Prices in stores are not increasing everywhere at the same rate. Interestingly, the slowest rise is happening in hypermarkets, where the year-on-year average increase is already in single digits. Other formats are becoming more expensive in double digits. These include discount stores, supermarkets, and convenience store chains. Experts commenting on these data pay particular attention to the fierce rivalry between hypermarkets and discount stores, as one or the other segment wins from time to time. Therefore, it is worth carefully watching the situation, especially as each format tempts with something different. In hypermarkets, it is more profitable to buy meat and cold cuts, fish, fruits, beverages, sweets and desserts, pet food, and personal hygiene products, while in discount stores, it is more advantageous to purchase dairy, bread, bulk goods and fats, food additives, vegetables, stimulants, children’s products and household chemicals.
Hypermarkets with single-digit “inflation.”
In general, store prices are rising in double digits. This is shown, for example, by the report entitled “INDEX OF PRICES IN RETAIL STORES,” which states that daily shopping in stores has inflated by an average of 12.4% year on year in August. Similar data (for the same period) were provided by experts from ASM Sales Force Agency, as well as by GUS. However, the aforementioned report shows that products in hypermarkets increased the least year-on-year in the above-mentioned month, up by 8.4%. In discount stores, they rose by 10.4%, in supermarkets – by 13.3%, and in convenience chains – by 16.2%.
“These results clearly show that with one larger family shopping in hypermarkets, a consumer can save between 50 to even 100 PLN, of course depending on the products put in the basket. These types of stores have been fighting hard for years for the position of being the cheapest, mainly with discount stores. And so far, the latter ones were usually winning. Now, as you can see, this trend has reversed. However, the situation may change again in a moment. I predict that in the following months the cheapest will be hypermarkets, and other times – discount stores,” comments Robert Biegaj, a retail market expert from Offerista Group.
Often it is said that hypermarkets can offer the lowest prices on the market because they sell the most products and thus have the greatest opportunity to negotiate prices with manufacturers. However, Robert Biegaj, who disagrees with this opinion, points out that discount stores have by far the largest number of outlets on the market. And that’s why they buy the most products from suppliers. Due to their size, they also dictate terms to some extent in the market.
“The number of discount stores in Poland is growing rapidly. They are appearing in increasingly smaller towns, even where it might seem they have no chance of success. And in larger cities, they are already visible almost at every corner of the street. Customers do not have to go to remote hypermarkets and usually shop there. This trend has been persistent for a long time. It is important for customers that shopping in smaller stores is faster and easier. Hypermarkets are not able to compete in this area, so they try to be more attractive in terms of price,” says Dr. Artur Fiks from WSB University Merito.
Hypermarkets and discount stores on a warpath.
Interestingly, although it is slightly cheaper in hypermarkets in general, discount stores limit promotional activities less, which Robert Biegaj points out. – In the first half of the year, there were over 15% fewer promotions in hypermarket brochures year on year, and in discount store publications, the decrease was just over 9% year on year. Recently, discount chains have also started to make more use of comparative advertising, which requires further price cuts in stores. And this may backfire on hypermarkets, as they will not be able to go down with their prices any further – highlights the expert from Offerista Group.
As Dr. Anna Semmerling from WSB University Merito predicts, hypermarkets may keep the leader position in the following months. However, discount stores will not give up their current efforts, continually convincing consumers that they offer a cheaper shopping basket. It is such a task for price cuts frequently purchased by Poles, products such as butter or bread. The exposure of lower values of selected categories is clearly visible in media campaigns.
“The aforementioned report indicates that in August, compared to hypermarkets, it was cheaper to buy dairy, bread, bulk goods, fat products, food additives, vegetables, stimulants, items for children and household chemicals in discount stores. In my opinion, discount stores have bet on categories that consumers most often need to buy on a daily basis. They have added items for children and household chemicals, hoping that customers might go on to make larger purchases,” maintains Robert Biegaj.
On the other hand, in hypermarkets, it was more profitable than in discount stores to buy meat and cold cuts, fish, fruits, drinks, sweets and desserts, pet food, as well as personal hygiene products. As stated by Dr. Semmerling, these product categories are often purchased by consumers in small local shops. In response to competition, hypermarkets lower their prices to attract customers. However, an expert from the Offerista Group believes that hypermarkets have chosen a strategy where they have cheaper items that can save more on one-off purchases, and for what it is worth going to a remote store.
Supermarkets’ approach to discount stores.
“It is also worth paying attention to the results of other formats. The increase in supermarkets is slightly above the market average. This may mean that these types of stores are trying to compete with discount stores, probably by lowering prices in selected product categories. This could be part of a strategy aimed at attracting customers who usually shop in discount stores,” thinks Julita Pryzmont from the research and analytical agency Hiper-Com Poland.
According to Robert Biegaj, supermarkets would like to get close to discount stores in terms of price, but they are not waging any war, they are just trying to survive on the market. It has long been known that supermarkets are not cheap, but that was not always the point. The mere approximation to discount stores should be treated with a pinch of salt.
“Supermarkets may offer a greater selection of products and better service quality compared to discount stores. This attracts customers looking for greater diversity,” convinces Julia Pryzmont. On the other hand, an expert from the Offerista Group emphasizes that supermarkets rather compete more with convenience store chains than with discount stores. And so far, they are visibly winning against them.
Single-digit decline is not certain.
Experts’ opinions are deeply divided over whether we can expect in the coming months for the prices of all products to rise at the rate of single-digit inflation. Dr. Artur Fiks is convinced that we will continue to observe a significant diverse price dynamic. Some products will be getting expensive more slowly, while others will be faster. Different stores will also try to attract customers through attractive price cuts.
“The transition of all store formats to a single-digit result year on year is possible, but there is no guarantee for that. Inflation and other economic factors can affect the rise in prices in different product categories. Monitoring the situation on the retail market and adapting pricing strategies in response to changing market conditions to maintain a competitive edge and please customers is important,” points out Julita Pryzmont.
The expert from the Offerista Group also notices this chance, but with some reservations. Firstly, inflation must still fall. Secondly, nothing negative can happen on the market. “However, there is one dangerous factor that is not much talked about currently. It is the time of the election campaign. Politicians promise more and more things without looking at where they will get the money for their implementation. And if it does not hurt us, prices in various formats may soon drop to a single-digit value. But at the turn of the year, this trend may reverse. The effects of promises and issues related to current politics may cause prices to rise again,” warns Robert Biegaj.
“I don’t see the possibility for a sudden price increase in all surveyed categories to reach a single-digit level. Like last month, we will deal with categories where the pace of price increases will be falling. However, there can also appear groups of goods that will be getting expensive faster than before. The amount of decreasing product categories may also increase or decrease. At the moment, there are too many unknowns to definitely determine how the price level in stores will be shaped,” summarizes Dr. Artur Fiks.
