BRATISLAVA, Slovakia -- The warehouse club concept is getting a serious test in this Eastern European nation where a one-unit operation is gearing for a major store rollout.
Opened in June 1993, Dino Warehouse Club boasts a sales floor of 25,000 square feet with 3,500 items, two-thirds of which are food products. The club offers dairy, frozen and grocery items, as well as clothing and housewares. A variety of locally branded foods is available, as well as Coke, Pepsi and Kellogg's cereals, among other major multinational brands.
The store is a novelty in a country where most consumers do business at tiny neighborhood shops. Western-style food stores -- which are practically nonexistent -- average 4,000 to 5,000 square feet. Austrian supermarket retailers Billa and Julius Meinl and Norwegian Rema 1000 are only just beginning to test the Slovakian waters.
Erik Weiss, president of Dino, chose Bratislava as the site of the first club opening because it is located within 40 miles of parent company Wilhelm Frank, a housewares wholesaler based in Vienna, Austria.
Weiss also serves as CEO of Wilhelm Frank. Dino, a wholly owned subsidiary of Wilhelm Frank, is run by two of his three sons who are based in Slovakia.
Weiss began seeing signs of economic rejuvenation in Slovakia about four years ago. "[People] had very little and shoddy merchandise for the last 40 years under the communists and they are sick and tired of shoddy merchandise. They want good merchandise," he told SN. "We are constantly advertising. When we do mailings, which we do every six weeks or so, people queue up outside and sometimes people show up and wait for an hour to get in."
Although Weiss only has one store in place so far, he has charted an ambitious expansion plan, which is partly based on obtaining the necessary financing. He has fingered nine other Slovakian cities for future club stores: Banska Bystrica, Nitra, Nove Zamky, Trencin, Trnava, Poprad, Kosice, Povazska Bystrica and Presov. Long-range plans call for a move into the eastern part of the Czech Republic.
Moreover, Weiss plans to develop a network of discount stores in the vicinity of each club to be supplied by the local club. He estimated that each location would be able to support three to five discount stores; the nation's capital, Bratislava could support as many as nine. "We are currently negotiating leases for four discount stores in Bratislava," he said.
"We think Slovakia's a perfect starting point for us. If we can do six, seven, eight warehouse clubs in Slovakia with a number of discount stores, that'll give us sufficient volume to go out of the country," Weiss said.
The club serves the Bratislava metro area, which has a population that reaches nearly 600,000. It currently has 16,500 members and Weiss expects to have up to 25,000 members -- the club's limit -- by the end of the year.
Although consumers' buying power is low by U.S. standards -- about $200 a month -- Weiss said he expects the Bratislava store to reach sales of approximately $5 million U.S. this year. When all nine warehouse clubs and a maximum of 39 discount stores are in operation, he estimated the chain will net about $700 million in sales.
Philip Leech, a retail trade researcher with International Retail Research, based in Redhill, Surrey, England, said that Slovakia is gradually improving its economy and the retail opportunities are still available for new players.
"Slovakia has succeeded in tackling some of its problems, and things are improving for much of its population although, necessarily, slowly," Leech said.
"[The] overall presence of Western-controlled retail operations is very modest indeed. The Czech Republic, Hungary and Poland are getting quite full up, by comparison," Leech warned, but noted that even those countries still have a relatively small Western presence.
Weiss said that due to the ongoing privatization of property and the continual upswing in living standards, there is a limited window of opportunity for investors looking to gain a foothold in Slovakia. That period could be as short as 18 months or as long as three years.
Because Dino is as-yet a single-store operation with limited capital resources, Weiss is looking for a partner to speed up the expansion process.
