Starting on Thursday 14th March, Eurospin will welcome customers to its new outlet.
The Italian discount store giant announced its arrival on the islands in 2019 and now, five years later, it is finally opening its first outlet in Mosta, neighbouring German rival Lidl.
While for now it will be opening one outlet, it has already set eyes on Bezzina Industrial yacht yard in Marsa. In addition, a 2019 report by MaltaToday states that Eurospin plans to launch five outlets initially, "with plans for 12 stores in total."
With many supermarkets and mini markets already established in various locations on the islands, can Malta handle another big supermarket?
Speaking to WhosWho.mt economist and E-Cubed consultant Victoria Mintoff Apap remarks that while the arrival of Eurospin holds the potential for increased consumer choices and competitive pricing, “it triggers concerns.”
She particularly highlights possible rough waters for local fresh food producers.
“The substantial importation by discount stores like Eurospin could negatively impact Malta’s vulnerable agricultural sector, which is already grappling with cost and other resource challenges,” she explains.
Asked whether she anticipates any ripple effects on suppliers or distributors within the industry, she expands that while direct effects on suppliers are limited, “the broader implications for the local economy and agricultural sustainability warrant careful consideration.”
She argues that this supermarket will have limited impact because it is expected to target customers who normally favour international brands such as Lidl.
In addition, she adds that such chains often bypass local suppliers and distributors, choosing to import the majority of their products directly from their own sources.
‘Another major player might exacerbate the scarcity of the labour market’
As expected, weeks prior to its opening, Eurospin was on the lookout for different roles, this included advertising for staff for the deli counter, butchers, store managers and even holding a recruitment day. Although the recruitment of several workers to the supermarket can be seen as good for the economy, according to Ms Mintoff Apap, it also has negative repercussions.
“The aspect of new employment opportunities should be viewed within the current labour market situation. Malta is currently facing a shortage of workers, particularly in low-skilled sectors,” she adds.
The entry of another major player, Ms Mintoff Apap highlights, might exacerbate this scarcity, “intensifying competition for labour and potentially affecting wages in low-skilled positions.”
The Maltese supermarket industry over the past two decades transitioned into an oligopolistic one
As an island nation, Malta imports around 80 per cent of its food, making the country more vulnerable to the business models and operations of major food importers and supermarkets.
Over the years, the country has seen large supermarkets expand into key locations around the country, competing for the nation’s custom. Welbee’s, Greens Supermarket, Interspar, Scotts, Pavi/Pama and Lidl are among the major players dominating the sector.
Other smaller supermarkets - despite being on a much smaller scale than others - are also well established in communities such as Piscopo Cash and Carry, Chain Supermarket, Arkadia Food Store and Smart Supermarket, among others.
In economic terms, Ms Mintoff Apap, describes Malta’s supermarket industry as having transitioned into an oligopolistic one, meaning that a small number of supermarkets now dominate the market and have a significant market power.
“This can be attributed to their utilisation of economies of scale and of scope, coupled with the favourable tax regime that Malta offers to foreign investors, which facilitates their market entry and enables them to maintain competitive pricing due to a lower cost of doing business,” she notes.
In this instance, she adds, various small corner shops that operated in villages found themselves unable to compete, leading to their exit from the market.
She now anticipates that the introduction of the new Eurospin brand is expected to affect the competitive landscape by reallocating market share among existing dominant players.
“Eurospin’s entry has the potential to prompt strategic adjustments among these players, potentially inciting price wars and promotional battles among established discount stores,” she says.
She highlights that within the competitive supermarket environment, consumers stand to benefit, anticipating possible improvements in both pricing and promotions.
On the other hand, having an insular economy comes with its constraints and adding up inflation and shipping constraints give supermarkets less room to decrease their prices.
“The arguments regarding the challenges of lowering prices hold merit. One critical factor contributing to this is the weak bargaining power of these smaller establishments due to their limited volumes,” she adds.
Additionally, she explains that, unlike larger discount stores which can leverage economies of scale, smaller supermarkets find themselves at a disadvantage in securing cost-effective deals.
“Moreover, the lack of economies of scale exacerbates the challenges related to transport, imports, and logistics for these smaller establishments,” she remarks.
In addition, she notes that the insular nature of the country, increases the complexity and expense of moving goods, making it economically challenging for smaller supermarkets to match the competitive pricing strategies of larger discount stores.
Is Malta’s market size large enough to be segmented into discount shoppers and other supermarket shoppers?
Ms Mintoff Apap comments that despite Malta’s relatively small consumer base, there is a cohort of consumers who favour traditional brands and are hesitant to embrace new products offered by discount stores. “Though I perceive this segment not to be substantial,” she says.
She explains that this inclination is notably evident among the senior population, “who may not find the shopping experience at discount stores appealing.”
“Convenience shopping has also established itself as an important segment, combining elements of accessibility and time saving, with some limited scale economies through the operation under single brands,” she says.
On the other hand, Ms Mintoff Apap argues that with competitive pricing and expanded product range, consumers might be inclined to explore offerings at Eurospin, leading to alterations in their shopping patterns.
She expressed her belief that price-sensitive consumers might be drawn to the competitive deals, fostering a shift in loyalty from existing preferences, introducing variety, and encouraging exploration.
“However, the extent of Eurospin’s influence will depend on various factors, including its marketing strategies and how well it aligns with local consumer tastes,” she notes.
Beyond price considerations, she sees that in Malta, there is a customer base that prioritises factors such as consumer engagement, experience, and quality.
Along with its distinct label and strategy, she foresees Eurospin’s primary focus to be on pricing, possibly targeting customers who typically opt for international brands such as Lidl.
Looking ahead, how does Victoria Mintoff Apap predict the supermarket industry in Malta will evolve?
In her concluding remarks, Ms Mintoff Apap states that the evolution of Malta’s supermarket industry is expected to be influenced by diverse factors “encompassing not only population growth and economic conditions, but also potential developments in the fiscal regime that Malta applies to foreign investors.”
She highlights that the growing emphasis on health-conscious choices, the appeal of a convenient one-stop shopping experience, and the rising popularity of online shopping are “significant factors shaping the industry’s evolution.”
Meanwhile, in terms of potential additional supermarkets, she comments that success will hinge on the ability of new entrants to provide distinct value that resonates with the changing needs and preferences of Maltese consumers.
Ms Mintoff Apap concludes that the key for both new and existing supermarkets lies in adapting to evolving market dynamics, prioritising efficiency, customer satisfaction, and strategic differentiation.
Social Image: Eurospin Casarano / Facebook and Victoria Mintoff Apap / E-Cubed Consultants Ltd
