Discounters in Chile

PROSPECTS

Consumption slowdown boosts the discounters channel

Even though economic expectations were positive at the beginning of the year, 2019 was marked by an unexpected economic slowdown driven primarily by macroeconomic issues that influenced Chilean consumer behaviour. Due to this external influence, Chilean consumers limited their spend to only what was essential with the economic uncertainty driving consumer behaviour towards price-based decisions.

Logistics strategies are a potential business differentiator

Even though all discounters are characterised by offering selected ranges of products at the lowest prices possible, it seems that only the biggest brands have the capability to increase value sales for the channel. As every discounter strategy focuses on price reduction, there is an important opportunity for companies that have sufficient logistical support to afford differentiation through a cost reduction strategy.

Growth opportunities for discounters remain in decentralised areas

According to projections by the National Statistics Institute, the Chilean population is expected to exceed 21 million by 2035. Even though the capital, Santiago, will see the highest population increase, the study estimates that six other main urban areas will surpass a million inhabitants.

COMPETITIVE LANDSCAPE

Walmart finishes its store remodelling and continues investing to increase Bodega ACuenta’s sales

US multinational Walmart Inc has finalised its 3-year restructuring plan to convert 110 Ekono outlets in Chile to its supermarket brand, Express de Lider. This impacted discounters value sales during 2017-2019 as Ekono was a relevant player owning a vast number of outlets in the country.

Competition turns towards price-efficient promotions

Since Walmart’s migration of its Ekono outlets to supermarket brand Express de Lider, discounters in Chile has witnessed a significant reduction in the number of outlets and in value sales. However, main players such as SMU SA and Wal-Mart Chile have developed business strategies that enable their brands to keep improving their performance.

SMU holds its position within discounters

In 2019, the Chilean grocery retailer continued to increase its company value organically, as no outlet expansion was seen. With its two brands, Mayorista 10 and Alvi, SMU SA stood out as the second biggest firm in value terms in 2019, maintaining a vast distance in value share terms from the next competitor, Erbi, which is also a Chilean brand.

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