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Tactics of Supermarkets in the Battle for Domestic Consumption

Source: Strategy (Chile )

The fight supermarket will increase after the consolidation experienced by the big players. There are few strings "girls" to acquire, so the fight for market share will be every inch a national level.

Competition in the supermarket industry, which this year billed nearly $ 14,000 million, to conquer new areas nationwide, will be "ruthless" hereafter.

This battle will be increased after consolidation experienced by the major players in the sector, in this case, Walmart Chile, Cencosud, SMU, South Supermarkets (SDS) and Tottus, which concentrated around 94% of domestic sales in the industry.

• A report Cencosud economic states that after settling in large cities, have begun to expand to smaller towns in which operators of smaller magnitude have been replaced by supermarket chains with national coverage.

• Over this process, there are few players "boys" available to be purchased and enhanced over time. This, following that, by 2010, less than 5% related to such chains, if you discount on Montserrat.

• So, growth through acquisitions will decrease, however, participation by removing competitor will be the main focus of the companies. The first strategy will be organic, whereas still remains room for growth: supermarkets in the country have a penetration of 70%, and 75m2 per 1,000 people . In Europe, levels are 90%, and the U.S., of 410 m2 per 1,000 inhabitants, and is pointing Chile.

• In that sense, every supermarket players are looking at almost 10,000 new acres to be opened in Santiago, with the recently approved extension of the master plan. Also probed the northern regions, primarily.

• The second strategy is to enhance different formats, among which are the smallest, of 500 m2 and 1,000 m2. The idea is to reach the popular strata of the population, replacing the traditional neighborhood shops.

• Meanwhile, the third strategy will be made stronger by the area of \u200b\u200bnon-excluding food SMU-with brands and external vital point for the differential recruitment of clients. And fourth, Internet sales will be in more affluent areas (in retail, this channel will move U.S. $ 700 million in 2011).

• reason? The land available is too expensive in these geographic areas, and supermarkets are not intended to assume the cost, whereas your profit margin is not more than 2% in these sectors.

• addition, each of the chains observed to arrest a relevant bill currently before the Congress: which allows the sale of medicines without prescription supermarket shelves. The interest is to install pharmacies within their locations, as is making Jumbo, as a pilot, and how did Walmart Chile (finally sold his operation to Farmacias Ahumada).

• Walmart Chile
• 's bet Walmart Chile, would invest U.S. $ 1,500 million in 2015 - will focus on smaller formats and popular-of C3 and D segments, "in this case, Ekono and Superbodega Acuenta. And to a lesser extent, continue buying regional companies such as supermarkets Requínoa and San Gregorio. Precisely, the idea is to deepen the battle outside the metropolitan area.

• also created signature Sections Entertainment and World Baby, thereby strengthening its non-food area, which keeps Clothing, Home Improvement and Technology, among others. In 2010, launched its e-commerce platform with the goal of being among the three largest retailers in this item in five years, with 200,000 customers.

• Your shopping area of \u200b\u200bUrban Space, meanwhile, has allowed him to make known its hypermarket format with a more complete proposal.

• The company is one that has won more -leading market share to 36.3% - in fact, in 2010 it gained two percentage points. However, its president, Felipe Ibáñez, acknowledged that there is increased competitive pressure, because of that "three of the five largest national supermarket players have an integrated retail format (Cencosud, SMU and Tottus by Falabella) ".

• Cencosud
• Cencosud, to date, is converting some local Santa Isabel Jumbo, since it is a format more profitable and recognized in the country, and also is strong in the more affluent sectors. holding company, in supermarkets, has plans to invest nearly $ 400 million in 2011, an area which delivers almost 70% of its total sales.

• However, it was the firm sector lost more market share in 2010, with a drop of 2.3 percentage points, dropping to 27%. This, for its sharp focus on the outside. Peru, by the way organic, and Brazil, through large purchases like Bret, for nearly $ 900 million.

• Therefore, in recent months has stepped up its local procurement. The Tribunal for the Defense of Competition (Competition Tribunal) has approved the group a lease for 20 years and renewable for five supermarkets Condell Region VI. And a few days ago, started a consultation process in the body with the intention of leasing for 20 years Abartal supermarket operations in the cities of Vallenar and Huasco.

• With Jumbo also has a pilot pharmaceutical division, seeks to leverage its non-food sector and Internet sales. With its shopping centers, has had the space to better display this format, while the chain Santa Isabel is usually accompanied by a Easy.

• SMU
• SMU is converting several local Unimarc in the area west of Santiago, to go as big as the eastern sector, which will enhance its Foodmarket format. His strategy is clear: focus entirely on food, and though the chain has been more intensive in acquisitions, organic growth would be their new center.

• In fact, this year will double its number of local OK Market, reaching 100, and by incorporating Telemercados at SMU, will increase its online sales channel, primarily in the eastern area of \u200b\u200bSantiago. And Wholesaler 10, ALVI and Trade, although wholesalers, retailers have strong features, which would contribute to its progress in the industry.

• SMU commitment be renewing the stock of products in the day, while the other chains do it every month, the method by trying to differentiate themselves.

• This year, moreover, would open a bag, which anticipates new expansion plans.

• SDS
• South Supermarkets (SDS), but has shown a lot plan aggressive-growth $ 200 million by 2013, lifting 80 stores, "and has bought several regional chains in recent years leading the South," in the industry is still seen as a signature "green" in terms of consolidation. His challenge now will be to enhance their formats Bigger (retail) and Maxiahorro (wholesale).

• In this way, SDS debuted in 2010 in Santiago, with locations in the communes of Renca and Maipú, and the possible extension to Peñalolén, Puente Alto and San Bernardo. Is working on developing its Internet platform, to have its own credit card for 2011 and to open the stock market.

• Tottus
• Falabella is betting many of its chips to expand its supermarket chain Tottus. The aim is that in Chile, the market share to expand the current 7% to 10% in the medium term.

• The way this will give a different business proposal, strengthening its non-food area, doubling the sales of this class of goods at its premises at 2015 (currently reaching 10% of total). ;

• On the other hand, Tottus is launching a pilot Internet sales, to compete fully in the eastern area of \u200b\u200bSantiago, in principle. And although that has hypermarkets and supermarkets, will also invest in new formats.

• Tottus has tested a small-format of 800 m 2 -, located next to the store Falabella Bridge Street, in the metropolitan area. Same mechanism as used in its future expansion, which would use its platform in Mall Plaza.

• invest U.S. $ 1,500 million Walmart Chile in 2015.
• 70% of total sales come from the area Cencosud supermarkets.
• OK Market reach 100 local SMU in 2011.
• invest $ 200 million South Supermarkets 2013.
• 10% market share of supermarkets Tottus aims to achieve medium term.