2023-09-18 16:02:03
The economic crisis, the increase in inflation and the expansion of discount stores have reconfigured the mass consumption or retail business in Ecuador.
This is evident in the price competition that supermarket chains have fallen into, offering cheaper products through:
Promotions. Discounts.
Smaller presentations.
Greater development of private labels, whose prices are usually 20% below the market.
The white or own label covers items from different manufacturers under the name of a distribution chain, which sells them cheaper.
“Promotions are skyrocketing. 2023 began with promotions growing by double digits compared to 2022, taking into account that it was the most promoted year in the history of the country,” says Miguel De La Torre, general manager of Kantar in Ecuador.
The reconfiguration of the business is also evident in the opening of new store formats, given the presence and expansion of Tuti.
The discount chain or ‘discounter’ registers 345 stores in 10 provinces of the country, until September 2023. In Ecuador, the ‘discounter’ already represents 5% of total mass consumption spending, according to Kantar. And if we analyze only Guayaquil, where this business model has the greatest presence, consumption reaches 10%.
What is the reason for Tuti’s success?
A series of characteristics typical of discount stores, which focus on reducing costs. Some of them are: not selling fresh products, having smaller stores that are closer to people and not spending money on the purchase or rental of land for parking.
New formats
By specializing in cheap products, the discounter is generating pressure on the country’s supermarkets and neighborhood stores, says De La Torre. This is taking into account that eight out of 10 households in the country affirm that they will spend the same amount of money or less on food in the next three months, due to the current crisis, according to the Central Bank’s Consumer Confidence Index.
For this reason, discount stores are an attractive channel for people from the middle and low socioeconomic strata. For people in the lower socioeconomic class, going to supermarkets involves more expenses, such as having a car or transporting purchases by bus, because these businesses are usually located far from their areas of residence.
“The ‘discounter’ brings the supermarket experience to the neighborhood,” says De La Torre. In this scenario, traditional mass consumption chains have begun to open small supermarkets or formats similar to neighborhood stores, to increase their penetration by being closer to customers. That is the case of Mini, from Corporación El Rosado, and Akí neighbor, from Corporación Favorita.
These are the two companies with the highest sales in the country, according to the Superintendence of Companies. For its part, Almacenes Tía maintains its business model that focuses on competing in penetration, being present in almost the entire country with its supermarkets and stores.
Promotions and premium
The price fight in the market benefits the customer because it allows them to cover their needs, despite the erosion of their purchasing power.
The consumer achieves accessibility.
But the practice devalues the market, that is, companies lose profitability, says Kantar. The marketing platform HubSpot agrees with this, maintaining that following the low price plan also means giving up good service, quality and innovation.
“Even if shoppers love low prices, they won’t buy a product or service if it doesn’t solve their problem,” HubSpot says.
For this reason, Acosta affirms that companies must understand the new consumer as someone who seeks low prices, but who is also willing to pay more if the products are aligned with values they share, such as caring for the environment.
These are the most influential brands in Ecuador
And that is reflected in the fact that spending on premium or higher value brands has continued amid the current economic crisis. The premium category also maintains its participation because the money that people “saved” in discounts, promotions or own brands is used to purchase better quality products. Above all, Ecuadorians are willing to spend more on categories with which they have emotional ties, such as beauty, pets and babies.
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