Since his election in May 2007, President Nicolas Sarkozy has attempted to push through a multitude of political reforms, not least with regard to the retail industry. Thus far, however, progress has been rather slow.
The French market has become much tougher for retailers in recent years. Shopping habits in the country are changing as consumers become increasingly price-sensitive.
Market leader Carrefour, for example, has struggled with stagnating hypermarket sales for some time and is currently reducing its sales space while stepping up price promotions in a bid to entice more shoppers into its larger stores.
In mid-January, the company announced that it would experience a “difficult” first term in 2009. Its overall turnover increased by a paltry 0.7 per cent in the last quarter of 2008 and actually fell by 2.3 per cent in France, its main market.
As Carrefour’s finance director Eric Reiss pointed out: “Consumption patterns are changing from one week to the next, even from one day to the next in major markets. Consumers have altered their spending; for food products they are now focusing on low prices and promotions.”
In France, there are currently very few opportunities for retailers looking to develop a network of stores, particularly larger stores, for which authorisation is virtually impossible to obtain. There are, however, some opportunities in the grocery sector for formats under 1,000m2, thanks to the introduction of the LME, the law for the modernisation of the economy, which came into effect last year.
Casino has signalled its intent to move more in this direction. The group has teamed up with newspaper chain Relay to launch a new neighbourhood shop concept specialising in fresh products and prepared meals. The first of these shops, which have been christened Chez Jean, opened in mid-January in Paris and, according to Casino, two other shops will be opening up later this year, with a view to further openings in 2010.
Carrefour, in contrast, has looked abroad for growth, announcing in February that it had signed a franchise agreement for the Moroccan market with Label’Vie, Morocco’s second largest supermarket operator, with whom it will develop hypermarkets under the Carrefour banner. The company also has plans to increase the number of its smaller and larger stores in Cyprus through the Greek-owned Marinopoulos Group.
According to retail analyst Planet Retail, other French chains are fairing better during this economic slowdown. Leclerc is one, thanks in part to its strong price-quality perception amongst consumers.
Planet Retail cites Auchan as another that is “weathering the storm”, but this has not prevented the retailer from taking steps to protect itself. At the end of January, it announced that it would convert all of its supermarkets in France, Spain, Poland and Italy to its new Simply Market discount format by the end of the year. According to Planet Retail's Isabel Cavill, the remodelling programme will cost a total of €280m, of which €100m is reserved for France, where 100 stores out of a total of 286 have already been converted to the Simply Market banner.
“Between now and 2015, we hope to be operating 500 Simply Market outlets in France,” said Auchan managing director Denis Simon, adding that the move had been made in response to the global financial crisis and consumer concerns about low prices.
Ms Cavill said the group has already converted 110 Atac stores to Simply Market in France and has reported that sales from the rebranded stores improved by between 12 and 13 per cent. This is in contrast to those remaining Atac outlets, where sales are said to have declined by 1-2 per cent. A further 10 Simply Market outlets are scheduled to open in France this year followed by a further 20 stores in 2010, as a result of the new 1,000m2 law.
The economic situation has benefited hard discounters, which have gained from growing awareness of pricing issues and a growing tendency among consumers to favour economy lines over higher priced branded goods. “Same-store sales of discount chains such as Leader Price (Casino), which were on a downward slide since the third quarter of 2005, have since been revived, as consumers begin to feel the pinch,” Ms Cavill said.
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