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Small shops wary of new hypermarkets

The June 14 opening of French retail giant Carrefour's Petržalka complex has left local smaller shopkeepers hoping that a law due to be passed in autumn will prevent a wave of similar commercial developments from cutting a swathe through small shops and stores in Bratislava.
The 13,500 square metre store - a one billion Slovak crown ($22 million) investment - carries 50,000 different products, offers free parking for 1,400 cars and 400 employees and dwarfs any other department store in Slovakia. Construction has already started on other Petržalka 'hypermarkets' (massive shopping malls) by the Tesco and Jednota chains, as well as other projects such as the Polus Center in Nové mesto, another suburb of Bratislava.


The French Carrefour opened their Petržalka hypermarket June 14.
photo: TASR

The June 14 opening of French retail giant Carrefour's Petržalka complex has left local smaller shopkeepers hoping that a law due to be passed in autumn will prevent a wave of similar commercial developments from cutting a swathe through small shops and stores in Bratislava.

The 13,500 square metre store - a one billion Slovak crown ($22 million) investment - carries 50,000 different products, offers free parking for 1,400 cars and 400 employees and dwarfs any other department store in Slovakia. Construction has already started on other Petržalka 'hypermarkets' (massive shopping malls) by the Tesco and Jednota chains, as well as other projects such as the Polus Center in Nové mesto, another suburb of Bratislava.

Richard Štiglic of the Ecomex electronics store on downtown Bratislava's Obchodná Street hit out at the wave of planned hypermarkets. He said that not only are the massive stores able to sell a wider variety of goods at cheaper prices, but they also have the ability to manipulate their stock and prices to ensure peak profits.

"Hypermarkets can play with their variety, from food to electronics," he said. "Depending on what is selling and what isn't, they can lessen their profit margin on televisions, while increasing prices on food. They will never lose money because they have such control over the variety of goods and the prices they charge," Štiglic explained.

He also attacked the control that large stores can have over suppliers, manipulating them and striking deals to squeeze out the cheapest prices.

"In the short term, suppliers will sell goods at lower and lower prices, because they want to make solid ties to put their other goods on shop shelves. In the long term, the stores may very likely be able to manipulate and influence prices with suppliers because of the power they will eventually be able to exert over them."

Help at hand?

A law drafted by the Ministry of Economy is expected to provide some degree of legislative protection for smaller retail outlets in competition with out-of-town megastores.

The draft law is currently under review by the government, but is expected to be submitted to parliament this fall. Although Economy Ministry officials were reluctant to discuss any law that was under review, spokesperson Peter Benčúrik said that the new law would regulate companies establishing hypermarkets and prevent big businesses from trying to "misuse economic dependency" and abuse their positions with suppliers. He specifically pointed to concerns over large firms requiring rebates, special fees and individual sale conditions from suppliers.

The law will also address the creation of strict control mechanisms for retail giants setting up hypermarkets. Benčúrik added that the law would not restrict the number of large business chains or megastores, but would regulate business practices between wholesalers and the stores themselves.

"This law is not designed to discriminate or restrict the business environment but to regulate a healthy environment among retailers, wholesalers and customers," he said.

Benčúrik explained that while there were valid concerns over hypermarkets coming to dominate the retail market, the business sector as a whole would benefit in the long term.

"The hypermarkets will certainly influence many small shops, but they have to adapt to new conditions and situations on the market. The hypermarkets will enlarge the supply on the market and will solidify competition among entrepreneurs. There will also be the advantages of lower prices," said Benčúrik.

He warned, though, that the ministry would be fighting to prevent "incorrect behaviour" by firms attempting to abuse their market position to force small storeholders out of business.

Štiglic himself was prepared to face the threat from the giant stores. He agreed that the hypermarkets would bring lower costs and higher quality to the whole market, and said that he planned to offer a more personalised service to customers and stock specialised merchandise in a bid to compete.

But representatives at retail giant Tesco, which is to open up a chain of new hypermarkets in Slovakia, said that it was likely smaller businesses in Bratislava would be squeezed out of the market after Tesco and other firms follow Carrefour's lead.

"If it's going to affect anyone's business it will be the small retailers, most notably in Petržalka. Like everywhere else around the world, some small businesses will be forced to close and some others will open up," said Tibor Koubek, director of Tesco in the Czech and Slovak Republics.

He added that the competition would force the stores to compete on levels of decreased price and increased quality, factors that ultimately benefit the consumer.

"We see the new Carrefour as a good thing. Competitors bring many benefits - one being that large and small business can take advantage of the supplier-base for such items as fresh fish and other goods that are not as readily available," Koubek said, adding that he felt there was more than enough room in the market to support the three stores, citing Brno in the Czech Republic as a prime example.

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