ECONOMY-CONSUMERS: Small Retailers Disappearing in Argentina

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Feb 12 1998 (IPS) - The “Mom and Pop” retail outlets in Argentina’s main cities are disappearing rapidly in the face of the relentless advance of supermarkets – that now sell half the food consumed throughout the country.

Tens of thousands of neighborhood businesses have been forced to close down during the past six years when shoppers abandoned them for the lower prices offered by the larger mega-stores.

Only 10 years ago, just about every Argentinean was on a first name basis with local trades people – whether they were the owners or employees. The question “Where do you shop?” would be answered simply at “Jose’s” or “Juanita’s” or the name of another person.

Now, the same question brings the answer at “Jumbo”, “Coto”, or “Carrefour” which have become magic words for modern consumers, who want to buy everything in the same place, at the lowest possible price. For the owners of 280,000 small shops, however, these are the names of their executioners.

Even if consumers must drive to the supermarket or travel by public transport, the prices, greater variety and the lure of “sales” with goods often below cost increasingly are pulling people away from the neighborhood store.

And this happing right across the spectrum of society – rich and poor.

During the first semester of 1997, the index of consumer prices fell to 0.5 percent, while in supermarkets the rate was 3.9 percent. In terms of sales, while the consumption of basic products fell 0.1 percent in 1997 compared to the previous year, in supermarkets it went up seven percent.

A final blow to the “Jose’s” and “Juanita’s” of the cities came when supermarkets introduced new services in order to attract more consumers that are restricted by distance.

Anyone who spends more than 60 dollars buying goods – what an average family spends on basics for a week – can be transpoorted home with their purchases in a private car, with a driver. Many clients – mostly women – now shop after work, and instead of carrying their grocery bags on the bus or the subway, they go home in a car, at no extra cost.

In 1984, when large stores were still rare, they accounted for 26.6 percent of total sales in the country, according to a study conducted by the Nielsen consulting firm.

Back then, neighborhood stores accounted for 56.4 percent of sales. Self-service stores under 400 square meters had 17 percent of the market.

In 1997, the same consulting firm revealed how the advance of the megastores has taken over the market, with 50.3 percent of sales, while small shops account for only 25 percent, and self- service have 24.7 percent of the market.

According to Nielsen, eight out ten people shop for food, drinks, toiletries and cleaning products at supermarkets, which occupy anywhere between 1000 and 2000 square meters. The so-called “hypermarkets” are even bigger.

According to an association of small shop owners, FEDECAMARAS, 1997 was not such a bad year, as only 25,000 stores closed down, compared to 56,000 the previous year.

The only attraction that the surviving smaller stores still have to offer is the credit that they give to their most loyal clients. But even that advantage is not enough for them to counteract the inconveniences generated by the “luxury” of closing down in the afternoon hours, at night time and on Sundays, while the big stores remain open 24 hours, seven days a week.

The association estimates that for each supermarket that opens, some 4000 small shops in the area are forced to close. In Lomas de Zamora, a satellite city of Buenos Aires, the recent opening of two hypermarkets (the French chain Carrefour and the Chilean Jumbo) caused 8,000 small retailers to close down.

Businesses say that they simply cannot compete. They argue that 25 percent of their income goes to taxes, they have little access to credit and when they do, it is expensive, and on top of everything they are frequent victims of robbery. Many even stock up with goods bought at the supermarkets.

The Nielsen study indicates that a comparison of the 10 main chains in Brazil and Argentina reveals that the latter has a higher percentage of sales per square meter.

In the province of Buenos Aires, a law was passed to regulate the establishment of super and hypermarkets. But it was vetoed by governor Eduardo Duhalde, and chains continue to occupy more and more space in the suburbs of Buenos Aires.

Investors still have their eyes on that province – home to almost 40 percent of the Argentine population – in order to determine which is the best place to set up the next store, which appears certain to produce a new wave of closings of small neighborhood shops.