Economical and financial situation of Hiypermarkets in Spain

The Hypermarkets’ Balance Sheet is changing nowadays. Why? Everybody knows the crisis has been changing the economical and financial situation of each bussiness in the world, and this sector has been another case of it.

How? Hypermarkets based their growth’s strategy in big figures of sales, moving a big amount of inventory. They managed to do it buying a huge quantity of goods with very good conditions such as low prices, long periods of payment, and short relationships with the suppliers, and at the same time, They were receiving inmediate money from sales(increasing their treasury), which allowed them to apply self-finance, thank to the big difference between the account payment period with their suppliers and the instanteneous money They got.

The percentage won in goods were very low, here was the necessity of having a lot of products, and the obligation of selling a lot, which could them have big profits and apply self-finance. It was working this kind of strategy until “the Crisis” appeared. The sales expected to grow in same percentages as They were doing, however, They went down and Hypermarkets started to have financial problems because of the obsolete strategy applied.

What are they doing now? They are reducing their inventory having less costs in term of transport, also They reduced the account collection period for those goods as fridges, microwaves,.. that people used to pay in long terms, and They have increased the account payment period with thier suppliers, trying to mantain the same prices without loosing self-finance.

In terms of economy, They are trying to raise the current ratio having more assets per liabilities which means more liquidity, and also, They are trying to assign less assets per sales being more efficiency.

However, there is a Spanish company called “Mercadona” that is having success with a different kind of management (Total Quality Management). They are focussed on clients. They have less products and their employees have more formation than the average in this sector, so They know with detail the products They have, and They are able to play more roles in the company, such as cashier, cleaner, retailer,.. They manage to do this spending more on them and paying them a 18% more than the competitors do.They stablish long relationshiop with suppliers, paying in short periods, creating a good relationship. This strategy allow them having higher productivity and constant profits, because of the increasing of sales much more than their competitors.

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