Numerous supermarket chains in danger of disappearing
They say that variety is the spice of life, but in some cases, too much choice can be damaging. This particularly goes for business.
While offering consumers a reasonable amount of choice is healthy and a good way of attracting new trade, saturating the market with too much of a good thing, can ensure that some businesses will inevitably fail.
Spain has quite a considerable variety of different supermarket chains. Many of them operate on a smaller scale and cater to preferences popular in the country’s different autonomous regions, and work well doing so too.
However, many of these are in danger of having to merge, be taken over, or disappear completely.
The market in Spain is very fragmented when it comes to grocery shopping, particularly for this reason.
Here, the five main supermarkets – Mercadona, Día, Carrefour, Auchan and Eroski – only control 50% of the market. This is in comparison to the UK or France, for example, where the five main operators control 80% of the market.
And, emerging supermarkets Lidl and Aldi are quickly gaining new customers on a daily basis and are threatening to reduce power from the five head honchos, as well as ensure that some of the smaller chains disappear completely.
With fewer supermarkets in existence in Spain, this would mean that the top five, together with Lidl and Aldi, would be able to share thousands of euro more between them.
Therefore, the increased number of supermarket chains actually means that competition for customers is much fiercer and a lot more depends on it.
Today, the current market leader in Spain is Mercadona, which controls 22.9% of the total. Nevertheless, this figure is set to drop as Lidl and Aldi rise rapidly and many customers switch from one to the other.
The rise in popularity of Lidl and Aldi has meant that giants in other countries have toppled (Tesco in the UK), and the threat from these two in Spain is also very apparent.
According to a study published by Reuters, the most vulnerable chains are those that generate between 200 and 900 million euro a year; those that are smaller in size and importance.
The majority of these would be family-run businesses and include Gadisa (Galicia), Alimerka (Asturias) and Lupa (Cantabria).
Other chains such as AhorraMas, popular in Madrid and some parts of Castilla-La Mancha, on the other hand, are managing to turn things around by adapting to the changing market.
However, those that can’t aren’t so lucky, sooner or later, will have to decide between merging with larger supermarkets or throwing the towel in completely.