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Carrefour and Yerevan City
And so, a Carrefour hypermarket will open in Yerevan in the fall. There are already opinions that it will significantly affect competition in the consumer market, and it will be a blow first to the aggressively expanding Yerevan City supermarket chain (believed to be owned by ruling Republican Party of Armenia MP Samvel Aleksanyan, pictured).
Carrefour opened its first hypermarket on the outskirts of Tbilisi in 2012: compared to the supermarkets in the city center, it offered cheaper goods, which contributed to the growth in the French company's reputation. Now Carrefour is building its second hypermarket in Tbilisi and aims to increase their number to 7 in Georgia. Presumably, this is feared by local chains — if Carrefour expands also in Armenia, then it will be problematic for the other chains to survive in the market.
Many, first of all, are interested in with what price offers Carrefour will enter Armenia. Carrefour's official website states that the company adopts different price policies in different countries and takes most into account its customers' purchasing power. In addition, it applies a very flexible system of bonuses and discounts. In any case, let's make a few comparisons.
In the hypermarket in Cyprus, one can buy meat-on-the-bone beef for 3.89 EUR ($5.30); cheese for 5.99 EUR ($8.20); 1 kg sugar, 0.89 EUR ($1.20); and dry red wine, 2.60 EUR ($3.56). In Sofia, 1 kg of potatoes cost 280 AMD ($0.68); cooking oil, 1,790 AMD ($4.32); 8 kg of ARIEL laundry detergent, 7,800 AMD ($18.83). We leave the comparisons to the reader, but let us say that Carrefour is known for its huge discounts.
Of course, Carrefour is distinguished by not only its pricing flexibility — the company pays great attention to quality; it sells goods under its own trademark. Usually, food products are purchased from small producers and packaged, while the Carrefour label must be placed on non-food products — after thorough inspections. When it comes to price/quality ratio, Carrefour is considered to be the best in the world. To what extent Carrefour will make use of the services of local producers in Armenia is not yet completely clear.
It should be noted that in recent years in Armenia, major commercial chains have had aggressive growth and were able to push small- and medium-sized shops out of the market. According to figures from the National Statistical Service of the Republic of Armenia, there are currently 158 major stores (those having more than 31 employees) in Armenia, which have 57% of the share of retail trade — a turnover of about 650 billion AMD (about $1.5 billion USD). For comparison's sake, in 2008, their retail trade turnover was 285 billion AMD ($688 million)— 47% of the market. In the last 5 years, the retail trade turnover of major chains increased by 2.5 times.
Mainly affected by the expansion of major chains are medium-sized shops (those having 6–30 employees). In 5 years, 125 such shops have closed, while their retail trade decreased by about 15 billion AMD (by 8%, $36.2 million).
But Carrefour's entry into the market slightly changes the nature of competition. It's more likely that Carrefour will attract the customers of not only medium-sized shops, but also major chains. In this sense, the main victim will be Yerevan City because its pricing policy, and system of bonuses and discounts is closest to Carrefour's ideology, but in the matter of quality, Yerevan City is unlikely to become a serious competitor for the French brand. Created is an interesting situation: Yerevan City expanded aggressively in the market, single-mindedly pushing out small- and medium-sized shops from the market, and now it might fall into the same hole it was digging for others.
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