Updated: Jul 4, 2021
Discount Retail Chain KAM (owned by Kamchev) has contributed to increasing the purchasing power of our citizens and we consider this to be our most humane contribution in our existence.
For 22 years, KAM has persistently remained with its foreign currency, quality products for low prices. Goce revealed in an exclusive interview for InStore trade magazine how the first Macedonian hard discount broke into the market in difficult market conditions and how it managed to gain and retain customers, because even today it is in the first place as a market where consumers most often buy and prefer it. Kamchev, owner and founder of the KAM discount chain. We also talked with him about investments in the new logistics center, the success of private labels, the attitude towards employees, the upcoming changes in the retail market ...
The first KAM store was opened in 1999. How did you decide on the concept of hard discount at a time when that concept was unknown in our conditions?
I started my business in the private sector as a distributor of imported food products. With Interkam, I was a distributor of many large companies such as Nestlé, Dr. Oetker, Thai Union from Thailand, Balzen, Scholer and others. I became a member of an international European distributor organization. There I learned that the largest distributor can have a turnover of 600 to 700 million euros (US$720-840 million), usually for specialties and special products that large retail chains sell in small quantities and it does not pay to import them themselves. Prospects for distributors in a small country like Macedonia were very slim. Then I decided to start a retail store. In a short time, about a year, I opened the most modern store Kamfud in the center of Skopje, on an area of 1100m2.
During one of my trips to Germany, touring various markets, I entered Alda. Since I lived in Germany for four years and traveled frequently on business, I was familiar with this supermarket chain. But then I didn’t analyze it for business, only as a customer. Ten years later, I began to discover Aldi as a concept and began to study it. I was impressed by the very low prices, limited assortment, few sellers, products displayed in cardboard boxes, and some only on pallets. A concept based on low prices and everything is subordinated to that, except for product quality and employee salaries. It was a concept that suited my character rationality, modesty, thrift and quality.
In Macedonia, we will open a new logistics and administrative building of 70,000 m2 and a building of 18,000 m2 in approximately 2 months. The center is based on the concepts of the most modern logistics centers in Europe.
What changes did the first Macedonian discount chain bring to the market? What was crucial to your success?
Initially, the concept was not accepted. The traffic was very low. Neither customers nor suppliers accepted us. Customers were confused looking at unknown brands, products in cardboard boxes, on pallets, shops were without any decorations, with a small number of products. It was important for customers to have a large selection, for example, five types of chocolate in different packages, the beautiful appearance of the market, quality was not the most important thing for them. In a word, they are not used to saving even though we are a poor country. Unlike us, in developed countries like Germany, customers compare quality, weight and price and measure every cent. We worked at a loss for three years. We have determined that if we want to succeed, we will have to work on changing the opinions of our customers and suppliers. But it was a long process.
We were persistent and did not give up on the concept. We put up a sign everywhere in the markets: Compare the quality, composition and prices of the products. Below the product was a price per 100g or 1kg, to make customers aware of how much they are actually buying at what price. We wrote about the composition and quality of the product. We directly compared the quality and prices of our products with major brands. For example, we placed next to each other Milka of 80g and 100g of chocolate of our brand Alpiko, produced in Germany or Belgium, with exactly the same composition and 30% lower price.
Over time, we realized that in our conditions, we could not completely replicate the Aldi concept. A good example of how to adapt to a market with different standards, mentality and infrastructure was the BIM chain from Turkey. The owner of BIM was from Turkey, but the creator was Dieter Brandes, a former CEO in the Aldi North chain.
What challenges did you face at the beginning of your business in terms of price competitiveness and negotiations with suppliers?
From the beginning, we had 20% lower prices than other classic retail chains. KAM customers received much more for the same amount of money. Gradually, other markets began to adjust prices. That is why we say that we have brought low prices to Macedonia and thus contributed to increasing the purchasing power of our citizens. We see this as our most humane contribution in our existence and we are extremely proud of it.
Suppliers initially did not understand our concept. They couldn’t calculate how much they were saving by working with us. In the meantime, many things have changed, but we all have a lot of work to do in the field of modernizing cooperation, in order to have a safer, faster and more economical flow of goods.
What is the best decision you think has brought a turnaround? Were there any wrong decisions and how did you deal with them?
The best decision was that we were persistent. We must continue to expand our market network to other markets to ensure higher supply volumes and thus lower prices.
In your experience, will the consumer struggle continue through price competition or will it be played on a different card? Does KAM plan to change the current way of working and introduce some innovations?
The struggle for new customers is continuous. It's competition. But offers, marketing methods, items, market size, equipment will change ...
You were the first to introduce private labels. What is their percentage in the total range of KAM? How's the sale going?
Own private label brands are one of the most important principles of hard discounters, but in order to become part of the range, you need to be able to supply large quantities of certain products. The price also depends on that. 30% of KAM products are private labels, with a tendency to increase to 60% in the next two years.
You expanded your business to Kosovo, and in 2016 you entered the Bulgarian market. Tell us a bit more about how KAM works in these markets? Can you compare those markets with the Macedonian ones?
The Macedonian market is small and does not allow an increase in turnover. If there are no large quantities of products in the procurement, it is not possible to present your own brand (which means at a lower price), which is necessary for a large discount. We estimated that a market with a population of less than 5 million inhabitants cannot ensure competitiveness and realization of the concept. Therefore, we decided to expand to neighboring countries.
Two markets, Kosovo and Bulgaria, differ from those in Macedonia. The large European chains Kaufland, Lidl, Bila, before that Penny, have been present in Bulgaria for 10 years and participate in the market with more than 60%. Hard discount shopping habits already existed. The assortment differs by about 20% compared to the Macedonian one. We currently have 17 markets in Bulgaria. Next month we will open 2 more markets, and by the end of the year we plan to have 28-30 markets. When deciding which of the neighboring markets we would expand to, Bulgaria was at the top of our priorities. Maybe great European competition would be a negative factor for someone in that decision, but we thought differently. We wanted to see how competitive we are in direct competition, and with our presence in a highly developed European market, but also by learning how they work on a daily basis.
Kosovo is a completely different story. There is no significant European market chain in this market. There was no discount store, after entering the DEPPO discount stores started. Now we are in that market, as in the beginning in Macedonia, we are trying to explain to customers the concept of a hard discounter and its advantages. Many products differ due to religious differences, they are sold in larger packages, but we are still connected by habits derived from living in the former common state. One of the biggest problems is the border, which is an obstacle to easier trade in goods.
Investments in a new logistics center have been announced, as well as in new stores within retail centers. Can you tell us something about them? Are you planning to expand your retail network in Macedonian and other markets?
In Macedonia, we will open a new logistics and administrative building of 70,000 m2 and a building of 18,000 m2 in approximately 2 months. The center is based on the concepts of the most modern logistics centers in Europe. Own distribution is the heart of every supermarket chain, especially hard discounters. This allows for a drastic reduction in storage and transportation costs. More importantly, product quality in our own warehouse and distribution are in our hands. The flow of goods is completely under our control. Freshness, deadlines, cold chain, optimal quantities, regular delivery to stores - all this we can guarantee to our customers. With our logistics center we will finally be able to function fully in accordance with all the principles of the most modern discount stores in Europe.
In the analysis of the Employment Agency, salesmen are among the most sought-after occupations. Is KAM still easy to find its staff? Will you continue to provide incentives to employees as at the start of the pandemic?
All countries in the region face the problem of labor shortages. This is especially true for young and highly educated staff who migrate intensively to developed European and distant countries. This will be the most serious problem for the development of countries in the region. This also applies to our company.
KAM is aware that the company is its employees. We think we have above-average salaries. We respect all legal provisions, and often exceed them. For example, in KAM, instead of the legal 50%, a bonus of 75% is paid for working on Sundays. Saturday is considered a day off and is compensated by an increased amount of 35%. We will soon present the concept of two days off for each employee, something that is extremely difficult to fully implement in our industry. Work-life balance is a topic we constantly pay attention to and make improvements.
A satisfied and loyal employee is not only created with a salary. Modern and safe working conditions and tools, fast and thorough training, opportunity for personal development, flexibility in terms of private problems, respect and transparent rules - all this creates a long-term team that sees the company as its second home and security.
KAM's revenues in 2019 amount to EUR 149 million - almost EUR 20 million more than in 2018, and the profit is 1.5 million higher than in 2018. What financial results does KAM record in 2020 compared to 2019?
KAM's revenues in 2020 amount to 170 million euros (US$204 million). The difference in 2020 in relation to the second-placed chain amounts to EUR 73 million (US$88 million), ie its revenues amount to 57% of KAM's revenues. KAM is the number 1 market in the market. There are currently 74 markets across Macedonia.
The German trade magazine Lebensmittel Zeitung called you a “Macedonian Aldi” in its analysis of Lidl’s entry into Macedonia. Do you think Lidl is your direct competitor? What, in your opinion, will change the announced entry of this chain into our country?
The arrival of Lidl will change the market situation. After all, this happened every time a new chain appeared in our market. Domestic companies are quickly learning and starting to apply new methods of work. The market is modernizing, habits are changing, the dynamics of overall development are increasing, prices are falling, and customers are more satisfied.
The share of hard discounters will increase at the expense of classic markets. Lidl is no longer a classic hard discount, and our concepts have additional differences. That is why we do not consider it the most direct competition for KAM. Of course, the competition will increase and will take part of our turnover, but our customers will also be convinced of the competitiveness of KAM. We expect small differences in prices compared to our offer, and our customers will also be convinced that their KAM now offers them most of the convenience of a bargain.
Our market cannot be compared to the market situation in Serbia or Croatia when Lidl entered their market. Hard discounters are currently present in Macedonia. The concept of low prices and high quality is accepted and will not contribute to such big changes and turbulence.
Is there room for foreign chains, when local retail chains are doing very well in this small market?
Of course, famous foreign chains will also come. They need a new market, because in their countries it is completely covered and saturated and they no longer have room to expand. A big problem is customs, sanitary and other controls that make it difficult to move goods.
In your experience, how will the Macedonian retail scene develop, are fragmentations or enlargements expected? Do you think the discounters will still be on the throne?
There will be a consolidation of the retail network in the market. A large part of small markets will disappear, and a part of medium-sized markets will have the same fate. It is a law of concentration, which has been confirmed in all developed markets.
Instead of the legal 50%, KAM pays 75% for work on Sundays. Saturday is considered a day off and is compensated by an increased amount of 35%. We will soon present the concept of two days off for each employee.