In less than a year after completing the liquidation process of Polar assets, the department store Ripley closed its operations, whose business plans did not materialise successfully and were well below the expectations along with the change in the macroeconomic scenario experienced in the country, which differed from what was expected at the time of the investment; this made the sustainability of its operation impossible. Although it had been expanding its operations with the opening of more stores, it failed the challenge of convincing consumers to find a product offer in one place. The economic scenario raised the prices of its imports and it could not find a local partner, as Falabella has managed to, which hindered it from making the heavy investments required to grow further in the country.
The gaps in the market left by the exit of certain department stores, have been taken advantage of by other players, with Falabella remaining as the leading brand with a 50% value share in 2016, gaining three percentage points. Its aggressive investment plan that aims to double the number of stores that it had at the end of the review period, along with the increase in local purchases to face the juncture of higher costs due to devaluation, and its promotional strategies of weekend deals in different categories that offer a larger discount with the use of its CRM card, consolidate its leading position.
The estimates of a down economy that have been reviewed in the short and long term, below 3% of GDP, along with the uncertainty because of socio-political aspects such as the evolution of the agreements signed between the government and the terrorist group FARC, have created caution in consumers, whose pessimism is resulting in delayed purchases of products sold in mixed retailers. This affects the expansion plans of major players in the channel and that if they are to continue, can lead them to high investments without a favourable return in the short term and having to wait for a recovery in the long term; this can restrict their decisions or redirect their strategies in the medium term.
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This industry report originates from Passport, our Retailing market research database.