DIY in CEE: a goldmine for everybody?

In the last months many western DIY retailers like Baumax, Obi, Hornbach, Castorama or Praktiker entered new, uncharted territories in CEE. New countries are opened up although the economic framework is everything but perfect right now. However, many international retailers currently only gain profits in eastern Europe. The exhausted western markets seem to be beyond large profit margins.

But how are profits in CEE doing? While in western Europe the limiting factor for expansion is high density, the main factor in CEE ist still the low purchasing power of the population. The three largest risks are local currency changes, wrong location decisions and the competitors. In the worst case two DIY retailers are planning to open in the same catchment area – which leads to insufficient potential for both of them.

However, it is not the case that the sales performance per squaremeter in CEE is automatically lower than in the west. On the contrary, some of the CEE countries or cities have higher figures than the established markets – combined with considerably lower cost (e.g. personnel costs). But one has to distinguish between the countries.

While the turnover per squaremeter in western European countries is mostly around 2.000€/sqm/year the values in eastern Europe are bridging a much larger gap. With more than 2000€/sqm/a in 2008 the polish DIY markets take the lead, closely followed by Russia and the Czech Republic. The lowest turnovers can be found in Turkey, Serbia and Bulgaria.