Business concentration in the Hungarian food retail market

Retail market consolidation and its effects on micro enterprises and corner shops present a long-term challenge to the Hungarian retail grocery market. The authors hope this study will help the concerned parties deal with this challenge. The study is one of the first attempts at a comprehensive analysis, and employs concentration tables and concentration ratios. It is based on a database from all businesses, including partnerships and individual entrepreneurs, and focuses on the quantifiable trends and the magnitude of market concentration regarding retail sales and specific areas affected by the consolidation process. Our research revealed that, by 2004, concentration in the retail food market was at a high level, considerably higher than the overall industry indicator. However, based on the various categories studied, no similar consolidation was revealed related to the specialized grocery operators’ market segment (specialized retail market). There are two essential reasons for this difference. One of them is trade-specific. Mass retail involves a broad product range, high levels of capitalization, and a high turnover, and is thus highly concentrated. However, in the specialized retail market the level of consolidation is relatively lower as less capital is required and the product ranges and turnovers are smaller. The other reason is also related to trade-specific characteristics: the presence of highly capital-intensive multinational corporations. While their increase in market share led to growing concentration in the food focused retail market, in specialized grocery retail their market share was negligible. Regarding employment, small and medium-sized companies prevailed at the industry level and in the specialized grocery market. However, in the food focused retail market, large corporations had attained a market share nearly equivalent to that of small and medium-sized businesses. Since there is a strong correlation between corporate size and economic power, small and medium-sized enterprises have been increasingly weaker vis-à-vis large companies. Greater consolidation means economies of scale factors are becoming more and more important. Compared to large companies, the smallest micro enterprises have suffered a serious handicap. Therefore, a high level of market consolidation will mean a decline in the number of businesses and retail outlets. In the Hungarian corner shop segment, rationalization is certainly justified as makeshift garage stores are often superfluous in the modern retail environment. However, in the future suitable corner shops will continue to be required due to consumer, employment, and social considerations. The trend toward concentration requires a shift in approach and strategies which may help independent retailers and corner shops survive. Compared to being totally independent, partnerships, with their ability to integrate sales and purchases, offer increased security for corner shops.


Subject(s):
Issue Date:
2008-07
Publication Type:
Journal Article
DOI and Other Identifiers:
HU ISSN 1418 2106 (Other)
PURL Identifier:
http://purl.umn.edu/46443
Published in:
Studies in Agricultural Economics, Volume 108
Page range:
67-80
Total Pages:
13




 Record created 2017-04-01, last modified 2017-08-25

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