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THE COMPETITION IS FIERCE BUT EXPERTS STILL SEE SPACE FOR NEW RETAIL CHAINS

Retail chains battle hard for customers

THE OPENING of a new branch of a retail chain in Malacky was preceded by a fiery advertising campaign that sought to attract new customers by offering them a chance to shop at night for half-price. A video, showing people crowding in front of the store struggling to be the first through the doors, circulated quickly throughout Slovakia, attracting differing reactions from viewers. But an expert on shopping behaviour noted that the controversial but nevertheless successful opening of this store is not a guarantee that customers will return, as Slovakia has a highly competitive retail sector.

THE OPENING of a new branch of a retail chain in Malacky was preceded by a fiery advertising campaign that sought to attract new customers by offering them a chance to shop at night for half-price. A video, showing people crowding in front of the store struggling to be the first through the doors, circulated quickly throughout Slovakia, attracting differing reactions from viewers. But an expert on shopping behaviour noted that the controversial but nevertheless successful opening of this store is not a guarantee that customers will return, as Slovakia has a highly competitive retail sector.

Slovak consumers have become accustomed to shopping in discount stores where they expect to buy goods for the lowest price, meaning that even the most loyal customers prefer the lowest price and each retail chain must find ways to draw them in, according to Dagmar Lesáková, an expert in marketing communication who teaches at the University of Economics in Bratislava.

The battle between competing retail chains is more intense in the deteriorating economic environment and companies must prepare their marketing strategy well if they are to be the most attractive option to a customer, Lesáková told The Slovak Spectator. To attract price-conscious customers, stores are often forced to sell certain goods at a price less than their cost. Experts say the question of whether competition based on ‘dumping prices’ is ethical or not is irrelevant in the difficult environment that retailers face.

“Presently most above-the-line and below-the-line communication by the retail chains concerns price,” Lesáková stated. “Special leaflets are the main communication medium. Almost two-thirds of households in Slovakia follow the special offers of retail chains.”

The marketing expert believes an approach to attracting customers that involves only focusing on prices can be hazardous over the long-term, noting that it can lead to a reduction in the chain’s average margin and it does not necessarily achieve customer loyalty.


The Slovak retail market



Retail chains sell a different range of goods in Slovakia and each is trying to adapt to the specificities of the Slovak market, the needs of domestic customers, and possible changes in their purchasing patterns during tough economic times.

“International retail networks have brought with them a successful application of international approaches to reaching the consumer,” Ľubomír Drahovský, a market analyst with the Terno market survey agency, told The Slovak Spectator. But he added that some domestic networks use only some parts of foreign marketing know-how and are far behind in terms of inventiveness.

"The crisis has significantly changed the behaviour of customers since early 2009," Hana Búgelová of the Nay company’s marketing department, told The Slovak Spectator, adding that Slovak consumers are willing to spend additional time shopping to find the highest possible value for their money.

“Our biggest competitors are customers’ wallets,” Jana Hrubcová from IKEA, the Swedish retail chain, told The Slovak Spectator in describing the current cautiousness of Slovak consumers.

Customer attitudes in individual countries differ and for that reason the Metro retail chain, headquartered in Germany, takes a personalised approach in each country, Romana Nýdrle, the head of corporate communications for Metro, told The Slovak Spectator. Using sophisticated customer segmentation and monitoring customers' changing needs in different regions are a major change in how the company approaches its customers since the economic crisis began, Nýdrle said.


The price factor



One technique used by the retail chains is regular monitoring of competitors’ prices.
"Our marketing communication corresponds to the structure of our customers,” Nýdrle said. "Given the fact that active entrepreneurs buy from us and they are registered with us, we have a good overview of their shopping habits."

Metro stores in Slovakia are not open to the general public and a person must first enroll before shopping there.

Lesáková does not believe there are significant differences in the marketing strategies of the major retail chains.

Mette Maix, marketing director of Tesco Stores in Slovakia, told The Slovak Spectator that a retailer’s failure to be competitive in prices or not making special offers in this economic environment can have strong negative consequences.

Retailers always need to deliver the best shopping experience in terms of prices, promotions, range, quality and seasonal buys, Maix said, based on her 16 years of experience in the retail sector.

“Some of the very specific things about the Slovak market are that customers are very price and promotion-oriented, have strong feelings for locally-produced products, want fresh bread every day and quality in general,” Maix stated.

According to Lesáková, individual retailers offer similar benefits to shoppers while the main attraction is price. Lesáková suggested that chains should focus on promoting certain brands and differentiate themselves based on unique offerings for specific target groups and tighten their differentiation so that it rewards specifically-targeted segments for their loyalty.


Retail club cards



Many retail stores are using membership cards as a marketing tool to generate customer loyalty and to give regular purchasers certain benefits and discounts. The retail chains also collect data on purchasing habits through the use of the loyalty or membership cards that can then be used to differentiate their customer bases, Lesáková said.

Retail chains are also providing other kinds of financial or non-financial services to encourage their loyalty-programme customers to shop at their branches.

Some customers receive offers of free home delivery or reduced-price delivery based on the distance of their home from the store. Some retailers offer a free bus service to their stores as well as in-home installation services.

Many retail chains also appeal to their customers’ concern for the environment by offering ecological disposal of unwanted products or recycling of appliances and light bulbs.


New retail players?



Despite the relatively small size of the Slovak market and the establishment of many international firms here, retail experts do not think the market is completely saturated.

“Despite the relatively small market, with just over 5 million inhabitants, there is still space for the arrival of new market players,” Drahovský said, adding that Slovakia is below the European average in terms of of per capita square metres of retail floor space.

Lesáková agreed that there is still some room for retail chains to expand in Slovakia, but added that the trend in the foreseeable future for certain chains, such as Tesco and Hypernova, is to build smaller retail outlets, like Tesco Express stores, for everyday purchases.

“The entry of new players in the sector of non-food retail chains is more unlikely because of the anticipated poor economic environment,” Lesáková opined.


The author is a student at the University of Economics in Bratislava

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