Year 2013 in Croatia was marked by the entry into the European Union. In the first half of the year, everybody were counting days until the entry and adjusting necessary laws. Retailers were saying that they are prepared for July 1st because they have adapted to the European way of trading years ago - when the foreign retailers like Billa, Interspar and Kaufland came to Croatian market.

Months before entering EU, retail was very lively: retailers were anouncing discounts and 'Europian prices', but were there any structural move in retail since July? Not really, although there has been some sort of pressure on prices in the stores, which reduced consumer price index, yet none of the major global retail chains did not dare to try their luck in Croatia.

Relative market concentration, expensive real estate and generally discouraging business environment rejects them from that. Existing foreign chains have facilitated pathways for import of goods from Europe, which can already be seen in the diversity of new products on their shelves.

Specificity of Croatian retail lies in the fact that it is similar to developed markets with higher purchasing power than the markets of eastern and southern Europe. Croatian retail has long time ago surpassed the level of overall economic development as a result of uneven development between production and consumption. Thus, for example, in Croatia we have 0,95 square meters of retail space per capita what is similar to the UK, Italy or France.

According to GfK, hypermarkets and supermarkets have held steady at around 50% of market share, as Lidl, so far the only representative of discounter in Croatia, is currently at about 8%.  It is interesting that in the 2012 and 2013 small shops have slightly recovered and after several years stopped losing market share.

In Croatia, the share of the Top ten retail chains strengthens each year. This is corroborated by the fact that in 2009 Top ten retail chains occupied 66% of the market, while in 2010 this proportion was 70%. Top 10 retailers in Croatia currently hold approximately ¾ of the market (similar to Czech Republic, Slovakia and Hungary), but it's not the end of market concentration. Clustering of major players continues by taking over smaller retailers.

Even before the merger with Mercator, Agrokor's retail operations - Konzum and Tisak - dominated the market with 22% share in retail and 33% in the food. The only rival that is somewhat closer to them is Schwarz Group, known for its shops Kaufland and Lidl, with 7% and 11% share in the same categories, says Euromonitor International.

Merging of Agrokor and Mercator creates a regional retail leader who will fight shoulder to shoulder with the Schwarz group for supremacy in South Eastern Europe. While the barriers of taking over Mercator in Slovenia, where market concentration is much greater than in Croatia, unexpectedly skipped easily and quickly without any major objections, the story about the Croatian Agency for Competition and the Croatian market is just starting.

Croatia uniqueness is unexpected toughness of regional supermarket chains. Thus, for example, KTC is the best in three counties, while Plodine lead in front of Konzum in one county on west of Croatia and Tommy in Dalmatia. Konzum is not even leading in all retail formats: in hypermarkets it exceeds by Kaufland. However, the strength of Agrokor in his omnipresence: not only in the most retail formats, but also throughout the country.

Within the increasingly competitive situation among the leading retail chains in the Croatian retail market, trend growth of retail private labels continues. In the first half of the 2013 share of PL was 22% as opposed to e.g. 2004 when this share was 5%.

Retail private labels, due to the unfavorable position of Croatian consumers, continue to grow, not only in the "soft" and "hard" discounters, but in "normal" stores. We will find them in small neighborhood stores, as well as drug stores, where their share is the largest. Looking at the other Eastern European countries, Euromonitor estimates that the penetration of PL still has sufficient space, up to 40% of sales, as almost reached in Poland.

As for the non store trade, we are making progress, but it is still a long way ahead of us. While direct sales is struggling with traditional distrust toward direct sellers and catalog sales almost extinguished after leaving of Quelle and Neckermann, Internet sales remains the only hope of this form of retailing. Compared with neighboring countries, Croats are slightly behind the Slovenians in the use of the Internet in buying and selling, but we are far ahead of our neighbors at east. At least citizens (5%) buy groceries online, while most of them buy a movie / book / software (45%).

And what about Croatian customer? In recent years, he became "smart customer", which is more deliberate, seeking more actions and promotions, purchases by leaflets, he is less impulsive. Due to the economic downturn and reduced buying power of consumers, turnover in retail seriously declined. Retailers are faced with the challenge of growth which is possible only at the expense of other retailers. How? Possible directions can be offer by research agencies and consulting companies, or Billa, which according to GfK data, holds the title of retailer with the highest growth in 2013. in relation to its competitors.

Marija Sedlar,

PROGRESSIVE Croatia