Retail is on a Boom

Economic News

22 Jul 2010
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Bulgaria is seeing impressive retail growth, with foreign companies entering the market joining the already thriving domestic firms. Shopping culture is changing in the country as the competitive and fast-growing environment encourages companies to offer different retail options. Growing incomes and high demand have hastened the development of malls, retail centres and out-of-town hypermarkets.

The announcement by the German discounter Plus, part of the Tengelmann group, that it will be opening its first shops in Bulgaria in the first quarter of 2008 marks another entry into the growing Bulgarian retail sector. The company plans a double-digit million euro investment in the country, opening "several" branches.

Plus follows compatriot firm Kaufland and Lithuanian chain VP Market, both of which are also discounters, into the market. Other international retailers in Bulgaria include Metro, HIT, REWE firm Billa and Ramstore, a Turkish outfit. The firms are drawn to the country by growth that is averaging around 6% annually. While purchasing power is still relatively low, it is increasing rapidly and foreign and domestic operators are finding that a shopping culture is developing. Companies are offering shopping options such as discount stores, hypermarkets and smaller supermarkets in malls.

Hypermarket giants, including France's Carrefour and Germany's LIDL, are known to be eyeing the Bulgarian market, which many have until now considered too small in comparison to its neighbour, Romania.

Serbia's number-one retailer, Delta M, has also announced plans to enter the Bulgarian market, as part of a $388m expansion into the Balkans. The entry could take the form of either greenfield developments or acquisition of local players. The firm has 25% market share in its domestic market and is aggressively targeting 10 to 15% share in the foreign markets it enters, CEO Dragan Filipovic told local press.

The retail boom is not only drawing in foreign companies, but is also driving the development of domestic players.

Bulgarian supermarket operator Piccadilly has announced plans to open 10 new stores by the end of 2008, adding to the six they already operate in Sofia and in their home city of Varna. The firm is performing strongly, and banks are lining up to fund the expansion. Previously, funding had come in part from a loan European Bank for Reconstruction and Development (EBRD), which owns 20% of the company.

Similarly, the north-eastern arm of CBA supermarket chain recently announced it would invest $13m to more than double its annual turnover to $66.4m.

The company currently has ten supermarkets in Veliko Tarnovo, Ruse and Gabrovo, with plans to open four to eight new stores each year, the general manager told the local media. CBA is a group of around 170 independently owned shops in the country, which share marketing, branding and logistics.

Retail malls are currently the topic of much conversation in Bulgaria, with two large centres already open and performing strongly in Sofia. Another 10 projects are expected in the capital, and several more outside. Some expect that every city with a population of at least 100,000 to 150,000 will have a mall within the next few years, although that claim has been met with scepticism in some quarters.

One such project that is attracting attention is in Varna, seen by many businesses as the second city of Bulgaria (Plovdiv is officially more populous). International property developer Orchid Developments has recently announced a $130m investment in a mall in the city. The mall will combine retail, office and residential properties.

Another is Bulgarian firm Alexandra Group's $26m project in Stara Zagora, which is expected to be completed in September 2008. The mall is sited adjacent to a business park which is under development, as well as several large retailers. Besides retail shops, the mall is slated to also house restaurants, a casino, a gym and a bowling alley.

At the end of last year, analysts at the real estate company Cushman and Wakefield (C&W) predicted retail space in Romania and Bulgaria would increase by more than 150% over the course of this year, "heading the list" of countries in Europe in this field. Shopping centre space on offer in Bulgaria will rise by 98,000 sq metres next year, according to C&W.

With incomes growing rapidly, an increasingly demanding consumer base and more foreign and domestic competition, the growth of the Bulgarian retail sector looks set to continue.

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