Discount Retail Chain Tiendas Ara revolutionized the Colombian market in just 11 years. In a decade, Tiendas Ara has managed to position itself as one of the main retail chains in Colombia, standing out for its focus on low prices, constant discounts and rapid expansion. This growth not only reflects an effective business strategy, but also a deep understanding of the changing needs of the Colombian consumer.
Growth Strategy
Tiendas Ara, owned by the Portuguese multinational Jerónimo Martins, has proven to be a formidable player in the competitive Colombian market. Since its arrival in 2012, the chain has implemented a bold strategy that combines accelerated expansion with an offer adjusted to the country's economic conditions. Its goal has been clear: to keep prices low and appeal to a broad spectrum of consumers, even in times of high inflation and high interest rates.
In 2023, a year marked by high inflation and economic challenges, Ara achieved significant growth, selling 12.3 trillion pesos, an increase of 42.7% compared to the previous year. This expansion allowed it to surpass Falabella, consolidating itself as the third largest food retail chain in Colombia, only behind Grupo Éxito and D1. Nuno Sereno, general manager of Ara in Colombia, attributes this success to the company's ability to adapt quickly to market conditions and the opening of 200 new stores during the year.
Pricing Strategies and Market Adaptation
Ara has made low prices a cornerstone of its strategy. During a period when many consumers faced economic hardship, the chain sacrificed some of its profitability to keep prices affordable. This approach allowed it to capture a growing number of customers, despite the rising costs of commodities. Sereno explains that, although the chain has tried to minimize the impact of price increases on the consumer, some increases, such as that of rice, have been inevitable due to inflationary pressures.
Consumer behavior has also changed significantly. Ara has noticed that Colombians are buying less in terms of volume and opting for cheaper products. This change has been reflected in the way consumers are distributing their purchases among more stores, increasing competition in the retail sector.
Expansion and Challenges
Ara has maintained an impressive rate of expansion. In 2022, the chain opened 275 stores, and in 2023, it added 200 new locations, reaching markets such as Medellín, Quibdó and Leticia. Despite this growth, Sereno recognizes that the operation in Colombia is not yet profitable and sets a goal to reach break-even in 2026. The company faces the challenge of maintaining its sustainable business model while continuing its rapid expansion.
Jerónimo Martins' annual investment in Tiendas Ara exceeds 220 million euros, a figure that the company plans to maintain over the next five years. In 2024, Ara has set itself the goal of growing total sales by more than 20% and opening 150 new stores. This effort includes the recent inauguration of a new distribution center in Palmira, Valle, with an investment of 200 billion pesos.
Regional Presence and Local Adaptation
Currently, Ara is present in 377 of the 1,102 municipalities in Colombia. The company focuses on areas with a population of between 15,000 and 20,000 inhabitants, avoiding saturation in large cities such as Bogotá, where it already has around 180 stores. Sereno highlights the success of the chain in cities such as Barranquilla, Cartagena and Santa Marta, where the brand has achieved recognition after a time of adaptation.
Ara's product portfolio is adjusted to local needs. While 92% of its purchases are made in Colombia, mainly in food, the rest includes imported products. Ara offers a variety of presentations for commodities, such as toilet paper and food, to accommodate changes in consumers' purchasing power.
Private Labels and Differentiation Strategies
A significant part of Ara's success is due to its own brands, which account for 43% of its sales. These brands include high-quality products such as detergents, toilet paper, and beauty products under the Be Beauty brand, originating from Portugal and Poland. The company has also developed innovative categories, such as a perfume for clothing, which has been well received in other markets and is now offered in Colombia.
Ara's strategy includes offering competitively priced products in varied presentations, reflecting the importance of adapting to the economic realities of its customers. In addition, the chain has demonstrated a commitment to the development of the quality of life of Colombian consumers, aligning itself with the growth of their purchasing power.
Impact on Local Commerce and Future
Ara's growth has generated some criticism in relation to its impact on traditional neighborhood stores. Although competition is strong, Sereno believes that neighborhood stores will continue to have their place due to their proximity and convenience for consumers. In addition, Ara values its relationship with its own brand partners and its ability to introduce innovations to the market.
As for the future, Sereno is optimistic despite the current economic challenges. Jerónimo Martins' long-term vision in Colombia is based on taking advantage of the opportunities offered by the market and continuing with strategic expansion. Sereno stresses that, although growth can be cyclical, commitment to objectives and adaptation to local conditions will continue to be key to the success of the chain.
Tiendas Ara has demonstrated a remarkable ability to grow and adapt in a challenging market. With a strategy focused on low prices, rapid expansion and a focus on local adaptability, the chain has managed to position itself as one of the main in the Colombian retail sector in just 11 years. Its success reflects not only the effectiveness of its business model, but also the importance of understanding and responding to the changing needs of consumers in a dynamic economic environment.
Read more: Tiendas Ara, how the retail chain revolutionized the Colombian market - AmericaRetail & Malls (america-retail.com)
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