Russian Mere struggling in Hungary due to the management’s unreal expectations, instructions
In July, we reported that the first Russian Mere shop is planned to open in H2 2024 in Budapest, in the place of a closed Spar supermarket. Nothing happened, and it seems that the chain is struggling to open its first store in Hungary. The reason is that the Russian and Belarusian management of the company set unreal expectations and would like to invest almost nothing into kicking off the chain in Hungary, while at the same time, they expect profit. Despite being successful in Lithuania and Romania, it seems the Hungarians have to wait a little longer until they can go shopping in one of the stores.
Russian Mere already has 4 companies in Hungary
The basic concept of the Russian Mere chains is that they compete with approximately 20% cheaper prices and, in return, their shops are more store-like than fancy places. However, it seems they are struggling in Hungary.
According to Telex, many thought it was a joke last April that Mere planned to come to Hungary. However, after such news emerged, the media discovered that the company already had more than 10 employees, so they were serious about entering the market. Furthermore, they registered four companies in Hungary, TS Retail Ltd, Hungarétel Ltd, Huntorg Service Ltd and Shoper Ltd. These four subsidiaries are attached to Serbian parents, of which Sergei Schneider has 60-80%, Andrei Schneider obtains 12-20%, and there is a third owner.
The Russian business model
Mere works as a franchise: the stores are separate with separate acquisition teams sharing only the name and the brand. Three different teams are operating in Hungary (Budapest – TS Retail Ltd, Debrecen-Miskolc-NyÃregyháza triangle Hungarétel Ltd, and Huntorg Service Ltd in Western Hungary). They do not communicate with each other, and it is forbidden for them to cooperate. They negotiated with many suppliers but could not launch the first store for multiple reasons.
Sources close to the Hungarian Mere management told Telex that the core problem is that the business model of the Russian company does not work in Hungary because, in Russia, all shops have 3 months to prove they can operate profitably. As a result, Mere does not pay a deposit for their rental, so if the shop is loss-making, they can terminate the rental contract whenever they want. However, that does not work in Hungary, where all tenants require deposits and choose long-term contracts.
In Hungary, there is serious competition for vacant shops: competitors like Aldi, Penny or Spar can easily pay the required deposit and sign a contract even if they can open a store only 6-12 months later. The three Mere teams tried to negotiate about rentals and could agree with owners e.g. in NyÃregyháza and Budapest, but could not open a store because the management did not let them pay the deposit.
Suppliers in Hungary unsatisfied
The other problem with the business model is that the Russian Mere would only like to pay for sold goods. They want suppliers to transport products to Mere stores and take the unsold amount. In Hungary, it is hard to find such suppliers because they are used to models where they only have to bring their goods to logistics centres.
Despite warnings from the Hungarian teams and proposals to adapt the business model to Hungary, the Mere management seems committed to entering the market just like in Russia. Due to these tensions, lots of employees left the company, other colleagues were dismissed. An informant of Telex said Mere might conduct market research with the negotiations and the sharp competition between the teams.
Mere told Telex that they would comply with Hungarian laws and are currently acquiring permits to start operation.
Read also:
- Too good to be true? Russian Mere’s prices could shake up Hungary’s retail market! – read more HERE
- Russian discount chain recruiting in Hungary with dream salaries!