Local supermarket chains have voiced their concerns on Italian supermarket giant Eurospin’s planned arrival to Malta and what it means for competition within the industry.
Eurospin is set to open five new stores in Malta, which will become 12 in the future, adding to the country’s long list of retail operators.
The Italian company is planning to transform the Bezzina industrial yacht yard into a supermarket, despite the area initially being zoned for the development of offices and showrooms.
Welbee’s Supermarket and Retail Marketing Ltd’s recently appointed CEO Jonathan Shaw commented that “In this sector and in a small island like ours any new store opening will affect sales,” and whether this impact is major or not will go down to Eurospin’s proximity to existing stores.
Chain Supermarket General Manager Daniel Micallef agreed that the launch of a new supermarket brand will influence other supermarkets’ sales, yet “given it has its own label and strategy, it will be more focused on pricing,” most likely targeting customers from other international brands like LIDL.
Scotts Supermarket Managing Director Mario Said added that it will have a significant negative effect on sales for several supermarkets, and if it fails to do so, it “will not last more than six months”.
Other supermarkets asked to weigh in chose not to comment.
Using the slogan ‘Smart Shopping’ to highlight its discounts-oriented approach, Eurospin currently operates over 1,150 stores in Italy, as well as 62 in Slovenia and another 20 in Croatia.
Whether such increased competition will prove to be beneficial for local supermarket chains remains in question, as while it will “definitely make the sector more competitive,” it is not always to the benefit of customers as it “can also start negatively affecting the quality of service,” Mr Shaw said.
“Yet, I strongly believe that besides price there are a number of clients who also place a large emphasis on customer engagement, experience and quality,” he added.
Welbee's Supermarket and Retail Marketing Ltd CEO Jonathan Shaw
Mr Micallef emphasised the importance of healthy competition, yet not when it comes to multitudes of supermarket chains like what is happening in Malta, as “someone, somewhere will face difficulties in continuing to operate".
He added that those finding it difficult to cope will “most likely be the ones that are not the owners of their own premises they are operating from”.
Additionally, Mr Shaw highlighted how foreign supermarket chains like Eurospin have a major effect on local importers, often bypassing them to “import the majority of their products directly” instead, unlike local supermarket groups.
Malta has become a hub for the supermarket industry, and Mr Shaw added that while population growth is levelling out and “it’s become a case of survival of the fittest”, this is the nature of business across multiple sectors, not just supermarkets.
Another issue that is already present in the industry and could become even more prominent with Eurospin’s introduction is that of the limited amount of retail staff in Malta.
“Finding people has become an issue in recent years and this was greatly experienced due to a number of expats leaving the islands during the COVID-19 pandemic,” Mr Shaw said.
He also voiced his concerns regarding the ever-increasing cost of living in Malta, which is an “understandable” reason for decreases in the supply of such workers.
“Yet, I strongly believe that if one has a good human resources strategy and approach to the workforce, one can still manage to attract sufficient people to choose to work with that particular organisation,” Mr Shaw added.
An important factor when it comes to staff shortages is whether foreign companies like Eurospin can “attract personnel from overseas,” to continue adding to the retail industry’s labour force, Mr Micallef said.
Mr Said added that as the number of supermarkets increases across the country, even local supermarkets “will depend more and more on foreign workers”.
Additionally, while businesses are subject to a standard corporate tax rate of 35 per cent, foreign-owned businesses may be eligible for a rebate that brings the effective tax rate down to just five per cent.
“I think the idea of tax incentives to attract foreign business in principle is right, but if on the other hand the return for the country is not extraordinary or provides an unfair advantage, then it’s wrong,” Mr Shaw said.
Mr Micallef remarked that such a difference in taxes due is a “total shame for us local investors in this sector,” with these varying rates having a significant effect on pricing strategies.
Mr Shaw emphasised the impact of these tax schemes, especially when it comes to competition, as “the parameters are not set at a level playing field”.
Through the operation of such a sector and environment, “one has to ultimately keep on managing the business with the customer in mind and work on ways to retain the customer and attract new ones by delivering on their needs and expectations,” he continued.
“Competition is always healthy, but the issue here could lead to unfair competition which is a different issue,” Mr Shaw added.
Eurospin’s arrival brings about even greater competition within an industry that is already heavily congested with both local and international brands, with Mr Micallef saying that even prior to the Italian supermarket giant’s introduction, this was already the case, “let alone having more”.
Mr Said reaffirmed this, adding that “the most likely result will be a number of existing players going to the wall,” citing the Priceclub saga as one such case.
Ever since it was founded in 1993 by its holding company EuroSpin Italia SpA, Eurospin has quickly risen in prominence and is now one of Lidl’s chief competitors in Italy, in a market that includes LIDL, Selex, Esselunga, and several supermarkets.