Makro adapts to evolving consumer needs in Colombia

Date : 08 March 2021

Oliver Butterworth

Retail Analyst

In 2020, wholesale retailer Makro (owned by Dutch private trading group SHV Holdings), celebrated its twenty fifth year of operating in Colombia. While Makro has recently scaled back its operations in other Latin American markets, Colombia remains a market of strategic importance for the business.

Over the last year it has made some significant changes to its store model to better align to customers’ needs.

Reducing the size of its stores

Makro was originally designed to serve mostly professional customers from HORECA (hotels, restaurants, and café’s) industries. Over time, its sales distribution between professional and final customers have balanced out and are roughly 50-50.

The business recognises that there is no longer a need for larger stores and that customer want to get in and out of the store quickly. This has been exacerbated during the pandemic, as shoppers want to limit their time in store more than ever.

In response, its new openings will be half their current size. Historically they were between 8,000 and 9,000 sq.m, which will reduce to 3,000 - 4,000 sq.m. To further support faster shopping, it is adapting its store layouts to make them easier to navigate.

Removing membership

In Q4 2020, Makro announced it was stopping its Makro Passport membership, which may have previously acted as a barrier to entry, particularly for final customers.

“There is no longer a need for a passport, anyone can go to a Makro store and enjoy the constant promotions we have. Or buy online and pick up in store, without any requirement.”, Arnoud van Wingerde, CEO of Makro Colombia.

Makro launches new proximity format

In March 2020, Makro opened a pilot store in a new format called Urban Market. The store, which is in Barranquilla, has an even smaller footprint (1,800 sq.m), which has enabled it to locate closer to its customers.

Urban Market has a strong focus on perishables and the banner aims to meet the requirements of both SME’s and final customers alike. Makro said this is a test store, which if successful will be expanded in Colombia and replicated in other South American markets.

New ecommerce and Pick Up service 

The conditions of the pandemic have sped up Makro’s digital transformation. It now offers over 5,000 products online, which customers can order and collect in-store without having to queue. Its Pick Up service is available in 22 stores, in 16 cities. Makro also has an alliance with last mile delivery business Domicilios (part of Delivery Hero), which enables it to deliver smaller orders to customers’ homes.

Improving the offer for final customers

Makro said B2C customers have always shopped in its stores, but it has never actively targeted this shopper group. It is now addressing this by adapting its assortment to offer a wider assortment of products and pack sizes, which range from bulk products to individual items.

It continues to develop its Aro private label with the aim of offering customers high quality products at low prices. 97% of its products are sourced from national suppliers, which also helps it to keep its prices competitive.

Makro is modernising the look and feel of its stores and improving the butcher and bakery counters. As a result, they are becoming more family friendly.

Colombia is a key strategic market

Makro operates 111 stores across four markets in South America (37 in Venezuela, 28 in Argentina, 24 in Brazil, and 22 in Colombia). Despite recently exiting Peru and selling 30 of its stores to Carrefour in Brazil, Colombia remains a market of strategic importance to the business.

Prior to the pandemic, Makro said Colombia was a desirable market due to its stable economy, reasonable GDP growth, and a good legal-political system. For these reasons, it plans to continue expanding in the market, with an aim of reaching 35 stores “as quickly as possible”.

Makro also benefits from a low level of competition in Colombia. Its main competitor (Surtimayorista) has around 30 stores and its customers are mostly small businesses.

Will Makro exit further markets?

It is hard to rule out the possibility of Makro exiting other markets in South America. The economic crisis in Venezuela and high inflation in Argentina create challenging trading environments in those markets.

Despite rumours it was exiting Venezuela, Makro recently (February 2020) made a statement on its social media channels confirming its ongoing commitment to continuing to trade in the market. There is a still a risk it could leave Argentina, where Walmart recently divested its interest and Falabella looks set to follow.

There is also potential for Makro to sell further stores in Brazil, which is the most competitive market in the region for cash and carry. The market leaders, Assaí (owned by Casino Group) and Atacadão (owned by Carrefour), are always looking for further opportunity to extend their presence in the market.

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