The Flamingo International Group has closed approximately 20 stores of its network as a result of a merger by absorption with the home appliances retailer Flanco.
The restructuring of the store portfolio is the most important such measure taken after a merger process on the domestic market.
"Non-profitable locations have to be closed. This is our long-term view," says Czech-born Jiri Rizek, who became the company's retailer manager this month and is in charge of the development of the store chain.
Flamingo's vice-president Dragos Simion confirmed the strategy.
"Approximately 20 small stores (100 square metres), mainly Flamingos, were closed, and their activity will be relocated to the Flanco stores close by, or other 200 to 400 square metre stores will be opened," Simion says.
He says one of the reasons for closing the stores was the proximity of Flamingo stores to Flanco stores. "By closing a Flamingo store, we tried to redirect the customers towards Flanco," added Simion. The second reason would be the low profitability or even the losses generated by a certain store.
"The development strategy entails opening other locations, in line with the new retail concepts, like Flanco World Baneasa Feeria.
We have already opened two such stores in Constanta and Oradea over the last few months. We could open one or two more this year, which would mean 8,500 square metres opened during this period," Simion added.
The other competitors on the market of home appliances, electronics and IT&C products have made similar moves, even though not as extensive as Flamingo's.
Altex, the largest player on the market, closed 10 stores and opened 15 of the 25 scheduled for this year, Carmen Lazar, Altex communication manager stated.
"We chose to close small spaces, which are not as profitable as expected," Lazar explained. She added the total sales area of the Altex and MediaGalaxy stores has reached 75,000 square metres from the 60,000 square metres at the end of 2005.
"Domo is now implementing a new retail concept, resulted from the rebranding campaign the Domo company went through in 2005. This store rebranding process overlaps with a process to make the network efficient," Domo officials say.
According to Simion, the radical steps such as closure of non-profitable stores will help Flamingo step into the black in the last quarter of the year, after having ended the first half with losses.
"The losses of the group were generated mainly by the costs of the merger and integration of the two companies. These costs will disappear as of October 15, at which time the process will have been completed. We will make full-year profit in 2007," Simion stated.
He estimates that turnover will stand at 150-160 million euros for the Flamingo group. As far as Flanco is concerned, the Flamingo official expects turnover to reach about 90 million euros, from almost 92 million euros last year.
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