Where is the Hungarian retail sector heading?

A study has been prepared about the future prospects of the Hungarian retail sector by the consultants of PricewaterhouseCoopers and the students of Corvinus University. It is foreseen as a general trend, that price competition and private labels will play an increasing role in the competitive strategies of FMCG companies. The study focused on retail companies which sell FMCG products, including food chains, hyper markets, supermarkets and drugstores. Leading officers of retail chains have been interviewed and existing research data has been collected and processed. 3 possible scenarios have been worked out regarding the future development of the Hungarian economy: a realistic, an optimistic and a pessimistic one. Similar retail chains have been grouped in 4 categories according to size and competitive strategy. 1. „Big units”: primarily hyper markets, (like Tesco, Auchan, Cora etc.); 2. „Medium size units”: medium size supermarkets and food stores (like Reál, Co-op, CBA etc.); 3. „Discount units”: small and medium size discount stores with a clear cost strategy (like. Plus, Lidl, Penny Market etc.); 4. „Specialised stores”: small and medium size drugstores and specialised food stores with a distinctive competitive strategy (like Rossmann, Héliker, DM etc.). The importance of private labels is expected to increase in all store types. According to the optimistic scenario, this increase will be more moderate than in the pessimistic scenario. Private labels will play the biggest role in price competitor chains, which focus on low prices and simpler products. “Specialised stores” will continue to focus on brand products as they will remain service competitors even among harsh economic conditions. Global purchasing has several advantages for not only global, but for medium size companies as well. Global purchasing allows products to appear on shelves which are not available at the moment. International cooperation allows retailers to strengthen their bargaining position in respect of big suppliers. According to the pessimistic scenario, regional purchasing will play a limited role, compared to local purchasing. Major changes are foreseen among medium size units regarding their number and location. These chains are expected to reduce the number of their urban units. They will probably focus on opening new units in smaller settlements. In the pessimistic scenario, even a drastic reduction in the number of units is conceivable. Another expected negative trend is that service standards for franchise partners will become more lenient. According to the realistic and optimistic scenarios, the IT infrastructure of retail companies will continue to develop. In the optimistic scenario, EDI and RFID systems will be adopted, primarily by international chains. The realistic scenario is regarded as the most probable. According to Karsten Hegel from PwC, international chains will probably continue to expand, displacing smaller local stores.