The major Belgian supermarket chains have lower profit margins than five years ago, and that is before Dutch Jumbo is set to disrupt the market even more. The reason is clear: the competition gets tougher and discounts, meant to lure more customers, cut the profitability.
Same spendings, more competitors
The trend is universal, but exact figures differ a bit. Aldi is the biggest loser, says Belgian business newspaper De Tijd: its margin dropped from 4.2 % to 2.4 %. Three of the other 'big five' also see their margins decrease: this is the case for Colruyt (6.9 % to 5.8 %), Delhaize (3.9 % to 2.8 %) and Carrefour (2.2 % to 1.9 %). The only exception is Lidl, but that is only because no exact figures its Belgian branch are known. However, analysts are certain that this chain too is under a lot of pressure.
Finding an explanation is easy: "Belgians still spend the same on groceries as five year ago, but those spendings have to be divided over a larger number of stores, causing the costs of supermarkets to go up. Discounts, designed to gain customers from competitors, put further pressure on them margins, as do the changing shopping habits of modern consumers."
Extra worries for all
Each chain also has some extra things to worry about: Colruyt's lowest price guarantee gains the chain turnover and market share, but that comes at a cost when it comes to profit). Delhaize stagnates and still looks for turnover growth, while Carrefour fares even worse - and not only because of its struggling hypermarkets. Aldi does grow, but has to invest heavily in fending off Colruyt and Lidl, while the latter still has important teething aches (see last year's strikes). Not to mention Makro, which may well be put down in order to save the rest of the Metro group.
And worse is still to come, in three months' time, Dutch price breaker Jumbo is entering the Belgian market. This will reduce margins even further, RetailDetail's own Jorg Snoeck says: "Jumbo also features a lowest price guarantee and may shake up the Belgian market as much as Albert Heijn did a few years ago." The future looks rather bleak then, except maybe for consumers' wallets...