The challenges of the retail sector, or can problems be transformed into solutions?

• The Hungarian consumption rate (72% of the EU average) is extremely low even in regional comparison, which is only stimulated by unfavorable macroeconomic processes. Due to the unpredictable environment, the population is less willing to consume, and is more inclined to save according to their means.

• Typically, our border food retail customers suffer from the influx of shopping tourism to neighboring countries, and they operate under constant pressure to reduce prices.
• The relatively low level of new housing construction is reflected in the commercial sector through the subdued demand for household appliances and equipment.
• The number of stores nationwide is insufficient, and their distribution is overly concentrated: in nearly 400 of our 3,000 settlements, not even convenience stores operate. Partly due to this, and partly due to the low willingness to shop, we are also among the leaders in the region in terms of per capita shopping space.
• The low shopping potential is also spreading: mall operators are finding it increasingly difficult to contract with larger retail chains, as it would not be worth investing in and renting below a certain number of square meters, and the operators are reluctant to maintain potentially unused areas later on.
• The vicious circle can also be found in the relationship between the retail chain and the customer: the shopping habits of the younger generations are changing faster than ever before, which is why retail chains are reluctant to rent premises with more specific conditions for the long term.
• Finally, the lack of young workers is creating continuous recruitment pressure and wage competition, according to industry players.

However, it would be a mistake describe retail. As a result of the challenges discussed above, the players had no choice but to become more efficient and crisis-resistant, in which areas the profession, including our clients, has basically performed well: the broader sector has continued to maintain its GDP share of approximately 10-12%, many retail chains have been able to achieve significant revenue growth, while the development of shopping spaces and malls, or even the opening of new ones, is not unprecedented, i.e. the willingness to invest – to the extent possible – is unbroken.

In close connection with this, we also specifically mean investments in smart solutions and artificial intelligence: the number of companies using artificial intelligence to some extent has increased from 19% last year to 28% this year. In addition, the domestic sector – at least for now – is not facing any phenomena that would require it to radically rethink previous investments (e.g. the wave of smart safes being dismantled in the United States). Communication with the regulatory environment is ongoing, and the willingness to assert interests has not decreased despite the apparent ineffectiveness. And the changed consumer habits hold an opportunity: the chain of stores that understands exactly what the expectations of the future customer are sooner can gain a significant competitive advantage, which innovation pressure can also have a positive impact on other, related sectors.

All of these phenomena hold additional acquisition and restructuring opportunities, whether at the level of assets, business lines or legal entities. We are proud that last year we helped our clients in the sale and purchase of industry companies with a total turnover of nearly 20 billion forints. Forvis Mazars – as a consultant with a strong focus on the sector – will continue to be available to its existing and potential clients to provide transaction support (due diligence, valuation, accounting and SPA advice) during this turbulent period of opportunity.