sales of kitchens and kitchen equipment increased by almost 50% during the review period – higher than in most other countries in which it operates. Kitchens currently account for around 15% of Ikea’s total turnover in Belgium, whilst kitchens and kitchen accessories combined account for 25% of sales.

• During 2005, Ikea opened two new warehouses in Belgium, in Anderlecht and Aarlen, as well as renovating its existing outlets. A key focus in recent years was to improve customer satisfaction by reducing the average waiting time at checkouts.

• Ikea closed its store in Ternat in January 2008, and at the end of the year opened a larger one in Ghent, with an area of 30,000 sq m and 450 employees. This was an attempt to get closer to Flemish consumers in Belgium. This transition was not without problems, and revenue slid slightly as a result. However, Ikea still managed to increase its sales thanks to increased opening hours and improvements in its service offering. For example, Ikea restaurants developed take-away sales over the last couple of years of the review period, with all menus being made available in single take-away portions.

• Ikea invested €34 million in 2009 and €21 million in 2010 for the remodelling of the Anderlecht, Arlon and Zaventem stores. 2010 also witnessed the end of the social conflict and strikes which started in 2009.

• In October 2010, Inter Ikea Systems BV revealed for the first time its global sales (€22.0 billion) and profits (€2.5 billion), which means that the Swedish chain is one of the most profitable retailers in the world. Other than its unbeatable production costs and its perfect logistics, a key factor in this 11% rate was its low level of taxes; only 13% of the profits in 2009. This stemmed from its coordination centre, which is located in Belgium, and enables it to minimise its taxes legally.

PRIVATE LABEL

• Ikea’s furniture and furnishings products are all sold as Ikea private label products. Each product is given an individual name.

• Famous for its low prices, all Ikea products are in the low to mid-priced range.

COMPETITIVE POSITIONING

• Ikea was the leading player in furniture and furnishings stores in 2010, and is generally positioned in the low to mid-priced segments. Ikea is constantly trying to innovate by broadening the range of goods it carries. Its share is notably derived from a low number of very large home furnishing warehouses.

• Towards the end of the review period, Ikea aimed to consolidate its competitive position and increase its share. In a further bid to stimulate sales, Ikea started to open its stores later, with its outlets opening until 20.00hrs during the week, and until 21.00hrs on Fridays and Saturdays.

• From 2006, food products became available in Ikea outlets worldwide. Many of the products available for purchase were previously served in the retailer’s restaurants. Some 150 items are available, of which 30% carry the Ikea private label. The product range is inspired by Swedish cuisine.

• The originality of Ikea is that this retailer transposes and even enhances its Swedish positioning and model, rather than suiting local consumers’ tastes. Ikea is perceived as Scandinavian, and also original and eco-friendly. It offers a high level of service, with 2,300 employees, convenient hours, crèche facilities and restaurants.

• There were six Ikea stores in Belgium at the time of writing. More than nine million visitors visited these stores in 2008, while the profile of the brand continued to rise rapidly. As in other countries, Ikea also launched the Ikea Family loyalty card, which succeeded in recruiting 300,000 members in 2007. According to a survey by Q&A Research & Consultancy, Ikea was the most popular chain in home and garden specialists in 2008.

• In Belgium, Ikea’s ambition is to increase its share within furniture and furnishings stores from 10% in 2008 to 15% in the forecast period. It claims to already be the leader in self-assembly kitchens, and the second most important retailer of kitchens requiring the services of an assembler. Another new key focus area is bedroom furniture. The company is aiming to stimulate sales by increasing the range carried, particularly in terms of mattresses, and reduced prices by an average of 6% in 2009.

• About 13 million customers visited Ikea stores in 2010, compared with nine million in 2008. Even so, although the Belgian subsidiary still performed better than in many other countries, and also still progressed in actual value terms, Ikea Belgium itself considered that 2009 and 2010 were rather sluggish years. 2009 was marked for the Swedish group in Belgium with the opening of Ikea Gent, “the jewel of Ikea in Belgium” that replaced a smaller store in Ternat.

STRATEGIC DIRECTION

• Due to the growing price-sensitivity of Belgians and their demand for high-quality products, it is in the interests of ITM Belgium to capitalise on low prices and freshness. Its slogan is “all united against expensive life”. However, ITM Belgium has still not reached national coverage, with only three or four outlets in Flanders, and the majority in Wallonia, close to the French border. Thus, in 2010, ITM Belgium declared it would open 30 new stores in the next three coming years, with a focus on Flanders.

• This is all the more audacious, given that many other chains are also focusing on Flanders, probably soon including the Dutch retailer Ahold. However, Intermarché has numerous assets: proximity, size (between 400 and 1,500 sq m), management style (opening times), a focus on price (soft discounter), combined with a traditional type of distribution (fresh produce, personalised service). In addition, the chain claims that it could easily recruit more candidates to its special franchise system, which implies more store owners.

KEY FACTS

INTERNET STRATEGY

• At the time of writing, there was no Intermarché web store in Belgium, and no sources had heard about future plans in this area.

COMPANY BACKGROUND

• ITM Belgium SA has been present in Belgium since 1992, and is part of the French company ITM Enterprises SA. It is focused on the French-speaking part of the country and Brussels.

• Following the same organisation as in France, ITM Belgium has a network of 44 independent owners working as franchisees. Its headquarters located in Louvain-la-Neuve has 120 employees, and the logistics centre in Villers-le-Bouillet has an area of 24,000 sq m.

PRIVATE LABEL

• ITM is generally considered to be a chain with a very high share of private label. More than 35% of its overall turnover is achieved by private label products. Its portfolio is wide, and encompasses all types of grocery products.

• It has budget private label products such as Netto, but also has mid-priced and even premium ranges.

• As on the shelves of its competitors, private label products gained ground in niche areas. For instance, it is increasingly active in the area of fair-trade products, or more ethical products than standard coffee, with Planteur des Tropiques and Samarcande.

• In the middle of the review period, the company realised that part of its difficulty was a lack of choice in terms of well-known brands. It limited the development of private label products until 2009, when many grocery chains started to focus on low-cost products.

• One of the latest innovations was NutriPass. This is a new label which informs consumers about the ingredients of its private label products and their health benefits, and advises in the area of nutrition.

COMPETITIVE POSITIONING

• ITM Belgium’s overall value share in grocery retailing was 1% in 2010, and its share in supermarkets was 3%. The company has been trying to progress by recruiting new partners/franchisees in Wallonia, and by its positioning in dynamic small and medium supermarket formats.

• In 2010, the company had 55 Intermarché and 19 Ecomarché outlets. The average sales area of Intermarché is 1,000 sq m. It notably focuses on fresh and chilled products (with an emphasis on meat, fish, vegetables and fruit) and a wide range of private label products.

• The average sales area of Ecomarché is higher than 400 sq m; in fact it can be considered as a convenience store or a small supermarket. It also focuses on fresh products, and wants to be perceived as the centre of local life.

• Such a positioning on low prices, freshness and proximity to customers paid off until 2008. However, the chain could reach saturation soon in the French-speaking area, mainly if potential candidates for its franchise system cannot get a sufficient loan due to the current cautious attitude of banks.

• In order to expand in Flanders, ITM Belgium is banking on its special franchise system, which should appeal better to candidates than traditional franchises. Indeed, franchisees have to contribute to the management of the chain by giving two days per week to the purchasing centre and headquarters.

STRATEGIC DIRECTION

• Lidl België’s aim is to continue to build a presence in the countries in which it operates, including Belgium, and to further differentiate itself from its arch rival, Aldi Group, through an emphasis on fresh produce and more branded products. Lidl initially seemed to have more room for growth than Aldi in Belgium, thanks to the higher share of branded products. However, with the recession this may have come at the wrong time, given that Lidl faced a slowdown from the end of 2008. It is uncertain whether the German discounter will continue to integrate more brands at a time when consumers are particularly price-sensitive.

• In addition, the German chain is facing issues with its staff, and with the Belgian justice system. In order to counter-attack against Aldi and Colruyt, Lidl België is multiplying its promotional operations and new displays, and changes prices almost every day. Working conditions have already been criticised, which resulted in strikes in 2010, even with store managers. The German discounter is asking for longer opening hours, which could be refused by local authorities. Lastly, the Tribunal of Gand is suing Lidl about illegal practices in the area of promotions – many products enhanced in its “in and out” operations were not available in stores on the opening day of the promotion.

KEY FACTS

INTERNET STRATEGY

• At the time of writing there was no Lidl web store in Belgium, and no sources had heard about future plans in this area. Lidl uses its lidl.be site as a shop window, and mainly to enhance its “in and out” promotional operations.

COMPANY BACKGROUND

• In contrast to Aldi Group, which initially focused on Germany, Lidl capitalised on stronger expansion in Western Europe than in its country of origin. Thus, Lidl België GmbH & Co KG has become a successful subsidiary of the German company Schwartz Beteiligungs GmbH. It has been present in the Belgian market since 1995, and operated around 290 outlets in Belgium at the end of the review period, with more than 2,200 employees.

• Lidl operates outlets throughout Belgium, and is present only in the discount segment, offering around 1,000 basic, everyday products.

• Its strategy during the review period was to differentiate itself from the leader in discounters, Aldi, through extending the fresh produce it sells, with more fresh fruit and vegetables, as well as fresh meat and well-known brands.

• The company accepts cash, debit cards and food stamps, but does not accept credit cards.

PRIVATE LABEL

• Lidl’s sales are predominantly of private label products. However, it stocks more branded goods than Aldi in an effort to generate frequent return visits from customers, and to strengthen its image as a discounter. This allows customers to directly compare the prices of branded goods.

• Private label sales accounted for about 80% of the company’s total sales in 2010.

• An important innovation is the company’s offer of a private label product line which features value-added products such as packaged food items formulated specifically for children and people with allergies, as well as organic products. This is a tactic the company has pursued in order to ease margins. Fairtrade products, under the Fairglobe label, were added in July 2008.

COMPETITIVE POSITIONING

• Lidl initially focused purely on hard discount retailing in Belgium, and is considered by some marketers to have copied its strategy from competitor, Aldi. However, Lidl is differentiated from Aldi in that it tends to stock a wider range of products, with a greater emphasis on fresh produce. It also has more branded goods on its shelves. Lidl has installed more chilled cabinets in many outlets in the hope that this will appeal to those consumers who generally visit supermarkets, rather than discounters. By integrating well-known brands, its aim is to stave off competition from both Aldi and supermarkets, which are reducing their prices and introducing more private label products.

• Lidl remains significantly smaller than Aldi in Belgium. In terms of regional coverage, as Aldi focused for two decades on the locations with the highest potential revenue in Belgium, this left the field clear for Lidl in rural and semi-rural areas. Lidl was eager to invest in these areas, sometimes at the expense of its profitability.

• Lidl invested less than supermarket chains in 2009-2010 on advertising campaigns, as part of its drive to keep costs low. It did not use television or radio advertising, but focused instead on promotional leaflets every week, and to a lesser extent, billboards, to promote its next “in and out” products.

• Lidl is aiming to lead the discount environment in Belgium. While this may seem difficult, integrating brands initially appeared to be an effective choice, as such brands already generate 40% of Lidl’s value sales in Germany.

• However, the company did not reach its short-term objectives in Belgium. Offering a selection of brands came at the wrong moment, as Belgian consumers focused on value-for-money products due to the recession. Another issue was the acceleration of the development of Etn Franz Colruyt. This popular local soft discounter/supermarket operator continued to compare prices on its cashier receipts with those of hard discounters.

• Maybe Lidl also paid for the story regarding the company spying on its staff in Germany in 2008, which was a scandal in Belgium. This worsened in 2009 and 2010 with the aforementioned strikes. Lidl will have to improve its image in terms of corporate communication regarding its human resources activities.

STRATEGIC DIRECTION

• After some mixed results in 2009, particularly in supermarkets, Louis Delhaize fared much better in 2010, and looks ahead with more optimism. First, the good results of Cora in early 2010 show that the decline of hypermarkets was not fatal in Belgium. Unlike Carrefour Belgium, Louis Delhaize still sees hypermarkets as being critical for its expansion in Belgium. It is differentiated from other retailers through its ownership of shopping centres, and it is expected to expand this line of business within the forecast period. However, it is not interested in the acquisition of Carrefour hypermarkets, as Cora needs better locations and an area of more than 8,000 sq m to be attractive and profitable.

• Louis Delhaize is focusing on catering to the increasing demand for fresh and healthy products, and intends to expand both within Belgium and internationally. Its spearhead is expected to continue to be the successful food/drink/tobacco specialist brand Delitraiteur’s caterer concept. The company has detected strong potential for this chain, notably in terms of diversification towards foodservice.

KEY FACTS

INTERNET STRATEGY

• None of the numerous chains of Louis Delhaize have web stores in Belgium, and no sources have heard about future plans in this area.

COMPANY BACKGROUND

• Louis Delhaize is a privately-owned food distribution group which has its origins with the same family as Delhaize ‘Le Lion’ (Delhaize Group), although the two groups are completely separate. Delfood, a subsidiary company of Louis Delhaize, performs logistics and distribution functions for Louis Delhaize, serving its own shops, as well as forecourt retailers, convenience stores, newspaper shops and hospitals. In addition, it operates 28 Delitraiteur catering and premium food shops.

• As well as owning retail outlets, Louis Delhaize operates seven shopping centres in Belgium, primarily in the centre and south of the country. More than 5,000 people work in its shopping centres (the majority of which are not Louis Delhaize’s employees). Louis Delhaize also operates logistics and distribution functions for its own outlets, in addition to a number of independent concerns, through its Delfood subsidiary.

• Louis Delhaize’s ambition is to increase the number of hypermarkets that it operates in Belgium, and it is looking to expand elsewhere in the country. Cora hypermarkets carry a wide selection of products, including clothing, textiles and consumer electronics. They are designed to be primarily self-service outlets.

• Louis Delhaize largely focuses on convenience stores. There were 91 Louis Delhaize outlets in Belgium in 2010, which are positioned as neighbourhood shops. It also had 53 Match supermarkets in the same year, which are also positioned as neighbourhood stores. Its Match stores are popular with women – 85% of customers are women. The emphasis is on freshness; to such an extent that customers are offered a double refund if a product is not found to be fresh enough. Match shops offer a wide range of products, including national A brands, through to mid-priced private label products, to discount-level private label products.

• Previously branded Profi, Louis Delhaize is in the process of re-branding these outlets as Smatch convenience stores. The objective behind this change of name is that Louis Delhaize is upgrading the selection available at these outlets, placing an emphasis on fresh products to attract health-conscious consumers.

• Lastly, Louis Delhaize opened many new Delitraiteur outlets during the second half of the review period, the majority of which were in France. The Delitraiteur fascia was born in Genval in 1990, and mainly centred on the French-speaking area of the country. It had just begun to spread in Flanders and into France at the end of the review period. More of 80% of Delitraiteur outlets are franchises.

• Louis Delhaize’s recent strategy has been to focus on neighbourhood stores catering to the needs of the local population. It has outlets throughout Belgium, but its future expansion will see any remaining gaps filled, particularly in shopping centres and hypermarkets, as well as international expansion.

PRIVATE LABEL

• Private label forms an important part of Louis Delhaize’s strategy, with ranges catering to both the low- and the mid-priced segments.

• The company has long focused on private label products, the proportion of which remained stable during the review period.

COMPETITIVE POSITIONING

• Including Cora, Louis Delhaize was the fifth largest retailer in Belgium during 2010. Its overall share slightly declined in 2009, due to the mixed results of its supermarkets, and the strong competition from other players in convenience stores. Nonetheless, it may have been helped by the difficulties of Carrefour in hypermarkets; its Cora outlets enabled the group to stabilise its share in 2010.

• Outlets operated under the Louis Delhaize banner range from quality supermarkets and hypermarkets, focusing on providing fresh products, a wide choice, good service and reasonable prices, to lower-end outlets which offer products which are comparable with the offerings of discounters.

• Louis Delhaize’s share is derived from a presence in a number of channels, backed up by its logistical and distribution operations. Louis Delhaize is active in hypermarkets with Cora, and enjoys the ongoing success of Delitraiteur within the food/drink/tobacco specialists channel. It is also active in convenience stores and discounters.

• According to a local survey, Cora was the chain which registered the best progression in 2008 in terms of customer satisfaction in the grocery retailers channel, notably thanks to strong improvements in the area of welcoming and product offering.

STRATEGIC DIRECTION

• Maxeda’s goal is to achieve retail leadership in each of the formats in which it operates. Its aims are to maximise synergies by being part of a group of companies, with an operational focus on selling more, improving purchasing processes and reducing costs.

• This strategy is likely to bear fruit, primarily in department stores, but less so in DIY, home improvement and garden centres, due to the recent slowdown of sales in DIY and garden centres. By virtue of its ongoing diversification, its cheap prices, and mainly its focus on smaller formats, which enables it to open even in modest towns, the Hema brand is expected to perform well in department stores. At the time of writing, Hema had 55 department stores in Flanders, and, according to the group, there is still a lot of growth potential in the region.

KEY FACTS

INTERNET STRATEGY

• Entering internet retailing in 2007, Brico from Maxeda BV was the first “bricks and clicks” retailer in the channel, which also benefited its store-based retailing operation. The aim of the company is to widen its offering on its web stores in the short term.

COMPANY BACKGROUND

• Maxeda BV is the new name for the company formerly known as Royal Vendex KBB NV. The decision to change the name of Vendex to Maxeda was partly a result of it losing its ‘Royal’ title (the K in KBB) in 2005.

• Maxeda operates entirely in the retail environment, and is present in department stores and DIY, home improvement and garden centres in Belgium. Maxeda’s outlets are spread throughout the country.

• Maxeda operates 75 department stores in Belgium, targeted towards women aged 25-50. All the goods offered are private label products. Its strategy is to provide good quality and contemporary styles at relatively low prices. Many Hema department stores in Belgium have specialist coffee shops.

• Due to its Dutch origins, Hema is concentrated in the northern part of the country. For Hema, Maxeda uses medium-sized stores, for which locations in city centres can easily be found. The average range offered by Hema is wide but not too deep, with a particular focus on clothing, housewares and foodservice.

• In terms of DIY, home improvement and garden centres, the company operates 111 Brico outlets and seven Brico Plan-It outlets; around two-thirds of which are franchise operations. Outlets range from 1,000 to 10,000 sq m, depending on whether they are located in town centres or out-of-town locations; the latter stock a much broader selection of products, including gardening equipment.

PRIVATE LABEL

• Maxeda has long held a strategy of stocking primarily private label products, with products sourced from a central distribution centre. Its outlets are obliged to carry products dictated by its headquarters.

• The company has a wide private label portfolio, with products ranging from the low- to the high-end of the market, priced accordingly. Its Hema private label range is positioned towards the lower-end of the market, prompting some to perceive the department store as more of a variety store.

• The share of private label products carried has remained stable, primarily because the proportion is already either very high, or there is a policy of holding 100% private label goods.

• Brico offers two private label ranges – Stop and Bricobi. Stop is a high-end private label, guaranteeing the quality of its products. In the Bricobi range, some 8,000 products are offered, generally at prices 15%-20% lower than national A brand prices. It also offers other minor private label brands.

COMPETITIVE POSITIONING

• Including Hema outlets, Maxeda was the sixth largest retailer in Belgium in 2010. It is positioned more towards the low-end of the market, although it does offer some higher-end products in its clothing and footwear and DIY outlets.

• Maxeda, through its Brico and Brico Plan-It brand, led DIY, home improvement and garden centres in Belgium in 2010. Brico’s strategy is to achieve growth both by opening new outlets and by expanding its existing stores. To better serve customers, Brico has been widening its offer to include garden equipment and hobby products. 40% of its network encompasses large, integrated 8,000 sq m “destination stores”, while 60% comprises franchised stores of 1,000-2,500 sq m.

• Until 2008, one of the company’s most successful concepts was Brico Plan-It. In the middle of the review period, Maxeda transformed old Leroy Merlin superstores into Brico Plan-It outlets, and renovated them with adapted merchandising and a new ambience. Its Brico City outlets saw a positive performance in 2008 in downtown locations. However, during the slowdown in sales in DIY and garden centres, Brico Plan-It seemed to be the most affected format, and had to close outlets.

• The Hema chain of department stores owned by Maxeda was dynamic owing to its ongoing expansion in Flanders during the second half of the review period. Hema outlets are medium-sized stores located in city centres. From 2007 to 2010, the group opened a total of 27 new stores in Belgium.

• Whilst most other chains found it difficult to open new stores due the aforementioned saturated urban environment, Hema is increasingly focusing on smaller towns. It has also expanded its presence by offering a greater range of products and services, including wine and language courses, as well as online energy contracts.

STRATEGIC DIRECTION

• The strategy of expansion of Metro remains uncertain in Belgium. First, the company has not given up on the idea of opening other Galeria Inno outlets, and is 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. Other sources even announced Galeria Inno was for sale at the end of 2010.

• In electronics and appliance specialist retailers nothing is certain, either. Despite ongoing rumours about unprofitability due to its meagre margins and the cost of its expensive locations, Media Markt-Saturn Belgium still opened new outlets in 2009-2010. However, after the possible acquisition of most Saturn outlets by Auchan in France in 2011, it is not certain whether the cohabitation between Media Markt stores and Saturn outlets will continue, due to growing risk of cannibalisation between the two chains in Belgium.

KEY FACTS

INTERNET STRATEGY

• None of the chains of Metro Group have web stores in Belgium, and no sources have heard about future plans in this area.

COMPANY BACKGROUND

• Metro Group is owned by Metro AG of Germany. Metro Group acquired Galeria Inno department stores in 2001. The first Media Markt was opened in Belgium in 2002.

• Metro is active in consumer electronics retailing, as well as operating department stores. It also has interests in the cash and carry environment in Belgium.

• In contrast to its most important segment in Germany, sales at Galeria Inno department stores in Belgium performed well over the majority of the review period, although they slightly slowed down over 2008-2010.

• Managers of Media Markt outlets are partners, with a 10% stake in the store, and a great deal of autonomy in terms of deciding what products to stock. The stores are large, and carry an average of 45,000 items.

• Metro’s outlets in Belgium are focused on major towns throughout the country. It invested €20 million in renovating its flagship Galeria Inno department store in Brussels during the second half of the review period. There were and will be other investments in renovation projects. The remodelling of the last Galeria Inno by Metro Group should end before 2015. The company has not given up on the idea of opening other outlets, and thus is studying projects for smaller outlets to overcome the issue of available sales area.

• The Media Markt brand uses extensive advertising campaigns, and prides itself on having some of the best-known advertisements in consumer electronics.

• The PAYBACK loyalty programme, which was introduced in 2000 at Galeria Inno, now boasts more than eight million customers as cardholders, offering them discounts and bonuses.

PRIVATE LABEL

• The sales strategy at Galeria Inno department stores has changed, to concentrate more intensely on stocking international A brands, complemented with high-quality private label products. Its aim is to intensify its store-in-store format, in order to attract even more high quality international brands.

• Galeria Inno’s private label brands aim to offer top quality at reasonable prices, as well as follow the latest fashion trends.

• The Media Markt strategy is to offer a wide range of brand name products, although the assortment carried is the responsibility of individual shop managers.

COMPETITIVE POSITIONING

• As well as operating 14 Media Markt outlets, five Saturn outlets and 15 Galeria Inno department stores, Metro Group has five Metro Cash & Carry and six Makro outlets, although the latter two are not included in this report.

• Galeria Inno department stores carry a sophisticated, high-quality variety of brands. Recent efforts focused on attracting customers aged 35 and over. Its stores are all sited in top locations in city centres. Although Galeria Inno was also subject to a slowdown in value growth in 2008, key factors in its ongoing success in 2009-2010 were the rejuvenation of its stores, its impressive development in cosmetics and toiletries (notably thanks to 20% discounts), and its focus on lingerie and upmarket clothing lines. During the last couple of years of the review period, it not only gained new consumers and created brand loyalty, but also managed to increase the average basket of each customer.

• Galeria Inno 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 thought to be the top advertising spender in 2009. The retailer produced its own magazine (Sensa), was present on bus displays, and strongly capitalised on in-store advertising. To suit local consumer tastes, Galeria Inno notably used CRM (Consumer Related Management) to better understand consumers, to utilise tailor-made direct marketing advertising and offers and to inform its Galeria Inno loyalty system. This loyalty programme became increasingly generous in 2009-2010, as the card notably offered more loyalty points than previously, strong discounts and eight Sensa magazines.

• Media Markt stores offer an extensive range of consumer electronics at low prices. The brand strategy is to focus on continued low prices, rather than short-term special offers. Each store enjoys a high degree of autonomy in the choice of products carried, and the outlets are located near large towns, but at a sufficient distance from the town centre to allow it to provide ample parking. Media Markt also offers repair, delivery, installation and financial services.

• Although Media Markt admits its outlets need a long period of establishment before they become profitable, some marketers consider that this player could be subject to the same fate as the So What chain from Makro, which was forced to exit the country more than a decade ago after many years of unprofitable development. Marketers wonder how Media Markt can be profitable, as its progression in recent years was probably not sufficient to offset its meagre margins and the cost of its expensive locations. Even so, Media Markt-Saturn Belgium still opened new outlets in 2009-2010, more particularly Saturn stores, which seems to prove that the German player does not face problems of profitability in Belgium.

• Metro plans to open one or two Metro cash and carry stores for foodservice per year in Belgium, and to hold 15 outlets in the long term. To do this, the group is not expected to take over the previous locations of Carrefour supermarkets and hypermarkets.

STRATEGIC DIRECTION

• PPR is present with two mainstream brands in Belgium, namely Fnac and La Redoute. In media products stores, the new store built in 2010 should be followed by other openings, the aim being to reach 15 outlets in Belgium in the long term. Fnac also wishes to become more profitable and develop online sales of music and films.

• Like in France, PPR does not expect positive growth before 2011 or 2012, as the steady progression of its internet retailing sales (more than 55% of its overall turnover in early 2010) still did not offset the stronger decline of its homeshopping activities in 2009-2010. In addition, while 3 Suisses usually lagged behind La Redoute in terms of innovative strategy, this brand quickly made up for its delay in the area of fashion and the design and the ergonomics of its web store. La Redoute is expected to retaliate by integrating brands other than the traditional portfolio of Redcats AS, as it already did in 2010, with 200 products from Zara Home. Such actions are not immediately profitable, but bring something else; a real plus in terms of image.

KEY FACTS

INTERNET STRATEGY

• Without Amazon.com and its trans-border sales from France to Belgium, PPR should theoretically be the leading player in internet retailing in 2010. It was one of the first “bricks and clicks” players in Belgium. While La Redoute was already well-established, Fnac entered internet retailing in 2005. In order to challenge the leadership of iTunes and illegal downloading, Fnac offered hundreds of thousands of unlocked MP3 files from 2007. The aim of both Fnac, and mainly La Redoute, is to widen their offering in internet retailing in order to get a higher “clicks” share in their sales. In the latter case, in 2011 PPR wishes to offset its loss in homeshopping with the ergonomics and the originality of its successful laredoute.be web store.

COMPANY BACKGROUND

• The Fnac and La Redoute brands are part of the French group PPR SA. In Belgium, this group mainly has interests in media products stores, internet retailing and homeshopping.

• The first Fnac store was opened in 1981 in Belgium. With its nine stores, Fnac has reached a national outlet network, whilst La Redoute products are distributed everywhere in the country.

• From the middle of the review period, Fnac started a programme of opening new stores and remodelling its old ones. Its aim is to open new stores mainly in the southern part of Brussels and in the regions of Namur, Mons and Charleroi. There is sufficient potential in the country for a total of 15 Fnac stores.

• After the opening of one store in Bruges at the end of 2008, the latest Fnac store was opened in La Toison D’Or in Brussels in May 2010. Its sales area is 3,000 sq m, it needed €4.5 million investment, and has 65 employees.

PRIVATE LABEL

• La Redoute is much more active than Fnac in the area of private label. One of its latest innovations was Coton Bio, a clothing brand made with organic cotton.

• La Redoute markets a wide portfolio of products in clothing and homewares. According to the company itself, 80% of La Redoute’s value sales in Belgium were achieved by private label products in 2010.

• The company positions its private label products for all kinds of consumers: La Redoute Prix Mini at the budget end of the market, Soft Grey and many other brands in mid-priced products and Laura Clément in premium products. Its share remained at a standstill in recent years, although La Redoute was successful with its A brands. Indeed, in order to be considered fashionable by consumers, catalogue operators tended to increasingly include popular and even premium brands, notably in clothing, such as American Vintage, Manoush, Levis, Converse and Dim.

COMPETITIVE POSITIONING

• PPR was only the 29th player in retailing in 2010. After growing strongly in 2008 owing to the opening of a new Fnac outlet and the dynamism of laredoute.be in internet retailing, its actual sales declined in 2009 due to the decline in the homeshopping sales of La Redoute. However, PPR recovered in 2010, notably by virtue of the opening of a new Fnac store. The company also benefited from its sales in internet retailing.

• Fnac is perceived as a premium hi-tech specialist for upper-middle income urban consumers, which could hamper its potential, particularly during times of high unemployment. It also banks on offering the most exhaustive selection of audio-visual and electronic products (together accounting for 46% of its sales), books account for 25%, and other media products account for the reminder.

• Like its competitors, the core business of La Redoute is clothing and footwear. However, while 3 Suisses is perceived as the most comprehensive catalogue, as it also offers consumer electronics, media products and toys and games, La Redoute wants to position itself as more fashionable and trendier than 3 Suisses. Nonetheless, 3 Suisses seemed to be more innovative than usual in 2010, putting more pressure on La Redoute.

• In early 2010, La Redoute still did not offset its losses in homeshopping with the success of laredoute.be. Even so, it had a wider range in terms of products and prices in clothing and footwear, and thus a wider consumer base than its competitors. Prior to the review period, La Redoute launched its online operations sooner than its competitors, and benefited from better experience. It also presented a more fashionable and glamorous image, with premium brands and supermodel or star endorsement.

HEADLINES

• Clothing and footwear specialist retailers sees slight value growth in 2010

• Summer sales save a sluggish year in 2010, which suffers from a slowdown of sales amongst the female target and the decline of the male consumer base.

• In 2010, the competitive environment is highly fragmented, with the top 10 companies accounting for a 28% share of overall value sales in 2010

• Clothing and footwear specialist retailers is expected to increase by a sluggish 1% in constant value terms over the forecast period

TRENDS

• According to industry sources, the summer sales ended in July 2010 with a similar performance as in 2009. Once again, they enabled retailers to offset a rather sluggish first quarter of 2010, owing to strong discounts, which in some cases reached 70%. In 2010, sales of clothing and footwear were hampered by the low level of consumer confidence. Consumers tended to buy less impulsively, and limited the number of transactions. A growing number of consumers mixed expensive branded clothes, often purchased during sale periods, with economy products in order to save money for other purchases.

• However, clothing and footwear could have paid a higher price for the economic crisis, as it is usually one of the first categories affected by crisis and difficult economic periods. Against all expectations, whilst the number of outlets declined, there was no decline in value, and mainly volume sales, in clothing and footwear specialist retailers over 2009-2010. The channel also witnessed the ongoing cannibalisation of independent stores by more profitable franchised and integrated clothing and footwear specialist retailers. Nonetheless, with an increase of 2% in current value terms, clothing and footwear specialist retailers seemed to tackle the crisis better in Belgium than in other countries, according to experts.

• Many sources observed that sales of clothing and footwear fared better within the target of children and teenagers rather than adults in 2009 and 2010. Parents tightened their belts for themselves, but continued to spend on their children. In addition, the incomes of teenagers and students did not decline, and clothing still remained crucial for these consumers. In the last couple of years, women purchased the same number of units as before the crisis, but were more reluctant to pay high prices. Meanwhile, men often limited or postponed their purchases.

• In 2010, clothing and footwear specialist retailers still had one of the most fragmented competitive environments. Due to the still dominant share of independent and multi-brand stores, the top 10 companies accounted for a 28% share of overall value sales in 2010. Nonetheless, there was a progressive trend toward concentration, as the top 20 brands gained one percentage point.

• Holding a value share of 7% in 2010, C&A België was the leading clothing and footwear specialist retailer. This leading position was derived from reasonable quality at the “right price”, and adapting the product offer to suit local demand. Until the middle of the review period, it also benefited from an extensive strategy of openings.

• Along with Hennes & Mauritz, JBC was one of the most dynamic chains both in percentage and actual value terms in 2010. This stemmed from a television campaign with Naomi Campbell and a high level of activity in sports sponsorship. In addition, JBC opened six new outlets in Belgium in 2010.

• Inditex, Industria de Diseño Textil also saw growing fortunes in 2010, but on the back of chains other than the Zara concept, which is reaching saturation in Belgium. Whilst Zara still gained ground amongst the young consumer base (children and youngsters), which was less affected or sacrificed than older targets, the Spanish group mainly focused on its other concepts, with new openings of Berska, Pull & Bear, Zara kids and Uterqüe. It also enjoyed some openings in Massimo Dutti outlets, the only franchises of the company along with Uterqüe in the country.

• C & A België stopped its new concept, Avanti by C&A, in 2009. Despite a promising start due to the acquisition of Go Sport (which is leaving the country), the failure was mainly in Germany, where the concept has been stopped, and maintaining four outlets in Belgium was not profitable. The C&A Shoes test store was a failure locally in 2009-2010, according to the company itself. C&A was more successful in 2010, and C&A Kids benefited from the transformation of some Avanti and C&A Shoes stores.

• As in other countries, Charles Vögele Belgium’s value sales declined in Belgium during the last couple of years of the review period, due to the gloomy economic context, according to the company itself. It succeeded in stabilising its sales in 2010 by virtue of the celebration of 55 years of the chain.

• The positioning of mainstream international retailers in Belgium was consistent with their positioning in other countries. For instance, the strategy of both H&M and C&A was to choose excellent store locations in downtown areas or large shopping centres, and to capitalise on low prices and fashionable designs in order to create dense traffic. Zara has a more mid-market approach with its expensive, often prestigious locations and its “Manhattan-style” dressing rooms. However, it does not rely on celebrity endorsements for the promotion of its products, unlike H&M.

• Given that Belgians were more cautious with their purchases, the best performers were often discount retailers and other chains with accessible prices, at the expense of premium and mainly mid-priced chains. Local chains such as JBC and Torfs took the pertinent decision to focus on the outskirts of cities, given that downtown was saturated in Belgium. The former was one of the best performers, not only due to its extensive development, but also thanks to its new positioning, similar to H&M, and its more limited, and thus more profitable, collection.

• Again, local chains, such as the aforementioned JBC and Torfs brands, often fared better than the large international chains during the last couple of years. Indeed, even though they performed relatively well in the country, multinational chains such as C&A, Zara and H&M suffered from the poor results of other subsidiaries around the world. Therefore, foreign chains often received less financial resources from their headquarters. This was not the case for local chains, which thus benefited from a proportionally higher marketing budget.

• In 2010, the main entrant was Desigual (included in others). This Spanish chain is already present in France and the Netherlands, and put a foothold in Belgium. Another trend was the development of casual clothing for youngsters, as exemplified by the emergence of Super Dry (already having five shops in 2010), and the launch of the Dutch chain Scotch & Soda in early 2010.

• Entering in 2009, Uterqüe seemed to be a success in 2010, notably thanks to the better fate of accessories than clothing. Accessories are less expensive purchases than clothes, can be bought more impulsively, and enable women to customise their style. In addition, the concept was already successful in Spain, Portugal and Greece in 2009. For the moment, all these new concepts have too limited a share to strongly impact the channel.

• The recession has not completely disappeared, at least in consumers’ minds, which caused further consumer goods manufacturers to step up the outsourcing of production overseas in 2010. During the review period, the growing success of value-for-money products prompted consumer goods manufacturers to seek increasingly cheap providers and shift production, first towards North African countries, and then China. While the remainder of local production slumped over the last decade, imports from China increased by at least 30%-40% annually over 2005-2010.

• The outlook is expected to remain rather grey for clothing and footwear specialist retailers in the coming years. Belgium seems to be suffering less than other European countries from the crisis in retailing, and mainly clothing and footwear. However, experts fear the slowdown of impulse purchases, mainly amongst adult consumers. Thus, clothing and footwear is expected to see very slight growth of 1% in constant value terms over the 2010-2015 forecast period. It is likely to record a sluggish performance during the first half of the forecast period, but could recover slightly, with the possible reprieve of the budgets of Belgian households after 2012.

• It looks like Scotch & Soda has room for growth. Its concept is promising for the Belgian market, and it is first being tested in a rejuvenated commercial centre. Like Super Dry, it could benefit from the anticipated success of casual clothing for youngsters; this is a strategic target group, and is still spending.

• In the long term, players which are real innovators in terms of concepts and products, and which have a value-for-money offering, are expected to see positive development at the expense of followers. International chains such as C&A and H&M, which often develop through the opening of new outlets, are very close to saturation in Belgium, and are thus expected to stagnate very soon. Therefore, they are expected to develop through other concepts and chains, such as COS and Uterqüe, or web shops such as Zara in 2011 or 2012 – included in internet retailing.

CHANNEL FORMATS

CHANNEL DATA

HEADLINES

• Increasing by 4% in current value terms, direct selling reaches sales of €239 million in 2010

• The last couple of years of the review period witness an explosion in the number of new entrants, and, notably, starters

• Other than services (not included in Euromonitor International data), jewellery enjoys the most impressive growth in 2010, which is included in other direct selling

• With the top five players accounting for a 46% share of value sales in 2010, the competitive environment is concentrated

• Direct selling is expected to increase by 10% in constant value terms over the forecast period

TRENDS

• The last couple of years of the review period witnessed an explosion in the number of new entrants, and, notably, starters. Indeed, the number of newly created companies in direct selling increased by 60% in 2009, and was said to forge ahead in 2010. Fedis, the main trade association for retailing, even observed a growing number of “bricks and direct selling” players in the category; in other words, operators coming from store-based retailing, and setting up a direct selling sales force.

• Whilst signs of strong economic recovery were still not yet evident at the time of writing, the success story of direct selling paradoxically continued in 2010. Sales in this category increased by 5% in 2009, and by 4% in 2010 in current value terms. Including services (excluded by Euromonitor International), this channel was even more dynamic, with, for instance, almost 10% growth during the first months of 2010. In fact, the economic crisis paradoxically had a positive effect on direct selling, as it enabled this channel to recruit more salespersons due to higher national unemployment. Also, many Belgians looked for additional income to increase their monthly salary, or simply because of the fear of losing their job.

• Belgians became more familiar with home parties, which gave the channel a better image than a decade ago, when such a format was less common. From that time onwards, with almost three million clients and three-quarters of value sales, the party plan format has largely driven sales in direct selling, along with person-to-person approach. Home parties particularly appeal to women aged 45 and over in small and mid-sized towns. According to APVD (Professional Association of Direct Selling), the average transaction in 2009 was €55, increasing by 7% compared with 2008. Meanwhile, traditional door-to-door still declined, and only accounted for 13% of value sales in direct selling in 2009.

• APVD only includes person-to-person and party plan sales, and excludes multi-level marketing and service sales. Due to the dominance of home parties, the most prevalent agent compensation scheme is single-level. However, multi-level marketing is still important, in line with the share of brands such as Tupperware, Amway and Nu Skin (Nu Skin Enterprises) in direct selling in Belgium.

• Services was the most dynamic category in direct selling in 2009, with value growth of 51%, and ongoing double-digit growth is likely in 2010. Included in the other direct selling category, jewellery also enjoyed impressive growth by virtue of Victoria and Bijoux Marie-Elle, the two mainstream players in this area, and two other dynamic companies, H2Oand Mylène, which both specialise in jewels and cosmetics. As well as clothing and footwear, jewellery is an ideal product for the party plan format, and is a high involvement item for both its salespersons and its female consumers.

• Some categories underperformed in 2010, including consumer appliances and consumer electronics direct selling, and mainly cosmetics and wines. This was partly the result of competition from internet retailing, and the prevailing discounting strategy of grocery retailers.

• Nearly 20% of Belgian consumers thought that direct selling consumer goods offered better value for money than store-based retailing in 2009, according to APVD. This indirectly indicates that a greater proportion did not believe that this was the case. However, satisfaction regarding the real value for money of products sold in direct selling was higher for party plans than the person-to-person format. Consumers particularly appreciated the ambience of a party with friends, and were thus less price-sensitive.

• More than 18,000 Belgians worked in direct selling in 2009, the majority of which did so as a second job. This number increased by 11% compared with 2008, and is expected to forge ahead in 2010. 94% in this category are independent. Women are the main employees in direct selling, at 68%, of which 89% worked part-time in 2008.

COMPETITIVE LANDSCAPE

• With the top five players accounting for a 46% share of value sales in 2010, the competitive environment in direct selling is concentrated. These included Tupperware Belgium, Amway Belgium, Herbalife Belgium, Nu Skin Enterprises, AMC Belgium and Victoria Benelux.

• Top-of-mind in the country, Tupperware Belgium has had a well-established presence in the country for several decades. Its multi-level marketing organisation encompasses hundreds of concessionaires and thousands of managers and presenters, who are mainly women and work for Tupperware on a part-time basis. In the last couple of years it progressed at the same pace as the overall channel; the result of the success of its cooking parties and an ongoing high number of innovations and improved design.

• Mylène, number two in terms of notoriety, was created in 1965, and is active in Belgium and the Netherlands. It scored a hit in Belgium in the last couple of years owing to the success of its specialisation in cosmetics and toiletries, linen and lingerie. Its 3,500 agents work in Belgium, but also in Germany and the Netherlands, and more recently France. Victoria Benelux, a local specialist in silver and iron jewellery, was also very dynamic. Its aim is to offer exclusive jewellery “far from the crush in shops”.

• Operators with declining shares were rare in direct selling in 2009-2010. However, Amway Belgium and Nu Skin Enterprises underperformed due to the stagnation of sales of vitamins and dietary supplements.

• Brand equity and recognition are important in direct selling. According to APVD, if a brand is not well-known or perceived positively, consumers tend to trust salespersons less. Since the beginning of the 1990s, the industry has followed an ethical code, which was created to improve its credibility and image. Players and brands which were positioned on the party plan format, such as Victoria Benelux and Mylène, for instance, seemed to benefit from better brand equity and recognition than those capitalising on the person-to-person format.

• The still high share of Tupperware Belgium, Amway Belgium and Nu Skin Enterprises enabled international players to dominate direct selling in 2010. Nonetheless, local players often fared better, and could even export their concepts to other countries, such as the aforementioned Mylène, the domestic leader. Local players have often recently mixed their direct selling activities with internet retailing.

PROSPECTS

• The main challenge and possible event in the coming years is the potential unlocking of tough local legislation concerning direct selling in Belgium. Despite the outcome of an appeal by Fedis in front of the European Commission, payment is forbidden during the party plan, and salespersons have to wait for seven days before accepting payment. Despite improvements in 2009, there is a limitation of €250 per sale in direct selling in some categories. Mainstream players still hope that the Belgian government will authorise deposits or a total payment before the legally required period of seven days. Then, becoming a salesperson/presenter/canvasser should become easier administratively, owing to the withdrawal of previously required “management certificates”. Also, door-to-door canvassers should no longer be required to have a VAT number.

• There are a sufficient number of promising signs to hope for an optimistic outlook for direct selling in the coming five years. As previously mentioned, the channel should benefit from more favourable juridical ground, and growing or stagnating unemployment should ease the recruitment of a new sales force. In addition, the satisfaction rate of direct selling clients jumped from 71% in 2008 to 76% in 2010. Thus, Euromonitor International expects direct selling to increase by 10% in constant value terms over the forecast period.

• The potential growth of the channel would be higher without the threat of the competition from internet retailing over the forecast period. Direct selling could also suffer from a reputation of relatively high unit prices. Nonetheless, some players think that the two channels can be run alongside. Therefore, a number of operators will focus on building a harmonised synergy with internet sales. This latter channel can be an excellent medium for advertising products and “opening the door” to consumers with direct marketing campaigns. An internet presence can be complementary, but cannot replace a network of canvassers/organisers.

• Products with a strong feminine touch, which both involve saleswomen and female consumers, are expected to drive sales over the forecast period. For instance, jewellery and clothing and footwear (including lingerie) are mainly targeted towards women, who are generally the ideal target for party plans.

• Consumer appliances and consumer electronics direct selling are expected to demonstrate the worst performances over the forecast period 2010-2015. This will notably be attributed to the increasing importance of sales over the internet, eroding the share held by direct selling, and mainly the declining popularity of the person-to-person format, which is often used for such products. Despite the fact that it is included in the female segment, beauty and personal care direct selling, which already suffered in 2009-2010, is expected to slightly decline again after 2012. This will notably act as a drag on the future performance of players such as Amway Belgium and Nu Skin Enterprises.

• The strongest performers are likely to be those capitalising on party plans, with a great emphasis on education and conviviality. Surveys show that consumers seek not only to buy products, but also to enjoy the sales process and experience, and they also want to learn something. Women, but also older men, are showing a growing interest in cooking party plans.

• What could shuffle the cards in the short term could be the entry of multinational manufacturers and brands, which previously focused on store-based retailing for their distribution. For example, Beiersdorf is demonstrating a growing interest in direct selling, and more particularly the party plan format, to complete its distribution. Yakult products, which are already distributed door-to-door in Japan, could also soon be sold in the direct selling channel in Belgium.

CHANNEL INDICATORS

CHANNEL DATA

HEADLINES

• DIY, home improvement and garden centres increases by 3% in current value terms to reach €3.1 million in 2010

• Despite the cocooning trend and the desire to carry out more do-it-yourself activities, volume sales level out in 2010

• Only four players drive sales in DIY, home improvement and garden centres, with a combined 65% share of value sales – Maxeda, Aveve, Hubo Belgie and Gamma België

• DIY, home improvement and garden centres is expected to post modest growth of 5% in constant value terms over forecast period

TRENDS

• In the last couple of years, there were promising signs for sales in DIY, home improvement and garden centres. The cocooning trend, the popularity of barbecues and the growing importance of interior design encouraged men, and increasingly women, to participate in home improvement and garden beautification. According to a survey by CRIOC (a consumer association which observes trends in Belgium) at the end of 2009, second-hand purchases, home cooking and do-it-yourself ranked amongst the main new buzzwords after the economic crisis. 20% of Belgians wished to carry out more do-it-yourself activities.

• This seemed to be only an intention or wishful thinking, however, as sales in DIY, home improvement and garden centres posted current value growth of 3% in 2010. This still appreciable performance remained slightly below the CAGR in the category over the review period, and was possibly due to ongoing price increases. Indeed, volume sales of DIY products completely levelled out during the first half of 2010 according to Fedis, the Belgian trade association for retailing.

• In addition, due to the closure of some independent stores, the channel continued to see a declining trend in terms of outlets in 2010. Independent retailers held a third of value sales, but yielded ground to more competitive and professional chains.

• Despite the presence of a large number of small players in the channel, the competitive environment in DIY, home improvement and garden centres is one of the most concentrated in retailing. Only four players drove this channel in 2010, with a combined 64% share of value sales – Maxeda, Aveve, Hubo Belgie and Gamma België. Owing to their strong logistics and low prices, these chains continued to put pressure on independent outlets. Nonetheless, many surviving independents were more resistant and professional than before, and many of them were able to face chains with their services and advice to consumers.

• With a value share of 19%, Maxeda led DIY, home improvement and garden centres in 2010. While 60% of its stores are franchised stores between 1,000 sq m and 2,500 sq m, its flagship brand Brico also has some large, integrated 8,000 sq m “destination stores”. Prior to the review period, Maxeda transformed former Leroy Merlin superstores into Brico Plan-It outlets, rejuvenating them with adapted merchandising and an original ambience. Brico was also a forerunner as the first “bricks and clicks” retailer operating within this channel.

• Hubo Belgie was by far the fastest growing player in 2009 and 2010, thanks to new openings, and mainly due to the ongoing acquisition of other chains. This chain acquired five outlets from Bricomarché in 2002, five from Selfmade in 2003, and the whole Superbois chain in 2004. In 2009/2010, it forged ahead with the acquisition of Aster X, a regional chain (included in others). In addition, Hubo Belgie became a “bricks and clicks” player by entering internet retailing in 2010.

• Aveve, the absolute leader within garden centres, continued to expand steadily in 2009 and 2010. It opened further outlets and focused on expanding its presence in French-speaking Wallonia from the second half of the review period. It differentiated its Aveve Tuincentrum outlets from other garden centres by concentrating on developing strong traffic builders such as pet food and pet care products, with even more space allocated to sales of pets and pond fish.

• The leading player Maxeda underperformed in 2010; notably the result of the closure of some Brico Plan-It outlets. The majority of DIY, home improvement and garden centres are located on the outskirts of towns. Nonetheless, Maxeda capitalised on the growing trend for DIY and gardening amongst urban consumers by opening smaller Brico outlets in 2007, named Brico City, in downtown areas. These offer product ranges and specific store merchandising which are more adapted to urban demand. However, this concept, which banked on the high level of urbanisation in the country and the high number of flats, did not seem to be particularly successful in 2010.

• Gamma België, owned by Intergamma BV, succeeded in stabilising its share in 2010, which contrasted with its decline in 2009. Gamma was one of the only chains, along with Hubo, to be present on television, with the sponsorship of broadcasts about DIY and home decoration. As well as other players, it also focused on mailings and leaflets.

• Regarding the relative positioning between retailers, Hubo banks on frequent discounts, adopts a strong training policy for its employees and capitalises on frequent promotions. It also banks on a balanced multi-brand offering, with a mix of A and B brands, as well as low-cost generic products imported from China. Whilst Brico favours aesthetic presentations, Hubo opts for clearer and more functional merchandising, with more product information provided on the packaging, even for B brands and generic products. Although there is not really a price war, all chains tend to offer the cheapest prices they can.

• There is a relative balance between international retailers such as Maxeda and Gamma België and domestic chained operators, such as Aveve and Hubo Belgie.

• As in other channels, players had to look for cheaper providers or shift production overseas to remain competitive. Nonetheless, retailers still had to offer standard and even premium products due to the importance of quality in tools. Thus, according to an industry source, there were still many local and European providers, although they manufacture less and less in Europe.

• Opinions differ on the predicted fortunes for DIY, home improvement and garden centres in the coming years. The competition from other leisure, multimedia and travel categories, the saturation of the network of chains and the weak recovery of the building trade and real estate in Belgium are expected to dampen the potential of the channel. The outlook is not totally bleak, however. Belgians are staying at home more due to the cocooning trend, and they could dedicate more time and money to DIY and gardening. The cultivation of vegetable gardens also allows consumers to save money and at the same time eat more authentic and natural fruit and vegetables, which is in itself a developing trend in Belgium. Thus, sales in the channel are expected to enjoy modest but still positive constant value growth of 5% over the forecast period 2010-2015.

• Aveve, and primarily Hubo, are expected to rank amongst the most dynamic players over the forecast period. Instead of fighting against each other in a price war, they will focus on loyalty, notably by giving consumers more loyalty points, or offering them more favourable discounts or credit. The overall number of outlets is expected to continue to decline over the forecast period due to the lack of competitiveness of the most fragile or the smallest independent players. Nonetheless, independent stores are likely to perform better than they did during the review period, due to consolidation amongst small regional chains, the creation of purchasing alliances and the training of staff.

• Players are expected to concentrate further on attracting female consumers. Although they still lag behind men in terms of consumer numbers within this channel, women were often represented as the most promising and dynamic consumers during the review period. Therefore, retailers are likely to continue to develop a more female-friendly approach within their stores, by adapting the ambience, offering advice and demonstrations, and by providing more diverse products in their offering, such as organic seeds, plants and fertiliser.

• Chains are also expected to broaden their offers outside their core business in order to generate more impulse purchases. “Cross-merchandising” is likely to become generalised; for example, displaying disposable gloves and masks close to paint on store shelves. Players will also try to build better synergy with their web stores. Indeed, at the time of writing, “bricks and clicks” retailers operating within the channel were slightly disappointed by the trickle-down of internet sales on their performance in store-based retailing.

CHANNEL FORMATS

CHANNEL DATA

HEADLINES

• Electronics and appliance specialist retailers increases by 1% in current value terms in 2010

• Sales are subject to irregular trends, depending on consumer confidence, technical innovation and the evolution of the euro against the US dollar

• Media Markt-Saturn Belgium is the leader in electronics and appliance specialist retailers, with a 14% value share in a still fragmented environment in 2010

• Electronics and appliance specialist retailers is expected to remain at a standstill in constant value terms over the forecast period

TRENDS

• Sales in electronics and appliance specialist retailers are subject to irregular trends, depending on consumer confidence, technical innovation and events. Again, the channel witnessed some trend reversals during the last couple of years, such as the recovery of “dark products”, namely consumer electronics. Such products enjoyed the relative success of LED and Blu-ray screens, notably thanks to the World Cup – although Belgium did not qualify.

• Meanwhile, sales of consumer appliances, so-called “white products”, were affected by the persisting recession. Consumers tend to replace broken fridges or dishwashers, but do not replace them, or replace them much less often when they are simply old, mainly during a gloomy economic or political context. In addition, the sustainable development trend and its impact on electronics and appliances made them more expensive, with the quest for the perfect AAA+ machine.

• In early 2010, due to the decline of the euro against the US dollar, unit prices tended to strongly increase until the recovery of the euro from the middle of 2010. As a result, value sales in electronics and appliance specialist retailers should increase less steadily in the second half of 2010 than during the first half. Meanwhile, volume sales in units dropped due to the decline of GPS systems (as these were integrated in all cars from then onwards), CD/DVD readers (with the exception of Blu-ray systems), and basic GSM phones (replaced with smart phones).

• The recession in 2009 and the weak recovery in 2010 seemed to freeze some openings, and resulted in the closure of the weakest stores, mainly within independent retailers, but also in chains such as Sonica – more in leisure and personal goods stores than in this channel. Thus, after several years of slight increase, the number of outlets declined by 1% in 2009 and 2010.

• The still high number of independent outlets and the limited presence of major international retailers in the country resulted in a still rather high fragmentation of company shares in 2010. The top five players accounted for a combined 38% share of value sales; nonetheless the companies which followed all had shares under 2% in 2010.

• With a 12% share of value sales in electronics and appliance specialist retailers, Media Markt-Saturn Belgium, owned by German company Metro AG, was the only operator in the channel with a double-digit value share in 2010. After its entry into Belgium, this chain totally shuffled the cards in electronics and appliance specialist retailers during the review period. Its aggressive promotions and its discounting policy enabled it to double its number of outlets over the review period.

• Krefel saw the biggest increase in share in 2010. It was said to be the leading player in consumer appliances in the review period, and later diversified towards consumer electronics. Its success notably stems from its rigorous management and procedures, which are somewhat comparable to the Colruyt grocery retailer. Most activities are performed internally: such as after-sales service, logistics, information technology and transportation. As Colruyt, the chain also offers a service which compares prices with the competition. The extension of the head office also allowed Krefel to install its own training centre, the Krefel Academy.

• Many players continued to wonder if Media Markt could be profitable, as its progression in recent years was not sufficient to offset its meagre margins and the cost of its expensive locations. Even so, Media Markt-Saturn Belgium still opened new outlets in 2009-2010, particularly Saturn stores, which seems to prove that the German player does not face problems of profitability in Belgium.

• Sonica was the main loser in 2010, although the results of its decline were more visible in leisure and personal goods specialist retailers than in this channel. This chain went spectacularly bankrupt, and only 20 outlets were acquired, or replaced by other chains, including Free Record Shop in Flanders, and some Sony outlets. Sonica seemed to be the main victim of illegal downloading; nonetheless, other chains, such as Free Record Shop, better faced this scourge in 2009-2010.

• Some common points in the various chains’ strategies were “price” and “discount”. Eldi and Media Markt were already considered discounters. The former adopted a new slogan in 2009, “c’est tous les jours qu’on en profite” (“a good bargain every day” or “we enjoy it every day”), which seemed to bear fruit during the economic crisis. The three key selling points of Saturn were its low prices, its wide choice of products in larger stores than Media Markt, and its focus on technological innovation. Nonetheless, Vanden Borre, the traditional retail strategy of which was building trust and offering premium products, also increasingly used the word “price” in its promotions. Initially launched in the French-speaking part of the country, Krefel has a German-sounding name, so consumers associate the company with reliability. Unlike Media Markt, Eldi capitalised on its mid-sized stores, and established strong relationships with its local customers.

• Local players continued to dominate in 2010. However, other than Krefel, local, and more particularly regional chains or independents, yielded ground to foreign chains. The mainstream foreign chain, Media Markt, appealed to Belgians with its large and well-located stores, exhaustive offering and simple discount strategy, further illustrated by the red colour of its logo. Media Markt is sometimes dubbed “the Colruyt of electrical appliances”; Colruyt is a very popular soft discounter in grocery retailers.

• Retailers enhanced the cheapest alternatives in white and mainly dark products in recent years, which resulted in tough price competition. Thus, manufacturers’ profits declined, and companies had to close factories in Western Europe and open production facilities in Eastern European countries such as the Czech Republic, Poland and Russia, and also in China, where labour costs are much lower.

• An alternative to this price war was to focus on innovation. Nonetheless, although it sustained demand for consumer electronics, new technology continued to replace previous technology, which was increasingly discounted. For instance, only LED new technology and Blu-ray HD remained successful in televisions in 2009-2010. In the declining market for telephones (GSM and home phones), only smart phones were successful.

• The scope for development is uncertain in consumer electronics and electrical appliances. 3D screens were just emerging at the time of writing, but the price of such products is still too high for the current gloomy economic climate. Even in the case of a good start, 3D screens are not expected to offset the effect of strong discounts on LED and plasma screens, and the impact of the irregular development of the euro and US dollar on imports in the coming years. In electrical appliances, Belgian consumers are expected to focus on accessible products such as kitchen sets for woks, and mainly the new wave of coffee espresso machines – Dolce Gusto by Nestlé, for instance.

• Competition from grocery retailers, in which such products are increasingly sold, is expected to limit any benefits for electronics and appliance specialist retailers. In addition, given that electronics and appliances are strongly linked to new technology, consumers of these goods are likely to use the internet, which also allows them to locate the best bargains. Due to the slowdown in impulse purchases, particularly in large kitchen appliances, sales in the channel are expected to level off in the coming five years.

• Krefel is expected to perform well in the coming years, as it has decided to focus on Belgium, while competitors such as Eldi are looking forward to further expansion in France. Besides the expansion of its existing outlets to move towards its preferred format (2,000 sq m), Krefel wishes to reach 90 stores. In this context, the current restructuring of Carrefour could open up new opportunities for Krefel. Growing in the market for kitchens is another priority, as 27 Krefel stores already have a showroom. As it has done so far, the family company expects to finance its growth in equity through changes in its cash flow and profits.

• During the last couple of years, all players found it was increasingly difficult to reach their sales objectives, and used all affordable means to achieve them, such as extending guarantees (five years free is expected to become more common), strong discounts or interesting credit or special offers – for instance €50 offers in exchange for an old appliance. The bankruptcy of Sonica should, paradoxically, give a breath of fresh air to almost every chain, as Sonica’s customers will switch to new outlets. The end of this effect in the short term could drag potential in the channel.

• Manufacturers and retailers are expected to continue to put more green in their white and dark products, due to new European legislation on the environment. Already present during the review period thanks to regional financial incentives and an industry initiative, energy-saving appliances are expected to see further growth. These products are more expensive than standard offerings, which should impact positively on value growth, but could also put off some consumers due to their higher prices.

CHANNEL FORMATS

CHANNEL DATA

HEADLINES

• Current value sales continue to decline slightly in 2010 in furniture and furnishings stores

• The channel suffers from the absence of recovery in the property market, and the lower budget dedicated to furniture

• The competitive environment in furniture and furnishings stores remains fragmented, with only Ikea Belgium having a double-digit value share in 2010, of 14%

• Furniture and furnishings stores is expected to decline by 2% in constant value terms over the forecast period

TRENDS

• According the Fedustria trade association, the Belgian furniture industry hoped for recovery, driven by demand, in early 2010. At the end of 2009, the number of orders within local manufacturers showed promising signs of recovery. However, the context was still gloomy within furniture and furnishings stores. At the end of 2009, Belgian families spent an average of 7% of their budget on purchasing furniture and other equipment; a proportion which has declined by two percentage points since 2000. Manufacturers and retailers in furniture and furnishings fear the impact of the absence of real recovery in the building trade and real estate on their industry.

• Therefore, current value sales continued to decline slightly in 2010 in furniture and furnishings stores. The gloomy economic context also acted as a drag on the number of outlets, which declined by more than 2% in 2010. This was sped up by the cannibalisation of some independent furniture and furnishings stores by franchised and integrated stores. The prices of the latter were generally less competitive than chained outlets. Meanwhile, sales area continued to see a slight increase, owing to the ongoing development of chained outlets, which have larger stores than independent outlets.

• In 2010, the competitive environment in furniture and furnishings stores remained highly fragmented, in spite of the better fate of chains than independent stores. Well-established chains secured less than a quarter of value sales in this channel, which encompasses many independent outlets. Within chained outlets, the absolute leader in 2010 was Ikea Belgium, the only player to hold a double-digit value share, owing to its success in Belgium, as well as in many other European countries. Its six stores achieved a 14% share of value sales in furniture and furnishings stores in 2010. According to a survey by Q&A Research & Consultancy, Ikea is by far the most popular chain of home and garden specialists in Belgium.

• In contrast with previous years, Ikea was not the most dynamic chain in the last couple of years of the review period, at least in percentage terms. After a slow beginning in the middle of the review period, Zara Home was one of the most dynamic chains in 2010, possibly due to the synergy with its recently launched web store. Although it confessed in the local press it was reaching saturation in Belgium and wished to invest in bordering countries, Heytens still progressed in 2010. Lastly, the ongoing diversification of Carpet Right towards flooring other than untrendy carpets seemed to bear fruit in 2009-2010, as the chain remodelled its stores and continued opening new outlets.

• As well as Blokker in variety stores, Leen Bakker (from the same NBO, Blokker Nederland) stagnated in 2009, and declined in 2010. Leen Bakker stores are relatively small outlets which specialise in low-cost furniture and furnishings, home decoration and linen items.

• About 13 million customers visited Ikea stores in 2010, compared with nine million in 2008. Even so, although the Belgian subsidiary still performed better than in many other countries, and still progressed in actual value terms, Ikea Belgium itself considered that 2009 and 2010 were rather sluggish years. 2009 was marked for the Swedish group in Belgium with the opening of Ikea Gent, “the jewel of Ikea in Belgium”, that replaced a smaller store in Ternat. Ikea also invested €34 million in 2009 and €21 million in 2010 into store extensions and the remodelling of its Anderlecht, Arlon and Zaventem stores. 2010 also witnessed the end of the social conflict and strikes which started in 2009.

• Regarding the relative positioning between retailers, Ikea has the widest and the most frequently rejuvenated offering, in combination with the most complete services. The originality of Ikea is that this retailer transposes and even enhances its Swedish positioning and model, rather than suiting local consumer tastes. Ikea is perceived as Scandinavian, but also as original and eco-friendly. Its sales were also boosted by its convenient opening hours, as well as its day nursery and restaurant facilities.

• The most dynamic performances were generally achieved by international chains. Although local independent stores appeared to dominate, they nevertheless suffered from a lack of traffic and competitiveness.

• During the last couple of years, the majority of chains had to seek providers in Eastern Europe, South America, and even the Far East for exotic wooden furniture in order to be able to offer lower prices. Whilst Belgian imports of furniture declined in 2008, according to Fedustria, imports from China increased by 14% compared with 2007. In 2009, imports continued to decline, even those coming from China. Nonetheless, with a decline of 4%, this country was one of the least affected by the crisis.

• Some experts consider that the cocooning trend will be reinforced during the coming years of sluggish growth, as well as a growing interest in fashionable home decoration, alongside attractive designs and ergonomic functionality. Replacement cycles are expected to continue to be shorter than before, as young Belgians rarely keep their parents’ furniture. However, sales of furniture and furnishings are expected to be hampered in the short term by the lack of recovery in real estate and flat-fitting. The budget which consumers usually dedicate to home furnishing is expected to stagnate, as even players such as Ikea do not expect a real recovery before 2012. Therefore, value sales are expected to see a slight decline of 2% over the forecast period.

• From the end of 2009, Ikea Belgium has been working on a strategy which will help it start over again. First, it will focus on particular areas, such as bedrooms, and will still concentrate on low prices. Then, it will try to improve the customer experience, notably with interactive tools to help visualise how the furniture will look like in the home environment. Lastly, it will continue to invest in remodelling its stores, and could enjoy the opening of a seventh shop in Mons in the long term. Given that its penetration rate in terms of Belgian households surpassed 50% in 2009, there is still room for growth for new stores. The chain’s aim is for the majority of Belgians to be able to visit an Ikea store within 45 minutes.

• Other than price, originality and design, major selling points over the forecast period, are likely to include ergonomic and storage solutions. Indeed, Belgians increasingly live in small flats, while the number of items in the home (furniture, furnishing, clothes and durable goods) continues to increase. Hence Ikea’s focus in 2009-2010 was on home solutions for “living with children”, “living in small places” and “the kitchen”.

CHANNEL DATA

HEADLINES

• Grocery retailing posts meagre growth of 1% in current value terms, reaching sales of €35.3 billion in 2010

• The restructuring plan of Carrefour Belgium strongly affects hypermarkets, and thus affects overall sales in the channel

• The number of grocery retail outlets continues to decline, by 1% in 2010

• The competitive environment is relatively concentrated in grocery retailing, with the top five players accounting for almost half of value sales in 2010

• Grocery retailing is expected to increase by 3% in constant value terms over the forecast period

TRENDS

• The most important factor driving grocery retailing in 2010 was the restructuring plan of Carrefour Belgium. For many years, the French player has faced difficulties in Belgium, which did not improve with the economic crisis. The closure of some Carrefour supermarkets, and mainly hypermarkets, strongly affected sales in this latter format, and dampened the recovery of grocery retailing. After a still appreciable increase in 2008, which was mainly fed by strong inflation and the slowdown of 2009, the channel posted sluggish growth of 1% in current value terms in 2010. The slowdown of the global economy and the absence of real recovery in unemployment in Belgium had a strong impact on consumer confidence.

• With a 41% share of value sales in grocery retailing in 2010, supermarkets is the most popular format in the country. Supermarkets is also the core business of the two most valuable and dynamic players in the channel, namely Etn Franz Colruyt and Delhaize Group. Given the small size of Belgium and its high level of urbanisation, Belgians tend to prefer smaller formats like supermarkets over hypermarkets, for example.

• With an increase of 4% in current value terms, supermarkets was also the fastest growth channel in 2010. It was the main winner amongst all grocery channels from many favourable factors in 2009-2010, including the closure of some hypermarkets (and the subsequent switch of their clients to supermarkets). Experts also pointed to the ongoing dynamism of Etn Franz Colruyt and the counter-attack of Delhaize Group, and their efficient strategies in the areas of price, discounts and private label.

• Declining by a significant 13% in current value terms in 2010, hypermarkets was the great loser in grocery retailing. Other than the sudden closure of Carrefour outlets, this category already suffered from structural problems. Before 2010, this channel continued to lose ground and profitability within grocery retailing in 2009. As retail density is much higher than in France, particularly in Flanders, the attraction of these stores was less potent in Belgium. Hypermarkets, which were more successful in France, had to face competition from supermarkets and discounters, which better suit the small size of the country. Lastly, hypermarkets were initially targeted towards larger families, whilst the number of divorces and single-person households continued to increase in recent years.

• Non-grocery products accounted for about 20% of value sales in hypermarkets and supermarkets, with a slightly lower share in the latter. Non-food items such as clothing, consumer appliances, toys and computer/multimedia products are mainly used to attract different types of consumers to supermarkets, but accounted for a limited share of 18% of sales in 2010. This share was 22% in hypermarkets, and slightly declined in 2010. Indeed, Carrefour seemed to focus more on food sales in 2009-2010, notably because Belgians also centred on the most crucial items during the recession. In addition, the CEO of Carrefour said in 2010 that the era of “all-in-one under the same roof” was past from then onwards.

• Other than hypermarkets, discounters was also affected by the economic crisis. Current value sales levelled out, and the number of new outlets was never as low as in 2010. Traffic, and thus sales, were affected by the reduction of expenditure in low-income households, the key clients of discounters, and by the counter-attack of supermarkets with more private label, low-cost products with similar or even lower prices than in discounters. In addition, the entry of A brands in Lidl outlets came at the wrong time, just prior to the crisis. This contrasts with the first half of the review period, when discounters was often the most dynamic format. Aldi and Lidl were even the chains which created the greatest numbers of outlets over the review period amongst supermarkets, hypermarkets and discounters.

• A non-negligible factor in the slowdown of discounters was the growing competition from other similarly positioned formats. First, Colruyt, which is included in supermarkets, has positioned itself as a “smart” discounter, selling both brands and private label products. Although it offers the lowest-cost products, this chain surprisingly has ranked the highest in terms of customer satisfaction for many years. It is even cheaper than Aldi and Lidl, as it has published unit price comparisons from 2008. Then there was also the launch of a soft discounting concept in 2009, Red Market – see competitive environment.

• After a logical slowdown at the end of 2008 and in the first half of 2009, convenience stores saw a recovery in sales in 2010. Mainstream grocery retailers believe that proximity and convenience are still ranked as the major needs of Belgian consumers. For food products, urban consumers, who accounted for 97% of Belgians, prefer to go to a retailer which is close by. Thus, Belgium is characterised by a dense network of shops positioned between superettes (small supermarkets, not included here) and convenience stores. In addition, this format often proves to be more profitable in terms of sales per sq m than other formats within grocery retailing.

• Industry sources were conflicting about the performance of forecourt retailers in recent years. Some sources deemed that this channel remained dynamic, but this was often attributed to the development of in-store bakery products fast food – not included in retailing. For others, in common with Euromonitor International, traffic and sales declined in forecourt retailers in 2010. According to the Belgian Petrol Federation, 500 service stations disappeared over the last five years, due to the too high number of stations in the country, the subsequent closure of many unprofitable stations, and the growing number of robberies. Sales also suffered from the limitation on alcoholic drinks sales from 2008. Lastly, in a highly urbanised country such as Belgium, people can more easily switch to public transport; some consumers became less inclined to pay the high prices of forecourt retailers in the context of the economic recession.

• With more than 5,000 outlets in 2010, bakers accounted for the largest share of food/drink/tobacco specialists in 2010. The remainder encompassed butchers and caterers, and some beer and wine specialists. Tobacco specialists are rare, as cigarettes are sold in many locations, such as vending machines in cafés/bars, booksellers and forecourt retailers in Belgium. Traditional food specialists are much less competitive than supermarkets and discounters, and thus lost ground even before the economic crisis. However, those which survived were often more professional and well-managed, and thus worked better. As a result, food/drink/tobacco specialists continued to lose outlets in 2010, but still progressed in current value terms.

TRADITIONAL VS MODERN

• Traditional grocery retailers accounted for only a 22% share of value sales in 2010, and continued to yield ground to modern grocery retailers. For many decades, traditional grocery retailers have progressively been cannibalised by the one-stop shopping positioning of modern stores, their much cheaper prices and their private label products. This movement sped up with the economic crisis of 2009, as Belgians became increasingly price-sensitive.

• Even so, with a share of 80%, the most prevalent format in terms of outlets in 2010 remained traditional grocery retailers. As in France, thanks to the quality of their products, the 5,000 bakers were still crucial stores for millions of Belgians for their daily purchases of bread, and mainly the Sunday cake. However, supermarket chains such as Delhaize have also focused for many years on quality, and recently cut the prices of bread. In early 2010, Delhaize’s 10 cent discount on 10 freshly baked and often authentic/traditional breads was important in comparison with bakeries’ prices. Given that bread is a crucial product, especially during a crisis, it triggered many reactions from artisanal bakers, notably in the press, which resulted in free promotion for Delhaize’s initiative. Butchers and the limited number of fish shops faced growing difficulties against the pricing policy of modern retailing.

• The main issue for traditional retailing is the issue of authorisation for opening. In this respect, the reaction of the Belgian government was too indulgent, or at least mishandled. At the beginning of the review period, it tried to relax restrictions on the retail environment in Belgium in order to provide it with greater stimulus, by passing a law simplifying the procedure for registering new businesses and gaining a licence in order to spur competition. This law was soon called the “Ikea law”, because trade unions and independent retailers claimed that it would favour larger chains and make it more difficult for independent shops with a sales area below 400 sq m to open.

• Not all experts agree, but many say that smaller outlets face more hurdles in getting authorisation, thus leaving the field clear for large chains, which are more established and experienced in areas such as legal issues and lobbying. From the beginning of 2010, against the multiplication of projects of commercial centres, and the door opened by the application of the Bolkenstein directive, a number of local political parties and trade associations are questioning the law, and this could lead to an amendment which could make more pragmatic the authorisation process for the opening of new outlets. The outcome could be a regionalisation of the law, which could mean that each region and every town will have the power to amend and adapt legislation regarding opening new retail outlets.

• Due to the near absence of chains, traditional retailers did not have clear strategies to maintain sales. Other than branded bakery products fast food (such as Panos and Delifrance), chains with national coverage do not exist in the country. Lobbying, and sometimes national communication campaigns about the professionalism of artisans, were the main weapons of the trade association of bakers in Belgium. Other types of traditional retailers did not have particular reactions to defend their shares in recent years.

CHANNEL FORMATS

COMPETITIVE LANDSCAPE

• The competitive environment in grocery retailing is rather concentrated, with the top five players accounting for almost half of value sales in the channel in 2010. These top five players were Etn Franz Colruyt, Delhaize Group, Carrefour Belgium, Aldi Group and Lidl België.

• Holding a 16% value share, Etn Franz Colruyt was both the leader and the most dynamic player in 2010. More than ever, Colruyt took advantage of the challenging retail environment in Belgium and of the economic crisis in the last couple of years. In spite of its cut prices (the cheapest in Belgium), Colruyt supermarkets continued to achieve the best marks in customer satisfaction surveys in terms of price, quality, service and the welcome offered. In fact, the Colruyt supermarket chain was the most popular brand in the whole retail environment, according to a survey led by Q&A Research & Consultancy in Belgium in 2009.

• The ongoing success of its Okay supermarkets also contributed to the success of Etn Franz Colruyt in 2009-2010. This brand’s success relies on tailored local marketing, a wide but not deep assortment, the freshness of food and drinks, and welcoming and cheap prices, as in Colruyt supermarkets. Etn Franz Colruyt also operates Spar convenience stores. During the review period, Colruyt progressively renovated and upgraded such stores, notably with the new formula of Spar Express – a concept focused on chilled ready meals, sweet and savoury snacks, confectionery and drinks.

• Another dynamic player was Delhaize Group, which saw a 4% increase in sales to reach a share of 13% in 2010, despite its reputation for high-quality (and thus theoretically not good value-for-money) products. At the beginning of the review period, it set up a plan to overcome this reputation. This plan focused on high quality organic products and sustainable development, but also price, notably through five waves of promotions and discounts in 2010. Such efforts quickly paid off, as Test-Achat (a local consumer association), which put Delhaize in 10th position in September 2009 in terms of price-competitiveness, put it in second place in the middle of 2010.

• The other spearhead of Delhaize Group was the launch of Red Market in 2009, a chain which is expected to reach six stores at the end of 2010. This new format is revolutionary, as it mixes low prices, as in hard discounters (it theoretically offers the cheapest shopping list in the region), but with more harmonised merchandising, which uses well-known brands, as in supermarket chains, and uses mainly self-checkouts.

• Due to its decision to close 14 hypermarkets and some supermarkets in 2010, Carrefour Belgium was obviously the main loser in grocery retailing. However, before the crisis, the French retailer inherited the drawbacks and the social conflicts of GB (the previous owner), and still had to face these in 2009-2010. For many years the French player tried new strategies to better adapt to local demand, without great success, such as the “Together with our customers” plan in the middle of the review period. In recent years, it further cut prices on thousands of products, and created the Carrefour Discount private label brand. It was aligned to discounters’ prices or low-cost products, but with slightly higher quality, such as the Tesco Value range in the UK. It also widened its private label offering, which reached 4,000 products in 2010.

• The main beneficiary of the difficulties of Carrefour Belgium was its main partner, Group Mestdagh. This Belgian player was the previous owner of Champion supermarkets in France, and continued to operate this chain in Belgium. In 2010 it acquired some Carrefour Market stores, and plans to transform its Champion supermarkets into Carrefour Market before 2013.

• In 2010, Colruyt still had a clear positioning as a “soft” or “smart” discounter, selling both well-known brands and private label products. Its policy to keep prices low by offering warehouse-style, self-service outlets, but also its atmosphere continued to pay off. Delhaize traditionally capitalised on differentiation by offering the highest quality. It was considered the freshest, cleanest, most natural and organic, but rarely the cheapest outlet – although this perception changed in 2010. Carrefour found it difficult to build a homogenous and attractive alternative image to Delhaize and Colruyt.

• The top five players generally benefited from national coverage in Belgium in 2010. Colruyt has a greater presence in the northern part of the country, whilst Carrefour is slightly more present in the south.

• The last couple of years further illustrated the difficulties of foreign international retailers in Belgium which were less adapted to local demand. Even Aldi began to reach saturation in Belgium in recent years. One industry expert argues that there are too many Aldi outlets close to each other, and thus some stores have begun to seriously cannibalise the sales of others within the chain. Meanwhile, Colruyt is highly familiar with its local consumer base, unlike Aldi and Lidl, which are hampered by their pan-European purchasing strategy and common offering in most countries. The reputation of high profitability of Belgian chains was confirmed in 2010 – both Colruyt and Delhaize are said to be in the top five of the most profitable chains in the world.

PROSPECTS

• The most important factor driving grocery retailing in the short term could be the entry of Ahold in Belgium. In summer 2010, the Dutch grocery retail chain confirmed its desire to open, or mainly acquire, some supermarkets in Belgium. This player has sufficient resources to put a foothold in Belgium. Such a project could shuffle the cards in the local competitive environment, and mainly trigger a new price war with Colruyt and Aldi. Ahold is already famous amongst Belgians for its cut prices, and many of them already cross the Dutch border for this reason. However, Colruyt and Delhaize should not be put off by the Dutch retailer; the former has already declared that there is still room for the opening of 70 new Colruyt supermarkets in Belgium, while the latter will open more Red Market outlets.

• Increasing by 9% in current value terms to reach an anticipated €15.5 billion by 2015, supermarkets is expected to remain the biggest channel in value terms. This format will benefit from the preference of Belgian consumers, particularly thanks to the competition between Colruyt, Delhaize and probably soon Ahold. Meanwhile, hypermarkets is expected to continue to bear the brunt of the difficulties of Carrefour. The growing competition from Colruyt, discounters and more pertinent and human formats such as supermarkets, will further constrain value sales in hypermarkets, which is expected to decline by 12% in constant value terms over the forecast period.

• Opinions differ about the potential for discounters. Some experts deem that this format will recover soon, with a new wave of openings. The absence of real economic recovery and the consequent focus amongst consumers on saving money is likely to benefit the channel. According to other sources, a possible saturation of the hard discount concept in Belgium has begun, as 85% of the Belgian population is said to be able to reach an Aldi store in less than 10 minutes by car. In addition, local concepts such as Colruyt and Red Market should better adapt to the demands of Belgian consumers, and could still offer cheaper prices. Colruyt claims that it is at least 10% less expensive than the two German discounters, which will affect their credibility during the forecast period.

• Other than value-for-money, convenience is expected to remain the main route to success in grocery retailing, and will fuel sales of small supermarkets and convenience stores. More profitable and less developed than supermarkets, such formats tend to better suit consumers with limited mobility, or older people, who often consider proximity to be a key factor in choosing where to shop. Retailers will respond to the surge in demand from singles by increasing the range of products carried, with a particular emphasis being placed on fresh produce and single-portion packaged food.

• Due to more than just the competition from convenience stores, forecourt retailing is expected to see the closure of dozens of independent outlets in the coming years. Belgians are likely to pay more attention to what they buy, opting to purchase fewer goods in forecourt retailers, where impulse products are more concentrated and prices are generally much higher than in supermarkets. Although chained forecourt retailers is expected to still slightly progress in constant value terms in the coming years, it will not be sufficient to result in positive growth in overall forecourt retailers in the forecast period.

• In spite of the expected dynamism of convenience stores, small grocery formats are expected to continue to give way to supermarkets and discounters. This will stem from the aforementioned decline in forecourt retailers, and mainly the decline of independent small grocers. Thanks to their growing professionalism, food/drink/tobacco specialists should perform better than independent small grocers; nonetheless the channel is expected to continue to lose outlets due to the further closure of less profitable butchers and bakers.

• Despite its decline in value sales in 2010, Carrefour Belgium has not had its last word. The fact that Group Mestdagh should transform its Champion outlets into Carrefour Market should give more presence and power to the French chain in Belgium. In addition, Carrefour Belgium plans to invest €300 million in the coming years to rejuvenate its supermarkets and hypermarkets. Lastly, as in France and Spain, the Belgian subsidiary is now testing the new concept Carrefour Planet. This new concept of hypermarkets has numerous assets, such as more specialised shelves, greater collaboration with famous non-grocery brands, and the enhancement of fresh and local products. However, experts have doubts about such a premiumisation of its positioning (while consumers are focusing on price), and about the ability of Carrefour’s staff to provide service and advice in outlets other than the current Carrefour Planet pilot store.

CHANNEL DATA

HEADLINES

• Health and beauty specialist retailers increases by 2% in current value terms to reach sales of €7.1 billion in 2010

• Competition between various categories in health and beauty specialist retailers continues, and results in a downgrading movement

• Health and beauty specialist retailers loses 1% of its outlets in 2010, primarily due to the bankruptcy of many independent stores

• The competitive environment is highly fragmented, with AS Watson being the only player with a significant share, of 6% in 2010

• Health and beauty specialist retailers is expected to increase by 4% in constant value terms over the forecast period 2010-2015

TRENDS

• Overall, a downgrading movement could be observed in sales of health, and mainly beauty, products in 2009 and 2010. Sales in beauty specialist retailers are increasingly being cannibalised by parapharmacies/drugstores and chemists/pharmacies, which are themselves competing with grocery retailers. Premium cosmetics in independent beauty specialists suffered both from the competition from well-known brands available in supermarkets, particularly masstige products, and the aggressiveness of Kruidvat in parapharmacies/drugstores.

• Meanwhile, chemists/pharmacies posted non-negligible current value growth of 3% in 2010, although this was less than the review period CAGR; the result of the slowdown in sales of OTC healthcare products in 2010, due a lack of diseases and the end of the fear about swine flu. As a result, health and beauty specialist retailers posted current value growth of 2% in 2010, which was below the CAGR seen during the review period.

• With an 11% share of value sales in store-based retailing in 2010, health and beauty specialist retailers is one of the biggest channels in retailing. This was derived from the high density of chemists/pharmacies in the country. There were 0.48 pharmacies per 1,000 inhabitants in 2010, and Belgium has the second highest rate in Western Europe, just behind Greece. Chemists/pharmacies accounted for a 76% share of the total number of outlets in health and beauty specialist retailers in 2010. Strict local legislation resulted in another peculiarity: the negligible presence of parapharmacies in Belgium, while drugstores are widespread in the country. Beauty specialist retailers is an important channel in Belgium, but no more so than in other European countries.

• In terms of growth, other healthcare specialist retailers saw the most success in Belgium, with a robust increase of 5% in current value terms in 2010. The ongoing potential for opticians in Belgium, and the rising number of older people needing to wear glasses were instrumental in this success. Pearle (Pearle Europe), Hans Anders (Optichains) and Krys (Guildinvest) are the dominant chains of opticians. As with chained beauty specialist retailers, the success of opticians also relies on the ongoing progression of dynamic, integrated and mainly franchised outlets, at the expense of independents.

• Strong credibility amongst consumers and the importance of prescription drugs, and to a lesser extent OTC healthcare products, helped chemists/pharmacies to defend its share, which was in the region of 79% of overall retail sales in health and beauty specialist retailers in 2010.

• Again, the number of outlets declined by 1% in 2010, primarily due to the bankruptcy of many independent stores. With the exception of opticians, included in other healthcare specialist retailers, the majority of categories lost outlets in 2010, including the dominant chemists/pharmacies channel. For instance, in parapharmacies/drugstores and beauty specialist retailers, the ongoing decline in independent outlets was not offset by chains, which tended to wait and see before opening new outlets in 2009-2010.

• Belgium is a small urban country, which results in the bulk of stores being located in town centres. The high price of retail property until mid-2009 prompted some chained opticians to look for cheaper out-of-centre locations; nonetheless, they remained on the outskirts of towns, and not in rural areas.

• The growing competition between various chains and formats in health and beauty specialist retailers encouraged them to be more demanding with their suppliers. There was an ongoing bipolarisation movement in the channel. In order to further emphasise the difference between mass and mid-priced products, Dior, Lancôme and other premium brands introduced more high-profile ingredients and increased their prices. This underlined a growing super-premium approach, but this trend slowed down in early 2010. Meanwhile, parapharmacies/drugstores limited their support to mid-priced brands due to the growing competition from mass brands with a masstige positioning.

COMPETITIVE LANDSCAPE

• The competitive environment is highly fragmented in health and beauty specialist retailers, with independent outlets accounting for the majority of chemists/pharmacies. Thanks to its complementary strategy, AS Watson (Health & Beauty Europe) was the major player in parapharmacies/drugstores in 2010. On the one hand, at the upmarket level, its ICI Paris format drives sales within beauty specialist retailers. On the other hand, with a 40% value share in 2010, its Kruidvat fascia leads parapharmacies/drugstores, notably thanks to an aggressive discounting strategy. “In and out” operations (see below) still paid off for Kruidvat, which remained stable in 2009-2010 despite the gloomy economic context.

• The second player in 2010 was Multipharma Groupe, the only chain within chemists/pharmacies, with a value share of 5%. It is also the most dynamic player, owing to iU, a new brand it created in early 2010, which is replacing the old Equiform parapharmacy. With iU, Multipharma Groupe changed almost everything, with a new concept, offering, design and merchandising, and also strongly increased its communication budget. iU looks like a beauty institute, has organic brands, and has a similar positioning to Yves Rocher, with a more upmarket image.

• Optician chains such as Pearle and Hans Anders also posted an appreciable current value increase in 2010. Both were spurred by the ageing of the Belgian population, as well as by aggressive promotions such as buy-one-get-one-free.

• Two or three players lost ground more than others in 2009 and 2010. This was particularly the case of Di, which had to close dozens of outlets in recent years. It notably paid for its previous strategy, which lacked realism. It tried to both offer drugstore products and achieve a more glamorous image, which were incompatible aims. It wanted to be perceived as the H&M of beauty and health, with masstige brands such as Welleda, Roger & Galler, Perlier and Toni & Guy. Hence its comeback after an ongoing decline to its core business – a positioning initially inspired by US drugstores – and better value for money brands in 2010.

• From the middle of the review period, Yves Rocher Benelux also declined, but this situation seemed to stabilise in 2010. In 2007, the French company started a restructuring plan which notably resulted in the closure of many outlets over the last couple of years. In 2010, it remodelled some outlets with its new trendy concept of Atelier de la Cosmétique Végétale – Botanical Beauty Workshop.

• There was no recent mergers and acquisitions activity from health and beauty retailers. The latest was the acquisition of Di by CNP (Compagnie Nationale à Portefeuille) in 2007. However, this did not change the highly fragmented competitive environment of health and beauty specialist retailers.

• Regarding the relative positioning between retailers, Planet Parfum and ICI Paris continued to bank on a chic Parisian image in beauty specialist retailers. Planet Parfum operated both with a self-service concept and with salespeople, similar to Sephora (Sephora Holdings, part of LVMH Moët Hennessy Louis Vuitton) and Douglas (Parfumerie Douglas France) in France. On the other hand, ICI Paris has only a dozen self-service shops, preferring to put its cosmetics products behind the counter or glass windows, favouring advice to customers. During the second half of the review period it launched a web store, and rejuvenated its communication with a new magazine, My Beauty, which replaced the previous Beauty & You in 2010.

• Kruidvat offers much the same average prices as Di; nonetheless, it enjoyed a more aggressive discounter image thanks to a so-called “in and out” product approach, with shoppers attracted to spontaneous price reductions causing them to look for a quick bargain, which can include electronics, appliances, audio-visual products and travel products. Paradoxically, Kruidvat has also already tended to give a more premium aspect to its positioning by still offering upmarket fragrances with consistently low prices.

• Many chains only have regional coverage within health and beauty retailers. Kruidvat primarily focuses on Flanders, and Di on Brussels and Wallonia. Schlecker entered the Belgian market by locating its first outlets close to the German border. Whilst both Di and Kruidvat focus on downtown and commercial centres, Schlecker is mainly in cheap locations on the outskirts of towns. In this respect, the endeavour of Schlecker to enter the Flemish market, home of the Kruidvat chain alongside the Netherlands, was a failure. The franchised outlets it opened in 2008 were all cannibalised by the Dutch chain in 2009 and 2010.

• The dominance of independent chemists/pharmacists enabled local players to still drive sales in the competitive environment of health and beauty specialist retailers in 2010. Although the majority of drugstores and optician chains are German or Dutch, local chains lead the pack in beauty specialist retailers. ICI Paris XL and Planet Parfum continue to offer 20% automatic discounts on every product sold in their outlets, which deters some international players, such as Sephora and Douglas, from entering the Belgian market. Nonetheless, the majority of drugstore or optician chains are German or Dutch.

PROSPECTS

• Despite the dynamism of some chains in parapharmacies/drugstores and the expected development of webstores such as newpharma.be, the border between health and beauty is expected to remain wide in the channel. Due to strong lobbying and consumer loyalty and trust in their chemists/pharmacists, the emergence of retail outlets other than chemists/pharmacies for the distribution of consumer healthcare products is likely to be slow. The majority of Belgians will still need a consultation with their doctor or the advice of their pharmacist, even for minor ailments. Thus, the number of pharmacists should not drop significantly. In addition, chemists/pharmacies will remain crucial for the development of premium brands and dermo-cosmetic products.

• Therefore, the ongoing overwhelming share of chemists/pharmacies in the country, and the tough legislation regarding sales and advertising in this channel, will continue to dampen its potential and the performance of overall sales. In addition, as consumers tighten their belts in the ongoing crisis, Belgians could still limit their spending to just essential items, sometimes at the expense of beauty products. Thus, health and beauty specialist retailers is expected to experience ongoing positive growth of 4% in sales area and in constant value terms over the forecast period; albeit that this is a slower rate than that seen over the review period.

• Sales in health and beauty specialist retailers are also expected to be hampered by the ongoing downgrading movement, which was already observed during the review period. First, the competition between channels will forge ahead, with beauty specialist retailers being cannibalised by parapharmacies/drugstores and chemists/pharmacies, which are themselves competing with grocery retailers. Beauty specialist retailers is expected to face growing difficulties attracting or even retaining so-called mixed consumers such as women, who usually purchase cosmetics in mass distribution outlets, but sometimes in selective outlets. Masstige brands sold by grocery retailers will remain the great winner of this competition between channels.

• Discounting and price competition are expected to continue, at least during the first half of the forecast period. Retailers will still attempt to compete on price, as consumers become more price-conscious. Parapharmacies/drugstores with strong discounts and promotional offers will face competition from grocery retailers. ICI Paris and Planet Parfum will also remain loyal to their 20% discount strategies. As in the review period, this policy is expected to deter potential foreign candidates from challenging the leadership of these two chains in beauty specialist retailers.

• Again, the main growth drivers are expected to be the less mature formats, namely opticians within other healthcare specialist retailers, and, to a lesser extent, parapharmacies/drugstores. Chains in the former will benefit from the ongoing ageing of the Belgian population, while the latter will remain stable in terms of outlets and sales area, but should pay in constant value terms for a strong discounting strategy.

• Regarding potential company activity, iU from Multipharma Groupe should further develop in the country. Even competitors are impressed by the promising start of iU outlets, which contrast with the previous Equiform and the value-for-money and less trendy image of competitors such as Kruidvat, Di, and mainly Schlecker. What could dampen its potential is the rather concentrated location of outlets in Wallonia, whilst households with higher incomes are mainly located in Flanders. However, iU has numerous assets, including its upmarket magazine, which is already successful, and four different universes in its shops: cosmetics with Avene, Caudalie, Bio Beauté, Dr Hauschka and Nuxe Pure Altitude; diet with Forté Pharma, Innéov and Oenobiol; body care with Bodysol, Dercos, Dermalex, Furterer and Klorane; and babies with Galenco and Mustela. All can be tested in a “discovery bar”.

• Lastly, with the 250 other pharmacies of the group[Q: please clarify, what group?], iU benefits from low unit prices and strong logistical capacity.

• Although unit prices are expected to continue to decline, mainstream chains are expected to continue to upgrade their offering and concept. Kruidvat, the cheapest player, had already begun to test smarter outlets at the end of 2010, and develop its ability to advise. In continuation of its long-term diversification policy, it also offered more services, such as the ability to buy bus tickets and book trains.

• Other chains are expected to find it difficult to expand in the coming years. Even so, Paris XL remodelled its outlets and tested new concepts in 2010, while Planet Parfum is expected to continue to launch in-store and media institutional campaigns to sustain sales of upmarket brands. Parapharmacy/drugstore chains such as Di are expected to focus on training their salespersons, as their ability to give advice is one of their great strengths, according to a survey by the Di chain in 2009. It will also seek out exclusive brands which could enable it to differentiate from its competitors, such as Kruidvat. However, Kruidvat benefits from the sourcing of its Asian group AS Watson (Health & Beauty Europe), and its ability to offer the cheapest prices.

CHANNEL FORMATS

CHANNEL DATA

HEADLINES

• Sales in homeshopping decline by 8% in current value terms, to €221 million in 2010

• Again, players focus in 2010 on the progressive transition of their activities and consumer base from homeshopping to internet retailing

• DIY and gardening homeshopping, beauty and personal care homeshopping and media products homeshopping rank amongst the better performing categories in 2010

• 3 Suisses is the leading brand in 2010, with an 11% share in a relatively concentrated competitive environment

• Homeshopping is expected to contract by 36% over the forecast period, to reach €141 million by 2015

TRENDS

• Again, mainstream VAD (Vente A Domicile – Distance Selling) players focused in 2010 on the progressive transition of their activities and consumer base from homeshopping to internet retailing. Indeed, online stores offer more interactivity, more visual stimuli, fashion videos and a broader offering in comparison with catalogues. However, the fact that companies are focusing more on internet retailing does not mean that they have given up on homeshopping. In fact, they increasingly have a multi-channel distribution strategy and a multi-media approach to advertising. Although pure catalogue clients are less and less numerous, and account for less than a quarter of customers, players still bank on a synergy between catalogue and web store.

• Key companies in homeshopping are discreet about their losses in homeshopping, and prefer to speak about a balance between their decline in this channel and their progression in internet retailing. Industry consensus is that value sales in homeshopping declined by 8% in current value terms in 2010, which was largely offset by the ongoing offensive of web stores.

• The cannibalisation of homeshopping by internet retailing is logical. With the latter format, consumers know the availability of products immediately. Collections can be updated every week, rather than every six months. Thus, collections can adapt better to reflect the latest fashions and trends, and prices can be made more competitive. The internet is also a less expensive direct marketing tool than heavy traditional catalogues, the printing and transport costs of which are high.

• Catalogue sales largely dominate homeshopping in Belgium, notably thanks to the geographic proximity with French players located in the north of France (3 Suisses and La Redoute) and German homeshopping specialists. Nonetheless, TV shopping performed better than the declining catalogue mail format due to the access of Belgian consumers to many foreign television channels. Nonetheless, TV shopping enjoys a stronger position in other European countries.

• No category performed particularly well in 2010, in continuation from previous years. DIY and gardening homeshopping, beauty and personal care homeshopping and media products homeshopping ranked amongst the better performing categories in 2010.

• As the core business of catalogue operators, the dominant clothing and footwear homeshopping category saw the most significant decline in actual value sales in 2010. In percentage terms, product types which underperformed in 2010 more than others were consumer electronics homeshopping and consumer appliances homeshopping; in fact those categories in which consumers heavily switched toward internet retailing. Many Belgians located and checked leisure goods, media products and consumer electronics in retail stores, then tried to find better prices on the internet.

• Regarding unit price differences between homeshopping and stores, there was still a gap with all kinds of discount formats in store-based retailing, notably due the cost of transportation. From the credit crunch in 2008, and the following recession, consumers looked for the best value for money in homeshopping, or the best bargains, but not always the absolutely lowest cost product. Although 3 Suisses, La Redoute and Neckermann could be competitive in terms of prices, this was not the case for many smaller players in the channel. In order to remain competitive, many products available in homeshopping tended not to be easily accessible in store-based retail outlets. Manufacturers, for instance, launched exclusive prêt-à-porter collections for catalogues, or innovative gadgets for TV shopping.

COMPETITIVE LANDSCAPE

• In GBO terms, the competitive environment in homeshopping was relatively concentrated, as illustrated by the 38% share of the top three players, Otto, Redcats and Neckermann.com in 2010. The leader was Otto with a 19% value share in 2010. It offers several catalogues, amongst which 3 Suisses is the best-known in the country. Present in Belgium for about 80 years, it is said to be the main catalogue in clothing and footwear homeshopping, although it is also present in other products areas. From the same NBO, and with exceptionally low prices, Bonprix met the demands of Belgian consumers, who increasingly embraced lower priced and discounted retail channels in the review period.

• Although they often offset their losses in homeshopping with internet retailing, the majority of catalogue players strongly contracted in terms of actual value sales in 2010. Some brands were spared more than others, however, including Damart, which benefited from the loyalty of its growing older consumer base, and, paradoxically, the rejuvenation of its offering – notably the launch of a Damart Sport offering in recent years.

• 3 Suisse’s competitors admitted that the French brand was more innovative than usual in 2010. With a reinforced one-to-one strategy, it adapted to the needs of various consumers based on their profile and purchases. This brand usually lagged behind La Redoute in terms of innovative strategy, but is quickly making up for its delay in the area of fashion. Even though it is mainly focused on internet retailing for this, it has also enhanced its accessories and shoes, and reinforced its clothing offering for men. 3 Suisses also used audacious slogans in its display campaigns, such as “No need to be a CEO to a have a f... wardrobe”. In 2009, 3 Suisses benefited from the patronage of Phillippe Geluck and Axelle Red, two local key figures, for the 40 years of its catalogue.

• Holding a 12% value share in 2010, Redcats and its flagship catalogue brand La Redoute is the main contender to Otto. Before being impacted by the counter-attack of 3 Suisses in the last couple of years, La Redoute performed better than 3 Suisses in clothing and footwear in both internet retailing and homeshopping, by virtue of a wider range in terms of products and prices, and thus a wider consumer base. Prior to the review period, La Redoute launched its online operations sooner than its competitors, and benefited from greater experience. It also tried to slow down the decline in homeshopping by presenting a more fashionable and glamorous image, with premium brands and supermodel or star endorsement.

• Although the top three brands have their core business in clothing and footwear and housewares and home furnishings, there are some differences in the relative positioning between the brands. The 3 Suisses brand is perceived as having the widest product range in its catalogue, as it also offers consumer electronics, media products and toys and games. La Redoute usually wants to position itself as more fashionable and trendier than 3 Suisses; nonetheless, the latter brand communicated more, and strongly improved its offering in this area in 2009-2010. Neckermann focuses on housewares and home furnishings more than on clothing and footwear.

• International operators largely lead the way in homeshopping in Belgium. In order to be considered fashionable by local consumers, they tend to increasingly include popular and even premium brands, notably in clothing. For instance, 3 Suisses built its recovery (more in internet retailing than in homeshopping, however) by welcoming new denim brands such as Hilfiger Denim, Freeman T Porter, Replay, Meltin’ Pot, School Rag, Polo Jeans, Pepe Jeans and also G-Star. The development of such brands in catalogues does not mean that private label has disappeared in homeshopping. In terms of La Redoute, for instance, 80% of its sales are achieved by its own brands and designers, while 20% is sales of national and international brands.

PROSPECTS

• Operators will need to be reactive regarding collections in the coming years, and updating product ranges on a more regular basis seems like an opportunity to improve their performance amongst manufacturers. However, this is difficult, as delays in distribution and publishing of the catalogues remains a major obstacle. Thus, all mainstream operators in homeshopping are reaffirming their will to concentrate on internet retailing in the coming five years, at the expense of homeshopping. Consumers perceive homeshopping as being less convenient and interactive, and both younger and older consumers are set to increasingly place their orders via the internet.

• Therefore, the main trend in the coming years is expected to be the ongoing cannibalisation of the homeshopping channel by internet retailing. Nonetheless, the synergy between homeshopping and internet retailing will still work, as both 3 Suisses and La Redoute said again in 2010 that their catalogues were crucial. Catalogue sales are not expected to disappear, due to the ageing of the population, and thus the loyalty of Belgians aged 60 and over, who are more reluctant than others to use the internet for their purchases. In addition, some Belgians use catalogues after a first order on the internet. Therefore, homeshopping is expected to decline by 36% in constant value terms over the forecast period 2010-2015, but not disappear.

• This decline is expected to speed up, however, in the case of a further switch of older consumers to internet retailing. Already existing bricks and mortar chains could also increase the competition for conventional homeshopping players by entering internet retailing, particularly in clothing and footwear and consumer appliances. Examples could be the possible launch of online stores H&M (Hennes & Mauritz (H&M) Belgium) or Hema (Maxeda).

• The only dynamic format is likely to be TV shopping, which should benefit from the ageing of the population, and in particular from less reluctance to pay by telephone, according to MasterCard in 2009. Even so, local trade press still pointed to the failure of the PingPing micro-payment by GSM supported by Belgacom, which shows that there is still room for growth in this area.

• In catalogue mail order, no category is expected to be spared by the disaffection for homeshopping. As in the past, the most valuable categories are expected to be the most affected, including clothing and footwear, given its core business of catalogue operators. Consumer appliances, consumer electronics and more particularly toys and games homeshopping are also expected to underperform during the forecast period, as such products are priorities for internet operators.

• As in 2009 and 2010, there could be a downgrading movement in unit prices in homeshopping, due to strong promotions and discounts. Nonetheless, in spite of this, there will still be a price differential with store-based retailers, whilst consumers are likely to remain particularly price-sensitive. Grocery retailers will always have the deepest price cuts, characteristic of discounters and even supermarket chains, such as Colruyt (Etn Franz Colruyt), which the homeshopping channel cannot offer.

• Otto has said that it will further focus on the denim offering of 3 Suisses, and enhance it by “special shops” in its catalogues, and mainly its web store. La Redoute is expected to retaliate by integrating other brands than the traditional portfolio of Redcats, as it did in 2010 with 200 products from Zara Home. Such an operation is not immediately profitable, but brings something else – a real plus in terms of image.

• To energise sales in internet retailing and homeshopping, players such as La Redoute and 3 Suisses are expected to introduce new brands, which exactly match the latest trends in web stores, but also in small half-season catalogues. There will be a growing number of players adopting a mixed channel strategy, with an increasing focus on internet retailing, but still with catalogues and traditional direct marketing methods such as mailings. During a survey led by BeCommerce amongst its members in 2009, this trade association observed that distance selling (homeshopping + internet retailing) players have used on-line communication with direct marketing tools such as billboards and mailing campaigns. Due to the gloomy economic context in the short term, operators are expected to use all affordable means to recruit customers and encourage loyalty, including traditional homeshopping methods.

CHANNEL DATA

HEADLINES

• Internet retailing continues to post impressive growth of 13% in 2010, increasing to €1.6 billion

• The strong increase in female and older shoppers is the main growth driver in 2009-2010

• Increasing by 22% in current value terms, housewares and home furnishings is the most dynamic category in internet retailing in 2010

• With 6,000 web stores and the top five players accounting for a 16% share of value sales, internet retailing is highly fragmented in 2010

• Internet retailing is expected to increase by 55% in constant value terms over the forecast period

TRENDS

• In 2009-2010, internet retailing witnessed an ongoing widening of its offer, but also of demand. Whilst the first purchasers were often men who “went on an adventure in search of new gadgets, new books”, by contrary, “the woman recently inserted the e-commerce in their daily lives and therefore in supermarkets, clothing stores, local places she already knows.” The same applied to older people, who had more confidence in the stores they knew, rather than in overseas websites. During the last couple of years, they became acquainted with the internet, and took to the medium after making their first purchase through this channel.

• Again, most players and experts were satisfied by the excellent performance of internet retailing in 2009 and the promising first half of 2010. Although the small Belgian population, its three official languages and the high retail density in the country still constrained the potential of this channel, internet retailing posted current value growth of 15% in 2010, reaching sales of €1.6 billion in 2010. However, there were still many uncertainties about the real size of internet retailing, using only online payments or not, with or without transborder purchases, including or excluding services.

• About 60% of Belgian households owned an internet-enabled computer in 2010, whilst more than 95% of internet subscriptions were broadband. One of the priorities of the Belgian government for many years has been to boost internet use, and mainly broadband access.

• The majority of product types in internet retailing recorded appreciable growth in 2010. Although these are not included in the Euromonitor International figures, the most dynamic were e-tourism, and ticketing and booking for concerts, festivals and restaurants. The target is young Belgians, who are particularly fond of such events, and are acquainted with the internet. In addition, logistical costs are limited, which enables many small players to develop such internet retailing businesses.

• Media products internet retailing registered the biggest growth in actual value sales in 2010. Sales of CDs, DVDs and books continued to take off in 2010, thanks to more accessible prices, the unlocking of DRM (Digital Rights Management) and dynamic players such as Fnac, iTunes, and, more particularly, Amazon.com. Despite the ongoing growth in illegal downloading, downloaded music increased by 27% in 2009, according to BEA (local entertainment trade association). Nine singles out of 10 were legally downloaded.

• Increasing by 22% in current value terms, housewares and home furnishings was among the most dynamic category in internet retailing in 2010, notably thanks to Ikea, and to a lesser extent Zara Home. Clothing and footwear, consumer electronics and consumer appliances internet retailing forged ahead in 2010. In the former, thanks to the efficiency and originality of La Redoute, and mainly 3 Suisses, promotional sales seemed to be offered almost permanently, and women always sought the best bargains.

• Although no category registered negative growth in 2010, some categories did underperform in 2010, such as beauty and personal care and consumer healthcare internet retailing. In the former, the recession in 2009 suddenly impaired the expansion of premium cosmetics and toiletries brands via the internet. Owing to the beginning of deregulation of OTC healthcare products and players such as newpharma.be, sales of analgesics, cough, cold and allergy remedies and other semi-ethical products took off in 2009-2010. However, overall sales of consumer healthcare products were hampered by the strong slowdown seen by vitamins and dietary supplements, which were considered less crucial products in the context of economic recession.

• During the last couple of years, continuous growth in internet retailing attracted an increasing number of players. There were 5,000 web stores in Belgium at the end of 2009, and 6,000 by the end of 2010. Within these are manufacturers which have set up direct online sales operations. For instance, developing sales through the internet enabled premium cosmetics and toiletries brands better control of their distribution against the aggressiveness of parapharmacies/drugstores and the discounts of beauty specialist retailers.

• The explosion of competition in internet retailing also led to operators asking increasingly low prices from their providers. The consumer focus on price encouraged distance selling retailers such as La Redoute, 3 Suisses and Neckermann to adapt the ergonomic and selection criteria of their websites. Indeed, women increasingly added “low price” in the search engine, or sorted products by price.

• M-commerce is still a micro niche, accounting for less than a 1% share of internet retailing in 2010. Its sales did not really take off before the impressive success of Apple’s new iPhone, sophisticated mobile phones and “blackberries” in the middle of the review period. Teenagers and young adults purchasing music and phone ringtones favoured this tool, although illegal downloading was also common within this consumer base. However, local experts consider that m-commerce sales were still hampered in 2010 by the limited size and availability of information, and mainly by the strong consumer distrust of online payment via mobile phones.

• More than ever, internet retailing had a strong impact on store-based retailers, which see this channel as both a competitor and an opportunity. On the one hand, retailers with a strong franchise network were reluctant to develop online sales, as it would directly cannibalise the store-based sales of their members. In clothing and footwear, women increasingly chose to “go to the winter sales” at home in front of their computer when the weather was bad, which could pose a serious problem for bricks and mortar outlets. On the other hand, other well-established store-based retailers became “bricks and clicks” players in 2009-2010. After the success of Brantano in 2008-2009, Eldi and Carrefour entered internet retailing in 2010 – included within others.

COMPETITIVE LANDSCAPE

• There were 6,000 web stores at the end of 2010, while this number was less than 2,000 in the middle of the review period. This means that despite the progression of mainstream players, the competitive environment was increasingly fragmented in recent years. In such a context, no company has emerged as dominant. Even so, although it was not officially present in the country, Amazon.com captured the virtual leadership in internet retailing during the last couple of years, thanks to transborder purchases and free delivery from France. Given that Amazon.com needs significant sales to be profitable, it was reluctant to create a Belgian subsidiary. Even so, local experts consider that Amazon.fr has already secured between 5% and 10% of the whole market for CDs. In addition, owing to a free delivery service, its delivered books are often less expensive than products in most local booksellers.

• Other than Amazon.com, the most dynamic players are often those with newly launched online stores. Already the most dynamic player in 2009, Newpharma, had forged ahead in 2010. This online pharmacy took advantage of a government law from February 2009 which deregulated the distribution of certain OTC healthcare products. It attracted customers who would usually rely on a consultation with their pharmacist. In Newpharma, consumers appreciated the local touch (in contrast to international web pharmacies), a wide range of products, advice, instructions and a 24 hour delivery service. As a result, in 2009, for instance, Newpharma’s sales increased six times faster than visits to its web store.

• Another winning trend in the last couple of years was the explosion of “private sales” in Belgium. With more than 500,000 members (not clients), Vente-Exclusive ranked as amongst the most dynamic operators in 2010. This online outlet store organises sales of mid-priced and upmarket brands exclusively for its members, with interesting rebates (between 30% and 70%) compared with the consumer retail price. These sales relate to all fields: fashion clothing, accessories, toys, sports goods, watches, interior decoration and high-tech products. Its catalogue now includes more than 100 brands, including Diesel, Marlies Dekkers, Kipling and Oxbow.

• Club by Proxis Belgie, the former leader in internet retailing, experienced one of the most disappointing progressions in the channel in 2010. With Mediadis, it was a forerunner in the country in sales of media products and small consumer electronics via the internet, and previously benefited from the absence of Amazon.com, its model, in the country. However, the sudden offensive of the US player with its cut prices and free delivery from France put pressure on Proxis Belgie.

• Regarding the positioning of retailers, there are strong differences. Coolblue capitalised on discounting, while the PPR online store Fnac wanted to maintain its leading role in terms of quality and sophistication. It also banked on offering the most exhaustive selection of products. In order to challenge the leadership of iTunes and illegal downloading, both VirginMega and Fnac offered hundreds of thousands of unlocked MP3 files from 2007. The positioning of “bricks and clicks” retailers was often the same as in store-based retailing. Delhaize Caddyhome is considered a specialist in good wines, and thus led sales of wines with www.delhaizewineworld.com.

• International operators still led the pack within the top 20 players in internet retailing in 2010, mainly if they were “bricks and clicks” retailers or well-established players. Even so, the second half of the review period witnessed the ongoing awakening of local players. Local operators other than Newpharma and Vente-Exclusive also scored a hit in 2010, including Krefel, Brantano, Vanden Borre and mainly Free Record Shop, which strongly recovered in both store-based and non-store based retailing. This contrasted with the first half of the review period, when international operators such as Apple, VirginMega and Fnac drove sales, notably by virtue of their presence in rapidly expanding products such as consumer electronics, leisure goods and media products.

• Other than Amazon.com, the most interesting growth in actual value sales was often achieved by “bricks and clicks” retailers, or operators which were already well-established in homeshopping – 3 Suisses and La Redoute, for instance. For reassurance, new internet customers frequently opted for a “bricks and clicks” retailer for their first internet purchase, according to Ogone, the leader in online payment in Belgium. Pure internet retailers often experienced the most dynamic growth in percentage terms, although they often started from a low base, such as Newpharma and Vente-Exclusive.

• Although not included in retailing, “e-market places”, and mainly C2C transactions, played a significant role in the familiarisation of Belgians with the internet and online payments. First mover eBay.be became popular in the country during the review period, with more than 2 million Belgian members in 2010. The Belgian version of eBay is even considered a testing ground for the global network of eBay, as Belgium was the first country to offer small advertisements/announcements for property, jobs and cars.

PROSPECTS

• Internet retailing is expected to see growing fortunes in the short term, on the back of the expected continuous progression of advertising and direct marketing. Indeed, this medium is still under-used by manufacturers and retailers in Belgium, according IAB Europe, the European trade association of internet marketing. Even so, whilst traditional media were affected by the crisis, online advertising expenditure nearly trebled from 2006, to reach €129 million in 2009. This was proportionally lower than in bordering countries, however. In addition, there are strong disparities between players and categories. Whilst Coca-Cola dedicated 1% of its communication budget to internet advertising, Ikea easily surpassed 10% in 2009. Services, transportation, telecommunications and energy seem to have better perceived the potential of online advertising. Meanwhile, areas such as health and beauty, clothing and footwear and packaged food invest much less, which leaves plenty of room for the growth of online advertising.

• Despite the absence of strong economic recovery, local experts are confident about internet retailing, as per capita consumption is still much lower than in France or the Netherlands, which leaves substantial room for growth. In 2009, for instance, the Netherlands already had 23,000 web stores, and nearly four times higher turnover in internet retailing (including services), according to local trade press. The anticipated entry of other “bricks and clicks” players should help internet retailing to forge ahead, with a predicted constant value increase of 55% over the forecast period 2010-2015.

• Illegal downloading will continue to be a serious direct threat to media products internet retailing. There is also expected to be continuing scepticism amongst many Belgians towards paying online. However, more and more first time internet shoppers will become acquainted with the new channel, shop online more often, and become confident paying online. Whilst some Belgians will continue to use traditional methods (cash on delivery or bank order), others are expected to increasingly trust complementary online payment methods such as credit cards (Visa, MasterCard, American Express), MisterCash, or PayPal, along with the growth of online bank accounts, the development of the BeCommerce label and the safety guarantee of Ogone.

• The share of the population which is expected to have home internet access could easily surpass two-thirds of the country by 2015. At the time of writing, more than four million Belgians had conducted an internet purchase.

• Again, consumer electronics is expected to rank amongst the most dynamic categories in internet retailing, with an anticipated increase of 111% over the forecast period. The majority of Belgians are now accustomed to making big purchases in this category. Toys and games should benefit from the same phenomenon, as buying online enables consumers to avoid the rush in overcrowded stores before the festive period. Boosted by dynamic players such as Ikea, housewares and home furnishings internet retailing is also expected to record impressive growth. As in 2009-2010, clothing and footwear internet retailing should enjoy the ongoing dynamism of homeshopping specialists, particularly 3 Suisses. Chains and brands such as H&M (Hennes & Mauritz (H&M) Belgium), Zara (Inditex, Industria de Diseño Textil) and C&A (C & A België) could also contribute to the performance of the category, if they launch online stores.

• The majority of product types are expected to post appreciable growth in the coming years in internet retailing. Some categories are set to expand less steadily than others, however. Beauty and personal care internet retailing is only expected to increase by 12% in constant value terms over the forecast period, due to the mixed results of premium brands, which dominate the offering in this category in internet retailing. In spite of the expected offensive of newpharma.be, consumer healthcare internet retailing is expected to record a relatively modest growth rate over the forecast period 2010-2015. Marketers have doubts about the future performance of herbal products and vitamins and dietary supplements, which could bear the brunt of the questioning of many of their claims by EFSA – the European Food Safety Authority.

• Owing to the cut prices of players such as Vente-Exclusive, the future unit price difference between internet sales and stores is expected to be increasingly limited. In consumer electronics, and mainly media products internet retailing, players such as Amazon.com and Coolblue are already cheaper than store-based retailers. However, consumers still have to pay for delivery or collect from the retail store in food and drinks internet retailing; thus unit prices are higher in this category than in store-based retailers. This additional price seems to be perceived as too high in a country in which the distance between home and the closest supermarket is short.

• The most dynamic operators are expected to be Newpharma, Vente-Exclusive, 3 Suisses and La Redoute. Vente-Exclusive offers the ideal opportunity for consumers to still have access to upmarket brands at a time when their purchasing power is under threat. Otto has said that it will further focus on the denim offering of 3 Suisses, and enhance it better via “special shops” in its catalogues, and mainly its web store. La Redoute is expected to retaliate by integrating brands other than the traditional portfolio of Redcats, as already seen in 2010 with 200 products from Zara Home. Such an operation is not immediately profitable, but brings something else – a real plus in terms of image.

• The duel between Club and Amazon.com is expected to continue in the short term, and some sources even fear that the US player could further penetrate Belgium by widening its offering and thus becoming a new 3 Suisses or La Redoute. However, due to its discreet marketing (loyalty strategy and word of mouth), it is expected to focus on media products, and not diversify for the moment. In addition, although it should continue to strongly develop its sales in the French-speaking part of the country, Amazon.com may find it difficult to spread into Flanders due to the absence of Dutch books in its offering.

• The competition is expected to become stronger in the area of private sales. The leader, Vente-Exclusive, is expected to face the ongoing assault of challengers such as Snapstore or outlet-avenue.be. The former is a “bricks and clicks” player which came from Cameleon, a store-based specialist of clearance sales of A brands in clothing and footwear. Outlet-avenue.be is the latest entrant in the Belgian market. Unlike Vente-Exclusive and Snapstore, which focus exclusively on fashion and lifestyle, outlet-avenue.be does not hesitate to venture into other areas; wine or mobile phones, for example.

• A growing number of operators are expected to contribute to the further development of “social shopping”, a trend which emerged in Belgium in 2010. Newcomers are Groupolitan, from France, Groupon from the US, and Promocity. In all three cases, the modus operandi is the same: every day, a new deal (such as restaurant menus, concert tickets) is offered on the internet. Potential buyers can be recruited through social networks such as facebook and twitter. If the target quota of customers who have indicated their intention to purchase is reached within the deadline, the deal is concluded with the merchant, and participants are charged. It could be the ideal gateway for SMEs to enter internet retailing.

CHANNEL DATA

HEADLINES

• Leisure and personal goods specialist retailers continues to decline slightly, by 1% in current value terms in 2010

• Sales suffer from the growing competition from other channels, from grocery retailers, for instance, and more particularly from internet retailing

• Due to the presence of many independent booksellers, sports goods stores and a range of other leisure and personal goods specialist retailers, the competitive environment remains highly fragmented in 2010

• Leisure and personal goods specialist retailers is expected to contract by 5% over the forecast period

TRENDS

• The most important factor impacting sales in leisure and personal goods specialist retailers in 2010 was the growing competition from other channels, from grocery retailers for instance, and more particularly from internet retailing. This was evidenced by the cannibalisation of books, and mainly press sales, by supermarkets and even convenience stores, which are increasingly offering newspapers and magazines. Media products stores also suffered from downloading (some legal, but mainly illegal) and sales of CDs, DVDs and books via internet retailing, primarily from aggressive operators such as Amazon.com and its cross-border sales from France.

• Although “bricks and clicks” players in channels such as traditional toys and games stores succeeded in building a synergy with internet retailing, this competition affected overall channel sales in 2010. Sales in leisure and personal goods specialist retailers declined by a slight 1% in current value terms in 2010. This contrasted with the growth in the review period, with a positive CAGR of 1% in current value terms. Before 2008, sophistication was the main selling point, and was the most common theme affecting the majority of categories within leisure and personal goods specialist retailers.

• Independent stores largely dominated leisure and personal goods in 2010, with about two-thirds of value sales in the channel. Such stores suffered more from the impact of the crisis than chains, which resulted in an over-average decline of 2% in the total number of outlets in the channel in 2010. For instance, booksellers was a niche which was characterised by a large number of independent stores in Belgium, many of which were not profitable. Independent stores still accounted for the lion’s share of sales in sports goods stores, despite the impressive breakthrough of chained operators in recent years. Indeed, chains such as Decathlon were better placed to operate in the business-to-business arena, selling to businesses, sports clubs and associations and public institutions, as well as offering complementary services.

• By the same token, due to the absolute dominance of independent stores, jewellers levelled out both in terms of number of outlets and current value sales in 2010. No mainstream chain has been identified in the country.

• In media products stores, sales of booksellers were strongly affected by the continuous decline of press publications in 2010. In local newspapers and magazines, the issue of declining advertising incomes due to the multiplication of alternative media (the internet again) has reached a critical point. In addition, sales of newspapers and magazines were not offset by low cost or “people” magazines, which are not as widespread as in France. Regarding books, sales tended to decline, with the exception of books for children and cookery books in 2010. Some products, such as tobacco, also acted as a drag on sales, but others, such as snacking products, fared better.

• The situation did not improve for audio-visual stores in 2010 that are part of media products stores. Many camera and photo development stores have closed in recent years due to the competition from vending machines, Kodak corners in hypermarkets, and websites such as ouistiti.fr or photo.com. Over the last couple of years, retailers have condemned the damage caused to audio-visual sales by piracy, as well as the competition from grocery retailers and online sales. Many manufacturers and retailers discounted old or unsuccessful DVDs and CDs, but maintained high prices on new products to limit losses.

• With a 5% share of value sales, Press Shop (owned by Lagardère) was the leading brand in leisure and personal goods specialist retailers in 2010. It focuses on standalone locations, whilst Relay, its other chain, concentrates on transport locations such as railway and subway stations, as well as airports, which benefited from rising traffic every year in Belgium. The first quarter of 2010 was difficult for Press Shop and Relay, which decided to close some unprofitable outlets to focus on bigger and better located stores, and on products such as lottery tickets. The French chain is now equipped with chilled shelves to offer soft drinks, sandwiches, salads and yoghurts. The aim is to offer a one-stop convenient shopping concept, which illustrates a great change in Lagardère’s strategy in Belgium.

• The main contender to Press Shop and Relay is Standaard Boekhandel, operated by ZNU. This chained bookseller recorded appreciable and atypical growth in 2010 in this gloomy environment, thanks to the opening of new stores and exclusivity agreements with providers regarding ventes jumelées (the weekend newspaper, available with a DVD, for instance).

• In other media products, the main winners were Fnac, which succeeded in opening a new outlet in 2010 (which is a sign of good health, given the large size of such outlets) and mainly Free Record Shop, which led an impressive recovery in 2009-2010 owing to its new strategy. According to local experts, Free Record Shop is a real success story: its new manager totally remodelled the concept and design, with more interactivity with consumers and limited stocks, and launched a total rebranding. While Free Record Shop was said to have missed the internet revolution before 2008, its outlets are now high-tech stores where consumers can select on screens what they want to buy, order or download. Free Record Shop also benefited from the acquisition of Extrazone outlets (ex-Sonica SA), and opened other outlets.

• Times of recession are theoretically said to act in favour of sales of pet food and pet care products, as owners often tend to indulge their pets in such instances. However, the recession did not really fuel sales in pet shops and pet superstores, which posted growth of 1% in current value terms in 2010, which was below the CAGR in the review period. Already affected by a lack of profitability of smaller, traditional pet shops, the channel had to face growing competition from economy products or standard brands with premium claims, which were available in mass distribution channels in 2009-2010. Even so, the surviving independent pet shops had a much wider and pertinent offering than a decade ago, as they now sell pets, as well as a wider range of pet care products.

• The relative dynamism of pet superstores was instrumental in the maintenance of positive value growth in 2009-2010. Chains such as Tom & Co and Zoomart remained the strongest performers in terms of attracting consumers in town centres and on the outskirts of towns. Delhaize Group’s Tom & Co brand was in a position of strength in the channel in 2010, with nearly seven million visitors per year. Its wide provision of products for many different types of animals and its 3,600-5,000 items per store made it the undisputed leader in pet superstores in Belgium. In its superstores, the emphasis is placed on quality products, personal service, tailored advice and a broad selection of products at competitive prices.

• Zoomart by Fressnapf Tiernahrungs, the only real challenger for Tom & Co, became Maxi Zoo in 2010. In Belgium, this chain is a specialist discounter of pet food and pet accessories. It offers both well-known brands and private label products, as well as extensive consultations. It has a discount-oriented pricing policy, and a very large product range. A typical Zoomart outlet stocks over 6,000 products. Before 2010, the chain planned to open other outlets, but the economic crisis dissuaded it from investing, which resulted in a less interesting performance than Tom & Co in 2010.

• According to a local expert, Belgians often switched to essential, economic and durable goods and activities, such as home cooking or sport; the latter was mainly thanks to recommendations by the WHO and the Belgian government about the need for healthy eating and physically active lifestyles. Increasing by 3% in current value terms, sports goods stores was one of most dynamic categories within leisure and personal goods specialist retailers in 2010.

• Chained outlets also energised sales in sports goods stores, as the offering drastically improved from the middle of the review period, when Decathlon (Decathlon Belgium) began to seriously increase its sales per outlet in Belgium. The French chain quickly captured the lead and drove sales in the channel in 2010. Its success relied on its strong positioning, its large stores and its wide range of products, covering the majority of sports. Some local authorities tried to limit its development in order to protect independent stores in recent years. Nonetheless, Decathlon got the upper hand in 2010, and opened other outlets. Three new stores are already planned in 2011-2012 in Belgium.

• Intersport has a similar positioning to Decathlon; nonetheless it continued to yield ground to this chain, notably due to a narrower offering. During the last couple of years, the number of Intersport outlets literally collapsed in Belgium, which could mean a departure from this country soon. Lagging far behind Decathlon in sports goods stores, the Belgian chain AS Adventure (AS Lathouwers) has adopted a narrower positioning than Decathlon, as it focuses on outdoor activities and trekking. However, this chain progressed better in 2010, notably by virtue of a higher number of openings.

• According to industry sources, sales in stationers/office supply stores were valued at €209 million in 2010. This channel was stable prior to the economic crisis; nonetheless, it declined by 1% in current value terms in 2010. This was concomitant with the competition from sales in grocery retailers and internet retailing. The ongoing recession also urged consumers, particularly professionals, to limit their expenses in the area of paper, print cartridges and office supplies.

• The number of pure stationers/office supply stores is rather modest in Belgium, with 500 stores. However, the competitive environment is rather fragmented, with an absence of players with true national coverage. For instance, the leading chain, Ava, from the Dutch company Nv Ava Papierwaren, is mainly in Flanders.

• Whilst industry sources were already surprised by the positive performance of traditional toys and games stores in 2008, they were amazed at the 6% current value growth of the channel in 2009, which was almost repeated in 2010. Including sales of toys and games via internet retailing, this growth was twice as high. In addition, unit prices of toys and games increased by 4% in 2009. Despite the economic crisis, Belgian parents refused to make sacrifices in this area. According to Fedis, educational, interactive or durable toys and games (for instance cuddly toys or wooden toys) performed much better than gadgets and fancy products.

• With a 27% share of value sales in 2010, Dreamland from Etn Franz Colruyt continued to dominate traditional toys and games stores. It was also the most popular chain in its category according to a survey by Q&A Research & Consultancy. However, it surprisingly closed outlets in 2009 and 2010. According to trade press, the chain focused on France, and stopped its expansion in Belgium.

• Fun (FUN Belgium) was very dynamic in 2009-2010, according to the company’s website, with two or three new outlets per year. The success of Fun relies on its very large outlets, as well as selling in bulk to businesses, horeca establishments, schools and clubs. It offers leisure goods such as garden furniture, camping equipment and seasonal goods, in addition to toys and games. It is mainly found in Dutch-speaking regions, but was increasingly targeting the French speaking area at the time of writing.

• Owing to Press Shop, Fnac and Decathlon, which held the first three positions in leisure and personal goods specialist retailers in 2010, international chains still dominated. However, domestic leisure and personal goods specialist retail chains saw better expansion in 2010, although independents and small chains remained dominant in the majority of categories. Local brands are mainly present in traditional toys and games, pet shops and superstores, and to a lesser extent in media products stores and stationers/office supply stores,

• The outlook for leisure and personal goods specialist retailers is not as favourable as during the first half of the review period. Due to its disparate composition, the channel is likely to experience mixed results. In the case of continued higher unemployment, consumer confidence will stagnate at a low level, and the early victims could be products such as jewels and audio-visual products. Legal, and mainly illegal downloading has reached such high levels in Belgium that experts are much less optimistic about the room for growth in media products stores which are specialised in CDs, DVDs and other audio-visual products. Given that Belgium is not expected to adopt tough legislation such as Hadopi in France, the issue of piracy will continue. Coupled with the expected decline in sales of newspapers and magazines in booksellers, media products stores is expected to see a decline of 15% in constant value terms over 2010-2015.

• Belgian consumers are not expected to stop purchasing products in sports goods stores and traditional toys and games stores, however. The latter is expected to post appreciable growth over the next five years, given that this channel is cushioned from the impact of the economic downturn. In the former, chains have significant potential in Belgium, but have to convince local authorities that the closure of many independent outlets will be offset by the creation of employment in larger chained sports goods stores. Decathlon, for instance, has ambitious projects for Belgium, as it plans to reach 80 outlets in Benelux by 2017. Nonetheless, the anticipated strong performance of sports goods stores and traditional toys and games stores will not be sufficient to offset the decline in other channels. Thus, leisure and personal goods specialist retailers is predicted to decline by 5% in constant value terms over the forecast period 2010-2015.

CHANNEL FORMATS

CHANNEL DATA

HEADLINES

• Mixed retailers increases by a robust 3% in current value terms in 2010, reaching sales of €1.3 billion

• Sales are underpinned by the ongoing premiumisation of Galeria Inno and the dynamism of Hema

• By contrast with the slowdown in 2008, the number of outlets increases by 2% in 2010, thanks to Trafic and Hema

• Blokker Nederland and Metro Group remain the leading players in a relatively concentrated competitive environment in 2010

• Mixed retailers is expected to experience 3% growth in constant value terms over the forecast period

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.

CHANNEL FORMATS

CHANNEL DATA

HEADLINES

• Current value sales of vending completely level out at €257 million in 2010

• The channel faces an atypical number of bankruptcies, loses consumers amongst teenagers, and does not prospect enough new locations

• Unpackaged drinks vending is the most dynamic category in 2010

• Despite the presence of dozens of small and mid-sized players, vending is the least fragmented channel in non-store retailing in 2010, with the outright leader being Coca-Cola

• Vending sales are expected to remain at a standstill over the forecast period

TRENDS

• Vending sales were affected by a combination of negative factors in 2009 and 2010. First, the channel faced an atypical number of bankruptcies, particularly amongst small and mid-sized players. Then, the category suffered from the declining loyalty of teenagers to snacking and drinking products. At the beginning of the review period, the explosion of mobile phones within this strategic consumer base limited their dedicated budget to impulse products, and thus vending. Lastly, a survey led by The European Vending Alliance showed that players do not practice “site hunting” any longer; instead they prefer to capture from other players the best sites by acquiring their intermediaries/operators.

• As a result, there was a stagnation in the category. Although there are no official or solid figures about sales in vending, all sources consider that the channel slightly declined in 2009, and to a lesser extent in 2010, which was below the CAGR in the channel over the review period. Probably thanks to the impulse nature of most purchases, vending machines seemed to be shielded somewhat from the sluggish economic environment before the recession of 2008-2009.

• Even so, vending has become an established distribution channel in recent years, according to GDA, the trade association for vending in Belgium. It shows similar attributes to stores in terms of locations, machine arrangements, merchandising and hygiene and packaging norms. The range of products on offer is becoming wider in order to meet the demands of an increasingly wide consumer base. Technology is constantly evolving, and machines are now able to offer fruit, ice cream, pizzas and ready meals, and to take payment by various means.

• Unpackaged drinks vending was the most dynamic in actual value terms in 2010 due to the popularity of hot drinks, and primarily instant coffee in railway and petrol stations and commercial centres. Hot drinks was clearly ahead of soft drinks and packaged food products, which mainly encompass carbonates and snacking products.

• Tobacco products vending continued to decline in current value terms in 2010. Given that the majority of tobacco vending machines are located in consumer foodservice outlets, the extension of the smoking ban in public areas to horeca outlets from the beginning of 2007 impacted sales further, although this ban was only partial before 2010. In contrast to Ireland, France or Italy, for instance, this legislation only concerned consumer foodservice outlets where food accounted for more than 30% of total value sales.

• Another factor in the sluggish performance of the channel in 2009-2010 was the disappointing progression of new concepts in terms of machine type and products offered. For instance, vending machines for sandwiches did not take off in recent years, as nobody wanted to invest in expensive chilled machines. By the same token, although pizza machines began to spread, mainly in or close to hotels, their development was also hampered by the high price of these machines. Lastly, after a promising start, ice cream vending machines began to decline in 2009, and thus Iglo-Ola (Unilever) disengaged itself from this niche in 2010. The only new and original concept was a vending machine for fresh milk, provided by independent farmers.

• As previously mentioned, manufacturers did not seek out new vending machine locations in 2009 and 2010. This worrying situation contrasts with the first half of the review period. According to a study released by an industry source in 2009, the number of vending machines (including machines in the consumer foodservice and captive environments) increased by double-digits over the period 2004-2008. Meanwhile, sales per vending machine multiplied three or four times. The clinch rate (number of purchases by visit) jumped from 15% in 2004 to 55% in 2008.

• Vending machines have tended not to move from traditional locations where traffic is high, such as railway stations or other transport facilities. Players in packaged food and unpackaged drinks vending mainly specialise in these areas. Due to the competition from small cafés/bars and bakery products fast food outlets selling drinks, vending operators focused on leisure parks, and, to a lesser extent, cinemas. In this case, vending machines enable clients to avoid queuing. Tobacco vending machines can be found in cafés/bars and next to tobacco shops, to facilitate purchases out-of-hours.

• Unit prices are higher in vending than in store-based retailing, as the majority of products available in vending machines are available in smaller portions than seen in the store-based environment. They offer more convenience to consumers who are usually willing to pay more for the service; except during gloomy economic periods such as the current ongoing crisis.

• Regarding vending in captive locations, players feared the implementation of the same legislation as in France in terms of sales of snacking products in schools. In France confectionery was replaced with fresh fruit in order to limit obesity in the country. Nonetheless, given the failure of this measure, (French pupils did not touch the apples, and instead bought confectionery outside of school), the banning of vending machines is not expected to spread to Belgium in the short term.

• As in other channels, consumer goods and machine manufacturers had to adapt to more demanding consumers, given that the vending channel became more sophisticated. Due to the movement towards health and wellness food and drink, there were attempts to replace unhealthy alternatives such as countlines with fresh fruit. However, as in France, such endeavours often failed, as young consumers prefer countlines, biscuits and cakes – for instance the famous Belgian waffles. In addition, fresh fruit has a much shorter shelf life than snacking products.

COMPETITIVE LANDSCAPE

• Despite the presence of dozens of small and mid-sized players, vending was the least fragmented channel in non-store retailing in 2010. Many small and mid-sized operators sold their businesses because of the administrative and legislative hurdles, and the difficulty in financing. This benefited some key players, such as Coca-Cola, which was the outright leader in 2010 with 16,000 machines in the country (including in captive locations – mainly schools, administrations and large companies).

• In Belgium, Coca-Cola can directly manage and fill its machines, or use intermediaries (operators). It is in such a position of strength that it can be both a provider and competitor for operators. It is something which some operators criticise, as the company can cannibalise its own distributors. In 2010, Coca-Cola forged ahead in the area of standard cola carbonates; nonetheless it seemed to have less success than PepsiCo in the area of light cola – for instance Pepsi Max performed better than Coca-Cola Light in 2009/2010.

• Coffee specialists (unpackaged drinks vending) still lagged far behind Coca-Cola. In terms of machines, the closest competitors to Coca-Cola were Autobar Belgium with almost 6,000 machines, immediately followed by DECS from Sodexho with 5,000 machines.

• In a totally different area, Conway, a subsidiary of Lekkerland Deutschland, is specifically focused on tobacco products vending. Conway changed its 7,000 tobacco vending machines in 2007-2008. It adapted them to the “Age Coin” system, the aim of which is to prevent teenagers having access to vending machines. Nonetheless, it did not prevent this player paying for the ongoing decline in traffic in cafés/bars, where such machines are located.

• Mars Belgium was the leading player in confectionery in vending but tended to recede until an expected stabilisation in 2010. This player had to progressively limit its network in Belgium from roughly 2,000 machines prior to the review period to less than 1,000 in 2010 in order to keep only the most profitable machines.

• Unilever Belgium sold its machines and activities over 2008-2009 to regional distributors – included in others. This player previously sold Unilever brands (Lipton Ice tea, for instance), as well as Coca-Cola product lines. Danone (included in others), another strong player in packaged food, tried to repeat the success of its Actimel flagship brand in vending. It set up a small network of a few hundred machines; nonetheless it never managed to really impose this format in recent years.

• The only important merger and acquisition activity was the progressive acquisition of DECS – Douwe Egberts Operating Services from Sara Lee International by Sodexo (one of the most important institutional caterers in the world) from the end of 2008. With such an acquisition, the total network of vending machines from Sodexo in captive and semi-captive environments reached 5,000 machines selling hot and cold drinks and snacks with a total turnover of €21 million in 2009.

• Often, food and drinks manufacturers which are also present in store-based retailing try to develop the same positioning as in their core business market. For instance, Coca-Cola tried to be available everywhere, and communicated an image of freshness and fun in its machines, with the same designs as in the soft drinks market. DECS wanted to convey an image of human warmth in 2009 and 2010, while Nescafé mainly capitalised on the sophisticated image of its instant coffee specialities. As in hot drinks, Nescafé also tried to target younger consumers than DECS, and thus focused on locations in cinemas, for example.

• Only a few players have national coverage with their machine networks, including Coca-Cola, Conway, Mars, Autobar, DECS, Maas and Selecta. There are also some regional specialists, such as Armonia, which is mainly available in Brussels, and Drink-o-Mat in Flanders. Both are mainly present in railway stations.

• Most mainstream players in vending are international, and rarely Belgian. In the vending channel there are machine importers and product providers. Sometimes a vending player can mix these two activities. Vending players distribute their products and/or machines to full-service operators or for-rent operators.

PROSPECTS

• Industry sources were much less optimistic about the potential for vending in 2010 than they were two years ago. During its last annual general assembly in December 2008, most EVA (European Vending Association) members remained confident about the future of vending. There was general consensus that the vending industry had important assets, such as good quality products at an excellent price, which could help it to resist economic and financial pressure. Mainstream players are expected to become increasingly efficient in terms of location and geographic coverage, merchandising and tailoring the range of products offered. They will also attempt to trigger more impulse purchases by launching more convenient and technologically-advanced machines.

• However, players admit that they are facing growing problems of profitability with their machine networks. Due to declining sales and a risk of stagnation, more operators are expected to disappear in the short term. A solution could be to rent vending machines instead of buying them, notably thanks to rental specialist Snapshop. Renting machines is more flexible and profitable than buying them.

• This should limit losses in the channel, but not give a sufficient impetus to sales in vending, according to local experts. In addition, even though consumers are less sensitive to price when they buy products in automated shops or from vending machines, a growing number of consumers will have to tighten their belts, and could try to limit non-essential purchases. Therefore, vending sales are expected to remain at a total standstill in constant value terms during the forecast period.

• Another potential threat to growth in vending is the total ban on smoking, which should be seen very soon in Belgium. In 2010, bar owners had to make a difficult choice: keeping smokers or eaters. Many cafés/bars which mainly specialised in drinks enjoyed improved traffic thanks to the legislation on smoking. However, such a benefit will be very short-lived, as the ban on smoking is expected to be extended to the remaining cafés/bars (those which serve only drinks) and night clubs by 2011-2012. In this case, a tricky question will be the presence of 18,000 cigarette vending machines in full-service restaurants and bars. Their possible withdrawal could be another blow for cafés/bars, as it will reduce the traffic in such outlets.

• Most sources consider the best location for machines (in the non-captive market) is linked to travel. The number of machines in locations such as railway stations and metro stations looks set to expand again in the future, as public transport is likely to develop further. Operators could also be increasingly tempted to replace some petrol stations with automated services due to problems of profitability, and mainly security in such locations. This will present an opportunity for packaged drinks vending machines and automated shops.

• As the most efficient player in terms of geographical coverage and merchandising, Coca-Cola is expected to forge ahead in vending. Due to the expected decline in tobacco sales, which accounted for a high share of its activities, Conway is expected to be less lucky. Instead, it is expected to focus on fresh products, at least through convenience stores, forecourt retailers and other small stores (not included in this channel).

CHANNEL FORMATS

CHANNEL INDICATORS

CHANNEL DATA

For each category and subcategory you will receive the following data in Excel format:

From Passport

• Market Sizes
• Company Shares
• Brand Shares
• Employment
• Grocery vs Non-grocery

Market size details:

• Retail Value retail selling price excl Sales Tax % growth
• Retail Value retail selling price excl Sales Tax local currency, USD, EUR, GBP, CHF, JPY
• Retail Value retail selling price excl Sales Tax per capita local currency, USD, EUR, GBP, CHF, JPY
• Sites/outlets
• Sites/outlets % growth
• Sites/outlets per capita
• Selling space
• Selling space % growth
• Selling space per capita
• Retail Value retail selling price excl Sales Tax real (constant 2008) Prices % growth
• Retail Value retail selling price excl Sales Tax real (constant 2008) Prices local currency, USD, EUR, GBP, CHF, JPY
• Retail Value retail selling price excl Sales Tax real (constant 2008) Prices per capita local currency, USD, EUR, GBP, CHF, JPY
• Retail Value retail selling price incl Sales Tax real (constant 2008) Prices % growth
• Retail Value retail selling price incl Sales Tax real (constant 2008) Prices local currency, USD, EUR, GBP, CHF, JPY
• Retail Value retail selling price incl Sales Tax real (constant 2008) Prices per capita local currency, USD, EUR, GBP, CHF, JPY
• Retail Value retail selling price incl Sales Tax % growth
• Retail Value retail selling price incl Sales Tax local currency, USD, EUR, GBP, CHF, JPY
• Retail Value retail selling price incl Sales Tax per capita local currency, USD, EUR, GBP, CHF, JPY
• Retail Value retail selling price excl Sales Tax Nominal (Current) Prices % growth
• Retail Value retail selling price excl Sales Tax Nominal (Current) Prices local currency, USD, EUR, GBP, CHF, JPY
• Retail Value retail selling price excl Sales Tax Nominal (Current) Prices per capita local currency, USD, EUR, GBP, CHF, JPY
• Retail Value retail selling price incl Sales Tax Nominal (Current) Prices % growth
• Retail Value retail selling price incl Sales Tax Nominal (Current) Prices local currency, USD, EUR, GBP, CHF, JPY
• Retail Value retail selling price incl Sales Tax Nominal (Current) Prices per capita local currency, USD, EUR, GBP, CHF, JPY

Global insight and local knowledge

With 40 years’ experience of developed and emerging markets, Euromonitor International’s research method is built on a unique combination of specialist industry knowledge and in-country research expertise.

This approach is what enables us to achieve our goal of building a market consensus view of size, shape and trends across the full distribution universe of each category. We factor in whichever channels are relevant, from large-scale grocery to direct sellers, from discount stores to local mom-and-pop outlets.

Industry specialists

Each industry we cover is managed by an Industry Manager and team of Industry Analysts who research and report on their specialist categories all year round.

Our collaborative approach to research means that these industry teams are in constant dialogue with industry players and opinion formers. The planning of our research programmes reflects latest market trends and industry events. In completing each update project, this provides invaluable input to the testing, review and finalisation of our data.

The specialist in-house teams bring together findings from all stages of the annual research process. They work closely with in-country analysts, assess and challenge data and exercise final editorial control over the publication of new data and analysis.

Country and regional analysts

Our in-country analyst network is managed by country and regional analysts in our offices around the world. Working closely with each in-country team, the regional research management team ensures that all country researchers are well schooled in best practices, from the information collected in store checks, to the dialogue we build in trade surveys. Our country analysts ensure that national reports explain the data trends and provide clear insights into the local market’s dynamics.

In-country research network

To deliver fresh insights every year in countries all around the world, we believe the strongest approach is to use analysts on the ground. They bring fluency in local language, physical proximity to the best sources, an ability to engage directly with local industry contacts, and an awareness of how the products and services we study are advertised, sold and consumed. These are essential parts of our ability to report incisively on these markets.

Our research methods

Each Euromonitor International industry report is based on a core set of research techniques:

Desk research

With industry events, corporate activity, trends and new product introductions tracked year round by our industry team, desk research provides a starting point for the in-country research programme. Our in-country researchers will access the following sources:

• National statistics offices governmental and official sources
• National and international trade press
• National and international trade associations
• Industry study groups and other semi-official sources
• Company financials and annual reports
• Broker reports
• Online databases
• The financial, business and mainstream press

Accessing sources is only the first step. The ability to interpret and reconcile often conflicting information across multiple sources is a key aspect of the added value we provide.

Store checks

Store checks are an integral part of our methods for product industries. Carried out on the ground across a relevant mix of channels, the information gained provides first-hand insights into the products we are researching, specifically:

• Place: We track products in all relevant channels, selective and mass, store and non-store
• Product: What are innovations in products, pack sizes and formats?
• Price: What are brand price variations across channels, how do private label’s prices compare to those of branded goods?
• Promotion: What are marketing and merchandising trends, offers, discounts and tie-ins?

Findings are cross-referenced with brand share data analysis. The results, combined with the findings of desk research, provide a strong basis for identifying key areas of questioning to take forward into our trade survey.

Trade survey

Interaction with global players at corporate HQ and regional levels is complemented by unique local data and insights from our in-country trade surveys around the world. Through the high profile of the Euromonitor International brand, we are able to talk directly to a wide range of sources and therefore inform our analysis with the knowledge and opinions of the leading operators in the market.

Trade surveys allow us to:

• Fill gaps in available published data per company
• Generate a consensus view of the size, structure and strategic direction of the category
• Access year-in-progress data where published sources are out of date
• Evaluate the experts’ views on current trends and market developments

In building our composite industry view, we engage with a variety of personnel in key players at all points of the supply chain: materials suppliers, manufacturers, distributors, retailers and service operators. We also interview desk research sources: industry associations; study groups; and third party observers from the trade and financial press.

Our objective is to engage in conversation with trade sources in which we exchange ideas and views on the industry, sharing our work-in-progress findings on supply/demand dynamics and potential. This dialogue enhances both parties’ understanding of the local market. The scope and reach of our trade survey also serves to eliminate bias (intentional and unintentional) from any single source.

Company analysis

At a global level, our company research combines our mix of industry interaction and use of secondary sources such as annual accounts, broker reports, financial press and databases. From a data perspective, the aim is to build “top-down” estimates of major players’ total global and regional sales.

At a country level, in line with local reporting requirements, we access annual accounts, national-specific company databases and local company websites. These are all invaluable sources as we build a view of each domestic player’s size and position within very specific categories of the industry.

Forecasts

Data projections and future performance analysis are key elements of Euromonitor International’s market intelligence. Working with historic trends of 15 years or more, a key aspect of our trade survey is to engage industry insider views of the next five years. Will volumes maintain their historic trend? Will price increases or falls of recent years continue, accelerate or slow down? Will increasing demand for one product cannibalise sales of another?

Forecasts represent many of the essential conclusions we have reached about the current state of the market, how it works and how it behaves under different macro and micro conditions. Our written analysis will state the assumptions and the trade opinion behind whether our predictions are optimistic or pessimistic, so that clients can use our statistical forecasts with confidence.

Data validation

All data is subjected to an exhaustive review process, at country, regional and global levels.

The interpretation and review of sources and data inputs forms a central part of the collaboration between industry teams and country researchers. Numbers are delivered to regional and global offices with an audit trail of sources and calculations to allow for a thorough evaluation of data sense and integrity.

Upon completion of the country review phase, data is then reviewed on a comparative basis at regional and then at a global level. Comparative checks are carried out on per capita consumption and spending levels, growth rates, patterns of category and subcategory breakdowns and distribution of sales by channel. Top-down estimates are reviewed against bottom-up regional and global market and company sales totals.

Where marked differences are seen between proximate country markets or ones at similar developmental levels, supplementary research is conducted in the relevant countries to confirm and/or amend those findings. This process ensures international comparability across the database, that consistent category and subcategory definitions have been used and that all data has been correctly tested. We make sure that possible discrepancies between different published sources have been reconciled and that our interpretation of opinion and expectation from each country’s trade sources has been applied to form a coherent international pattern.

Market analysis

Another integral part of all our research programmes is that all Euromonitor International data is accompanied by clear written analysis. From a research perspective, this explains and substantiates data findings. From a client perspective, this offers unique insights into local consumption trends, routes to market, brand preferences, channel dynamics and future trends.

Our country level analysis also provides invaluable input into the ability of our central industry specialist teams to marry local insights with strategic conclusions on the direction of the market regionally and globally.