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Austria: The antithesis to online shopping, discount retail, is booming

Constantly new stores and long queues in front of the shops: discount chains such as Action and Tedi are continuing their expansion course in Austria. The coronavirus pandemic, including lockdown, was apparently only able to slow them down for a short time. The next discounters are also in the starting blocks.

The German chain Tedi now has 168 shops in Austria, and the trend is rising. And the chain Action, which was originally founded in the Netherlands, is opening its 74th store in Austria these days in Vienna's Lugner-City, thus also its tenth bstore in Vienna.

Tedi mainly focuses on housewares and decor, garden accessories and handicraft supplies are just as much in the range as pet supplies. In the case of Action, the offers, for example, with sporting goods and home improvement supplies, but also food are thematically diversified. This is also due to the fact that the range changes constantly. Only a third of the approximately 6,000 products are always available. They advertise 150 new articles per week.

Impulse purchases and "ungoogleable" products

The promotional discounters are the countermovement to buying on the Internet, said Romina Jenei, managing director of Regioplan Consulting, which specializes in market and location analyzes in retail. The purchase motive is therefore a completely different one. While online shopping is more or less targeted, the non-food discounters are about impulse purchases. Customers would make a spontaneous decision, and of course the low price also plays a role. When shopping itself, it's also about the experience and about being surprised by offers. The chains would often also offer "ungoogleable" products, said Jenei.

Penetrated into better locations

And that is exactly what these chains would have recognized and can score with it. As with textile discounters, the turnover per square meter of retail space is a third of that of other and higher-priced stores. Therefore, the chains would rather switch to cheaper locations for their quite large shops.

The expansion has been observed for several years. The fact that the chains are now even more present could be related to the fact that they are also penetrating better and therefore more expensive locations. With the lockdowns, rents would have fallen slightly, and owners would be more willing to give up their space cheaper, says Jenei.

Success story in Germany

In Germany, the run of success had already started earlier: Between 2013 and 2019, the promotional discounters grew by almost 40 percent, according to the Gesellschaft für Konsumforschung (GfK): Online booms are still going strong. ”And the pandemic was only able to slow down the expansion course a little: Last year, Action wanted to create more than 240 new stores in Germany. They realised around 160.

Thousands of stores across Europe

Action was founded in 1993 in the Netherlands, but it did not expand until the British investment company 3i Group took over the company in 2011. There are now more than 1,800 stores across Europe. The company has been represented in Austria since 2015.

Tedi was founded in 2004 by the German Tengelmann Group, which also includes the textile discount store KiK and OBI hardware stores. Recently, Tengelmann gave its shares in exchange for KiK shares to the H. H. group of companies of the German entrepreneur Stefan Heinig. So far, there are more than 2,300 stores across Europe; In 2011, the first store outside of Germany was opened in Graz.

Stronger demand for lockdowns

Why the rush to the discounters' stores, which can often be observed, was so great after the reopening, can probably be explained by the increased need to equip your own four walls. Furniture stores and hardware stores are also heavily frequented, said Jenei. In the meantime, textile discounters such as KiK, Takko and NKD would also respond to the demand, they too would increasingly have other promotional goods in their range in addition to clothing.

New chain is coming in autumn

And the next competitor is also about to jump to Austria: the Pepco chain, founded in Poland in 2004, plans to open its first store in Vienna in autumn and 20 more by the end of the year. There are already around 2,300 stores, mainly in Central and Eastern Europe. In the west it is only represented in Spain and Italy so far. There are also more than 200 shops that are operated under the name Poundland in Great Britain. They rely on a mixture of household goods and clothing, the chain is especially known for its children's clothing. In other countries, too, they are pursuing an aggressive expansion course. According to reports, the first stores in Austria will be taken over by the Polish shoe discount store CCC, which is withdrawing.

In Lower Austria and Burgenland there are so far eight stores of the Cherry special item markets, a chain that is also looking for other locations. And in Vienna, several shops with the name Apyco Home recently popped up, which, in addition to household goods, rely heavily on toys and children's bicycles.

Euro shops as pioneers

The pioneers in the cheap segment have been around for a long time, especially in the cities: under various names such as discount, best price, euro shop and the like, a wide range of products is offered in some cases from household goods to electrical appliances, from tools to textiles, from cleaning agents to toys. Even if the optics are often similar with mostly yellow or red shop designs, most shops are run by sole proprietorships. Only occasionally do several shops belong together. In principle, however, there is little data on these transactions, said Jenei. One can assume that most of them have similar suppliers.

On the other hand, off-price stores such as TK Maxx fall into another category, which also attracts attention with long queues for waiting customers. The European store of the US chain TJ Maxx offers branded products at low prices by also buying remaining stock at low prices. These business models differ from an outlet in that it is not the brands themselves who sell their products, but a retailer who brings together items from different labels.

Cut-throat competition at the local level

In general, there is a trend in the retail sector that the middle price segment is coming under greater pressure, said Jenei. On the one hand the pressure comes from the high-priced shops, on the other hand also from the discounters from below.

How long the discounters' expansion course can continue is difficult to assess, said Jenei. She rather expects that predatory competition could slowly set in, at least in some areas, but it always depends on the location and whether the target groups are available there and can be reached.


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