Serbian retail market records steady growth, but modernisation needed

The Serbian Commission for the Protection of Competition published a report on the sector inquiry into the Serbian retail market for 2017 and 2018 on 14 January 2020.

This retail sector inquiry is a follow-up to the initial inquiry for 2014-2016 that provided comprehensive information on the retail market's structure. The latest Report is not as detailed as the original, and many pieces of information have either been redacted or aggregated. This Report, however, reveals interesting facts concerning the competitive position of retailers.

Main players: Delhaize and Mercator-S

Based on a pool of 2,500 retail shops, Delhaize is still the largest retailer in Serbia, with the highest revenue and the highest number of stores, although its revenue-based market share declined from 20.6% in 2016 to 10%-20% in 2018. Mercator-S remained in second position with a share of 10%-20%.

German budget supermarket chain Lidl has made a breakthrough in the battle for Serbian consumers even though it only began operations in the second half of 2018. Research shows that Lidl, with its 23 stores in 2018, came third after Delhaize and Mercator with an estimated revenue-based share of between 10% and 20%. It appears that Lidl's solid performance came at the expense of mid-sized retail chains and traditional shops.

The market shares of the top seven remaining players were below 5%.

Traditional retailing slowly losing value

Retailing in Serbia still lags behind Western Europe since the number of traditional retail outlets (those up to 200m2 in size) in 2018 accounted for 63% of all retail shops in Serbia. However, the revenue-based share of traditional retailing went down from 24% in 2017 to 22% in 2018, which seems to be a clear and continuing trend.

Over the same period, the revenue-based share of modern retailers, such as superettes (200m2 to 400m2 in size), supermarkets (400 to 2,000 m2) and hypermarkets (over 2,000 m2), increased from 76% in 2017 to 78% in 2018. One of the key findings in the Report is that supermarkets experienced the highest growth both in terms of sales surface (from 38% in 2017 to 41% in 2018) and generated revenue (from 39% in 2017 to 48% in 2018).

Increased spending

Consumer spending increased by approximately 11% in 2018 compared to 2017. Personal-consumption expenditures have risen annually by approximately 9% since 2014.

Finally, the Commission reported that the average Serbian shopper spent RSD 71,000 (EUR 600) in 2018 compared to RSD 64,000 (EUR 550) in 2017.

Consolidation and slow modernisation

The prevailing trend in the Serbian retail sector is market consolidation after several mergers in the past decade that led to a high concentration in some markets and several mergers in the pipeline. As a result, traditional retailers appear to be slowly losing sales and market share because – among other reasons – Serbian shoppers have turned to Lidl in record numbers.

Modernisation in the retail sector is creeping ahead at a slow pace, especially when it comes to e-commerce. Although no one expects e-commerce to overtake traditional retailing, the performance of online sales in 2017 and 2018 was disappointing, representing just 1% of total sales in both years.

No details about the supply chain

The Commission only made public an anonymised version of the Report that is largely descriptive. This is particularly evident with the results of the analysis for the commercial relationship between retailers and suppliers of their best-selling products, such as coffee, beer, milk, still water and confectionery products. Here, the Report is missing clear results.

Important announcements

The Commission is advocating for the establishment of a public register of retailers containing statistical information on the number and size of shops, their locations, number of employees and revenues, to be able to monitor the competitive conditions on the retail market. The Report concludes by saying that the Commission will continue to track the behaviour of market players. Hence, it is highly recommended that retailers comply strictly with antitrust laws, especially in their contact with competitors and suppliers.

For more information on this report and opportunities in Serbia's retail industry, contact your regular CMS advisor or local CMS expert: Raško Radovanović and Srđan Janković.