The attack the superstore

  • 2002-09-19
Neighborhood shops in the Baltics are closing at an alarming rate, falling victim to the growing popularity of mostly foreign-owned hypermarkets and discount retail outlets.

Estonia now has more than 100 supermarkets across the country, most built within the last two or three years. The retail sector during that period has grown more than 20 percent, yet still small shops are closing — another sign that globalization has caught up to the Baltics.

This, of course, is a phenomenon that gripped Western markets decades ago. But the market here has not had the chance to mature and absorb the shock of so much change so fast. Just a decade ago, a privately owned food shop was nothing short of miraculous. Now their owners are scared of losing a fruitful livelihood they thought awaited them when they dashed headlong into capitalism.

Hypermarkets have succeeded here for the same reason they have succeeded everywhere else — they sell a bigger selection of stuff at a cheaper price.

Because they sell so much the big stores can leverage local producers and distributors to buy goods for less. Throw in the fact that many small shops in the Baltics are often the most glaring vestiges of the Soviet era — bad selection, rude service, etc. — and it's a relatively safe bet that most will fail or be gobbled up.

The Baltics are in the delicate position of courting foreign investment while looking on with a suspicious eye as foreign businesses sometimes crowd out the locals. That will likely increase with European Union membership and it's easier for capital to move across borders.

The question now is: How much backlash from disgruntled local wholesalers, distributors and shop owners there will be?

Many Estonians are already touchy about the amount of Finnish ownership in their country.

In parts of Asia, a similar influx of foreign retailers is taking place. Britan's Tesco began opening stores in Thailand in 1998 and local competitors filed a flurry of lawsuits to stop them. It didn't work.

A few months later two Tesco stores were bombed and another was peppered with machine gun fire.

The business climate here isn't quite that volatile, but a certain amount of protest is inevitable.

What we have yet to hear is a government response. In the very least governments in Estonia, Latvia and Lithuania need to start formulating and implementing plans, whether it be a development plan that would keep strip malls out of Old Town or more incentives to small businesses.