Crises fuel explosion of low cost brands

Crises fuel explosion of low cost brands

Normal, Pepco, Kik, Primark… so many names that you’ve certainly heard of and know what they are. Low cost chains that seem to be invading Portugal and are delighting those looking for cheaper products.

Most of them are European stores and their growth in Portugal is notable. The most recent case – or at least the most prominent – ​​is the Danish company Normal. It arrived in Portugal in October 2022, settling in Sintra, but quickly spread to other parts of the country. It promises a unique ‘smart shopping’ approach, with more affordable prices from brands known to the public, from food to personal hygiene and household cleaning products. There are currently 18 stores in Portugal, spread across several municipalities from north to south, with four more openings planned by next spring.

Following the same logic, but with a different variety of products – as it also has clothing – Pepco arrived in Portugal less recently. Of Polish origin, it is one of the largest clothing retail stores in Europe. It currently has 14 stores in Portugal between Lisbon, Coimbra, Porto, Albufeira, Olhão, Elvas, Tavira, Barreiro, Aveiro, Pombal and Barcelos.

And these are not the only ones. Also noteworthy is Kik. The German retailer is expanding and its biggest focus is on clothing – but it also has items for the home -, promising to dress a person from head to toe for 30 euros. It is already in several European countries and in Portugal it has at least five stores.

The fever seems to take effect and awaken other marks. Soon, Portugal will also have Action. It is a Dutch ‘bargain’ chain and stands out for its thousands of everyday (non-food) products at low prices. And when we say low prices, they mean it: there are more than 6,000 products in the catalogue, with 1,500 products under one euro.

«If they ended up here it is because they are already elsewhere», comments Daniel Sá, executive director of the Portuguese Institute of Administration and Marketing (IPAM). In fact, all of these stores have a presence in several European countries.

The person in charge adds that «any market has everything from low cost to luxury» and that, looking at the Portuguese case as if it were a pyramid, «the luxury market in Portugal is very short», giving as the main example the well-known Avenida da Liberdade, in Lisbon, «and a few more brushstrokes around the country». One thing is certain: «We don’t even have a very significant luxury market».

Speaking of the low cost market, which «is obviously part of all industries, all businesses and has an obvious retail aspect too», where does this success come from? «Because the market is very competitive and because the consumer always wants to pay as little as possible», adoption «is natural», considers Daniel Sá. And he continues: «And in contexts of crisis, or economic difficulty – which is what we are also going through – there is a greater chance of success».

Remembering that families’ disposable income is lower, the executive director of IPAM argues that «if we can have offers at lower values, people will take advantage of these opportunities. It’s a natural record». And he says he sees this scenario «as perfectly normal in relation to mature markets such as the Portuguese market».

XTB analysts draw attention to the impact of the arrival of these chains. At Nascer do SOL they say that, in terms of production, «the economy could suffer a negative impact, as we could stop producing certain products nationally and import them». However, «for the end consumer, this scenario will be positive, as they would be able to purchase similar products at a low cost».

Analysts say that, on the other hand, «some companies may end up being penalized in profits, due to increased competition in the market». However, «taking into account that we are in an open economy, it is also necessary to remember that the market has the capacity to adapt to different situations».

A phenomenon that is not new

Despite this fever, it is necessary to take into account that this is not exactly the debut of low-cost retail in Portugal. The first highlight goes to C&A which appeared in our country in 1991. Despite not being exclusively low cost, the brand assumed more accessible prices when it arrived in Portugal more than 30 years ago. H&M followed. The Swedish brand arrived in the country in 2003 and like H&M, it was not (and is not) exclusively low cost, but has more affordable prices on several pieces.

It joins the French Kiabi, which has been growing visibly in the country and which promises affordable clothing for the whole family. She arrived in our country in 2010.

And it’s impossible to talk about low cost in retail without highlighting the craze for Lefties, known for being the cheapest version of Zara. It already has around 30 stores across the country and is known for its quality-price ratio.

Of all these, the most ‘recent’ is Primark. It arrived in 2009 and has not only clothing but also items for the home, beauty, hygiene, among others.

Daniel Sá explains that this trend is expected to continue. «It is to continue and has been for many decades. We have already talked about the case of C&A and we find these types of solutions in practically all industries”, detailing that this lower price market “is not new, it is something that has been around for a few decades, it is being renewed and is appearing with new brands, with new ideas, with new formulas. But, at its base, this low cost market remains unchanged».

The truth is that we all like a good bargain, which is the main reason for the attraction of these chains. «It’s part of the business model. Not only do they bring very competitive prices, but the communication strategies themselves are very aggressive, very effective”, says Daniel Sá, highlighting that “they end up being brands that manage to reach large masses and have very large communication volumes and manage to create that buzz with meaning in the markets where they arrive».

And the others?

Asked whether these mass arrivals could have consequences for brands that have already been installed in the country for longer and at different prices, the executive director of IPAM is of the opinion that the phenomenon is “never negative, it is always positive”. And it justifies it. «This is how the economy grows, this is how competition has to become better, this is how those who are already in the market have to reinvent themselves and, if they want to lower prices they have to be creative or else, if they want to differentiate themselves from otherwise, you have to do it». And, given this scenario, there is no doubt: «The end consumer always wins, who always has different alternatives».

The person responsible also argues that «it is this dynamic that makes the market move forward and that nowadays we have increasingly better companies, products, services, always to the benefit of the consumer. And it is up to each company to reinvent itself and analyze the market where it wants to be and do better. This is the principle of this modern competition. I never see any disadvantages in this, I only see advantages».


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