Carrefour and Casino may have reported some under-par domestic sales but E.Leclerc, France’s largest retailer, is thriving amid the downturn. 2010 is looking to be just as challenging for French retailers as 2009 but, as Dean Best reports, Leclerc is well placed to continue to see off competition from its multinational competitors.
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After some lacklustre domestic numbers from multinational French retailers Carrefour and Casino since the New Year, you could be forgiven for thinking that France’s food retail sector was less than buoyant.
Last Friday, Carrefour, which has spent the last 12 months trying to breathe life into its French business, said its underlying domestic sales had fallen by 2.8% in 2009.
The company has focused on price, promotions and marketing and, in May, launched a cut-price, own-label range called Carrefour Discount but falling sales at its hypermarket and hard-discount outlets more than offset gains from its supermarket business.
Carrefour CEO Lars Olofsson insisted the retailer had eked out some gains in market share in France in the fourth quarter of 2009 but the company clearly realises it is in a fiercely competitive market. The first week of 2010 saw Carrefour launch another marketing push for its Carrefour Discount range.
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By GlobalDataOver at Casino, the retailer reported a 3.8% fall in its French revenues and cited weak sales at its Leader-Price discount stores, which, the company claimed, was in a sector that had been “harder hit” by the downturn.
So far, so gloomy. However, privately-owned E.Leclerc has this week proved that not all of France’s largest retailers have had a poor 2009.
Leclerc, France’s largest retailer, widened the gap between the company and its nearest rivals in 2009 after reporting an almost 6% rise in turnover.
The business grew its share of the French retail market by 0.6% to 17% in 2009, some 3.9% ahead of main rival Carrefour, after seeing its sales rise the fastest during the year.
Leclerc has long been market leader in France and seen as a value retailer. Verdict Retail research analyst Daniel Lucht said the retailer had been “better” at marketing the business to consumers than its rivals – despite Carrefour seeing some success with its own campaigns.
“Those campaigns helped Carrefour gain sales [but] Leclerc is traditionally viewed as a retailer that is better value,” Lucht tells just-food.
Leclerc said its “permanent” low prices had attracted French shoppers, who are increasingly focused on price, particularly in such a bleak economic climate. Consumer spending is a hot topic in France and consumer watchdogs regularly publish surveys to help guide shoppers on where they can get the best value.
Leclerc was quick to point to its strategy of keeping its prices lower than its competition, which helped the company drive sales in a discount sector where the likes of Casino have been seeing problems. For instance, sales of Leclerc’s La Marque Repère own label boomed and now makes 40% of the retailer’s consumer goods volumes.
However, the business may have benefited from Carrefour’s eyes turning inwards in its bid to revitalise its hard-discount business, Dia. Carrefour’s hard-discount sales slid 6.7% over 2009 and were down 7.3% in the fourth quarter of the year. The retailer tried to point to the success of the rebranding of its discount stores and said the outlets converted to the Dia banner had seen sales jump 30% in the quarter.
The economic outlook in France seems to point to the discount sector remaining a key competitive battleground in 2010.
Upon reporting its 2009 numbers, Leclerc issued a note of caution on the prospects for the French economy this year. The retailer said French consumers are set to endure rising unemployment, while the French government will, like many of its counterparts around the world, pull back on the fiscal stimulus packages used to prop up in the global economy last year.
Lucht argues that French shoppers will also face other challenges in 2010. “We will have inflation coming back as well. We had food deflation for a couple of months and that’s going to turn,” he said.
However, Leclerc said its position in the sector should help it continue to grow. “More than ever, in this difficult economic context, E.Leclerc’s image as a hard discounter, built over the years through a sustainable strategy of permanently low prices, should enable the business to continue its development.”
The regulatory environment also suggests the discount sector will see fierce competition. And, with changes to French regulations on opening new stores, the likes of Aldl and Lidl will be able to open more stores, potentially meaning stronger rivals for Leclerc.
However, Aldi and Lidl’s store count lags behind Leclerc, which counts the likes of Carrefour and Casino as its closest rivals. For Verdict’s Lucht, 2010 promises more action on price for Carrefour and Casino as it looks to keep pace with Leclerc – which comes with the potential negative impact on margins.
“Definitely, investing in price is a good idea. Purchasing power is a big story in France. The French are quite price sensitive,” Lucht says.
And, with little sign of those trends changing, Leclerc seems ideally placed to enjoy bumper sales in 2010.
