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1.3 Distribution and Import Channels

Contemporary Retail Landscape

Although the modern concept of retailing, such as hypermarkets/supermarkets, shopping centres/malls and department stores, has been developing rapidly in Argentina in recent years, the Argentine retail market is characterised by a large number of independent grocers, which remain the leading retail distribution channel in Argentina, accounting for more than two-fifths of retail market sales. Hypermarkets and supermarkets, on the other hand, follow with a combined market share of slightly more than a quarter. In fact, the traditional mode of distribution has been challenged by the emergence of supermarkets and hypermarkets. Smaller importers and retailers face strong competition from large supermarkets and hypermarkets that prefer to import directly from overseas suppliers. In view of these trends, hypermarkets and supermarkets are becoming more and more important buyers of imported goods in Argentina. The increasing popularity of hypermarkets/supermarkets, coupled with the increase in the number of shopping centres and department stores, indicates that the Argentine retail sector is undergoing steady modernisation.

Retail Sales by Sector: 2003-2007 (in billion Argentine peso)

 

2003

2004

2005

2006

2007

Stored-based retailing

93.3

104.3

122.2

148.1

178.7

 Grocery

53.8

59.8

70.3

82.6

100.5

 Non-grocery

39.5

44.5

51.9

65.5

78.2

Non-store retailing

3.1

3.7

4.2

5.1

6.6

 Vending

0.01

0.02

0.02

0.02

0.02

 Home shopping

0.62

0.72

0.80

0.90

1.22

 Internet retailing

0.15

0.24

0.39

0.76

1.40

 Direct retailing

2.29

2.73

2.98

3.39

3.95

Total

96.4

108.0

126.4

153.2

185.3

* Preliminary figures

Source: INDEC, Argentinean Association of Supermarkets (CAS), Euromonitor

Major Retailers in Argentina (in terms of sales)

Company Name

Nature of Business

Cencosud

Hypermarket/Supermarket

Carrefour

Hypermarket/Supermarket/Discount Store

Coto

Supermarket

Imp. Y Exp. de la Patagonia

(“La Anónima)

Supermarket

Wal-Mart

Hypermarket

Frávega

Home Equipment

Garbarino

Home Equipment

Maycar

Wholesaler

Casino (Libertad)

Hypermarket/Discount Store

Makro

Wholesaler

Source: Mercado

From 2003-2007, Argentina’s retail sales recorded growth of 92%, demonstrating a compound annual growth rate (CAGR) of 18%. Stored-based retailing increased by 91% between 2003-2007, while non-store retailing (though insignificant in terms of industry share) grew by some 114% over the same period, with internet retailing seeing the most significant growth. Regarding its structure, the Argentine retail market is considered fragmented, with the leading 20 retailing companies sharing less than 20% of total retail sales. Apart from 130,000 independent grocers, major retail channels in Argentina, as at the end of 2006, included 110 hypermarkets, 1,340 supermarkets, 560 discount stores, 5,500 convenience stores, 76,000 food specialists and 103,000 other grocery retailers.

Argentine Retail Market – Grocery Retailers

Remark: Percentages shown above are calculated according to sales value.

Source: INDEC, CAS, Euromonitor

Hypermarkets/Supermarkets

Hypermarkets/supermarkets, sharing a combined market share of almost 30% of the total grocery sales, are gaining in importance in the Argentine retail sector. It is reported that there are supermarkets per every nine streets in the city of Buenos Aires, while there are supermarkets per every 20 streets in the Great Buenos Aires area. Together with the fact that most hypermarkets/supermarkets in Argentina are managed by foreign supermarket operators such as Carrefour, Wal-Mart, Jumbo and Casino, the traditional mode of distribution (exporter-importer-wholesaler-retailer) has been challenged by the emergence of supermarkets and hypermarkets. Smaller importers and retailers face strong competition from large supermarkets and hypermarkets that prefer to import directly from overseas suppliers. In view of these trends, hypermarkets and supermarkets are becoming more and more important buyers of imported goods in Argentina.

Shopping Centres and Department Stores

Apart from hypermarkets/supermarkets, other modern forms of retailing in Argentina include shopping centres and department stores. In 2006, there were around 60 shopping centres operating in Argentina, with sales growing at 25% year-on-year and topping US$1.5 billion. According to industry sources, 24 new shopping centres were opened in 2007. Among many other product categories, clothing, footwear and leather consumer goods are major items selling in shopping centres, sharing over half of the total sales in shopping centres.

Selected Major Shopping Centres in Buenos Aires

Abasto

Alto Palermo

Buenos Aires Design

Galerías Pacífico

Paseo Alcorta

Patio Bullrich

Unicentre

 

 

 

Source: Buenos Aires Shopping

On the other hand, department stores are also gaining in popularity in the Argentine retail sector. For many years, the Chilean department store, Falabella, has been the only department store in Argentina. However, since 2007, its monopoly position has been challenged by the entrance of South America’s oldest and largest retailer Almacenes Paris. The increase in the number of department store operators not only brings about competition, but also retail format modernisation in Argentina. For Hong Kong traders, the most effective way to do business with Argentine department stores is to contact their buying offices in Asia. For instance, Hong Kong companies can sell to Falabella via its sourcing offices in Shanghai.

Major Shopping Streets

Apart from the aforesaid types of retail channels, there are two major shopping streets in Argentina, Florida Street and “Once” Street. Located in the very heart of downtown Buenos Aires, Florida Street is the most emblematic shopping street in Argentina. It is a 1.5 km-long pedestrianised street filled with stores selling apparel, books, electronics, gifts, leather consumer goods and sporting goods. Every day, some 2.5 million people pass by the street, allowing businesspeople to meet Argentine consumers from every walk of life and promote their products.

On the other hand, “Once” street is considered a more “informal” commercial street, selling mainly mid-to-low-end imported goods. It is noteworthy that “Once” is only the popular name of the shopping neighbourhood, but not the official one. In fact, this name does not appear on the map of the Buenos Aires City. The limits of this shopping neighbourhood are the Avenues Callao, Córdoba, Pueyrredon and Rivadavia. The whole area is covered with stores selling imported goods mainly to wholesalers at wholesale/distribution prices. These stores generally offer lower prices, especially for unbranded products. The major products sold include textiles and garments, gifts, toys, stationery, fashion jewellery, sport goods, sport footwear, leather goods and bags, hand tools and electrical tools, optical products, electrical households, audio-visual products and computers. This is also a hot spot of “informal” business activities, where goods coming from “informal” channels are traded.

Wholesalers and Importers

The Argentine external trade community is characterised by a large pool of small and medium-sized companies. Large-scale importers or distributors are not yet commonplace in Argentina, although more organised buying co-operatives, national and regional wholesalers have appeared in the market following the rebound of the economy and retail format modernisation. Also, it is not uncommon to see some large Argentine companies that are also dealers of international brands to serve as national distributors of similar products they are dealing in. Hong Kong companies are therefore advised to get into contact with these dealers so as to take advantage of their agency networks throughout the country to better penetrate the whole Argentine market.

Import Channels

Common Shipping Routes and Major Ports

For goods shipped from Hong Kong to Argentina, most importers deliver directly to major Argentine ports. On average, it takes around 30 days for goods exported from Hong Kong to arrive at ports in Argentina. Major transit points for sea freight from Hong Kong to Argentina are South Africa (Durban, Port Elizabeth and Cape Town) and Asia (Singapore, Port Kelang (Malaysia) and Tanjung Pelepas (Malaysia)). In 2007, the total annual cargo volume is estimated to have reached 1.4 million TEUs (20-foot equivalent units).

Major Ports in Argentina[1]

Port

Province

Buenos Aires City

Buenos Aires

Rosario

Santa Fe

Bahia Blanca

Buenos Aires

Quequen

Buenos Aires

Mar del Plata

Buenos Aires

Puerto Madryn

Chubut

Ushuaia

Tierra del Fuego

Source: INDEC, Administracion General de Puertos (AGP)

Handling about 80% of the Argentine import and export operations, the port of Buenos Aires City is considered one of the busiest and most important seaports in Latin America. From January-July 2007, the port of Buenos Aires City processed 638,000 TEUs, including 319,800 incoming containers and 318,200 containers departing Argentina. Total tonnes handled by the port during the first seven months of 2007 added up to 6.8 million, while imports grew by 28% to 3.38 million tonnes, and exports rose by 3% to 3.45 million tonnes.

Apart from the port of Buenos Aires City, there are other major seaports in Argentina specialising in different activities. For instance, the ports of Rosario, Bahia Blanca and Quequen basically export local commodities (meat and cereals), while the ports of Mar del Plata, Puerto Madryn and Ushuaia are related to the fishing industry and handling of local and international vessels.

Informal Channels

Its vast territory, coupled with a long border, has facilitated the development of an informal market in Argentina. Informal cross-border trading, in particular, is not uncommon in Argentina, which shares borders with Brazil, Bolivia, Chile, Paraguay and Uruguay. The most important spot for informal trade is the commercial hub being developed near Ciudad del Este (a major trading city in Paraguay) and Foz do Iguaçu (a city in the southern part of Brazil). While Ciudad del Este is widely considered one of Latin America’s most popular cross-border trading centres, with informal traders (“sacoleiros”) dealing in almost all types of products through the Friendship Bridge over Rio Paraná, Foz do Iguaçu is dominated by the trading of electronics, toys and clothing.

Free Trade Zones

Free trade zones have been established in Argentina since 2004. However, most of the Argentine free trade zones only carry out storage and service activities, industrial production will only enter into the local market when they are capital goods that are not produced in the rest of the Argentine territory. So far, the only special free trade zone is located in Rio Grande, Province of Tierra del Fuego.

To take advantage of the privilege provided by the Tierra del Fuego Free Trade Zone, prospective production needs to include new products involving complicated procedures and capital goods that are not produced in the rest of the Argentine territory. Basically, the Argentine government has established a closed list of goods that can be produced within the Tierra del Fuego Free Trade Zone, which includes a detailed list of household electronic appliances and electronic products such as air-conditioners, microwaves, auto radios, video cameras, video recorders, television sets, and mobile phones. In fact, this list of goods can be expanded subject to the fulfilment of the requirement that the products are “not elsewhere produced in the rest of the Argentine territory”. For instance, the production of computer equipment (including monitors) has been recently added to the list.

Against the Free Trade Zone standing, imports of parts and components into Tierra del Fuego Free Trade Zone are free of import duties, while the goods produced in Tierra del Fuego Free Trade Zone can be imported duty-free into the rest of the Argentine territory. The goods produced in the Tierra del Fuego Free Trade Zone will receive the “Made in Argentina” origin qualification which grants them also a preference margin within Mercosur[2].

In fact, there have already been some Chinese companies operating in Tierra del Fuego, although Hong Kong’s presence remains unseen. Those Chinese companies are mainly firms producing TV sets, air-conditioners and electronic products in partnership with Argentine companies.


[1] Please refer to Appendix 1 for a map on Argentina.

[2] Argentina, Brazil, Paraguay, Uruguay are full members of Mercosur, while Bolivia, Chile, Colombia, Ecuador and Peru are associate members of Mercosur. Venezuela signed a membership agreement on 17 June 2006, but its full member status is still pending ratification by Brazil and Paraguay.

Content provided by Hong Kong Trade Development Council
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