Four strategies driving growth in France

Date : 07 February 2013

From our stores visits this week in Lille, here are our four developments to watch in Europe’s largest grocery retail market.

Price perception key to attracting shoppers

A difficult macro-economic environment has caused shoppers to search out ways to save on every purchase. Retailers like Leclerc, Aldi, Lidl and, increasingly, Carrefour have benefited from an EDLP offer, which is helping them provide a clear marketing message to shoppers.

The importance of price was underlined by the relative performance of Carrefour and Casino’s hypermarkets in the final quarter of 2012, especially when seen through the lens of the latest Linéaires’ price survey.

While Carrefour reported a 2% decline in like-for-like sales for its hypermarkets, Casino saw a fall of 9.9%. Carrefour’s investment in price during 2012 meant that, according to Linéaires’ pricing study of national brands; it had the second cheapest basket of goods, behind Leclerc. Casino, on the other hand, raised prices on branded goods during the year, until December when it reversed the strategy, whilst cutting prices on private labels.

The improving price perception for Carrefour has helped the retailer drive footfall and support loyalty at its stores. The study also highlights how shoppers’ impression of a retailer is driven by its pricing of brands, rather than private labels.

Local ranges strengthen bonds with shoppers

During our visit to a number of retailers, but particularly Auchan’s Partisans du Gout and Carrefour, it was clear that local ranges are becoming an important part of retailers’ strategies to build an emotional link between themselves and the shopper. Partisans du Gout is a great example of how enabling each store to buy locally can help it to differentiate itself from the competition. The brand buys separately from Auchan, making it possible for it to purchase from individually chosen farms and fish suppliers. This was highlighted in-store through signage and point of sale materials.

Carrefour took in-store marketing of its commitment to local a step further, providing a TV screen showing shoppers the farms from which the meat came and interviews with the farmers. This sort of interaction is a great way for retailers to help build shoppers’ faith in their brand, while also boosting shoppers’ loyalty by enabling them to support food producers in their region.

Drives help retailers to grow sales

France-based retailers have been at the forefront of the Drive format’s growth and evolution. Drive’s fast expansion is helping retailers to differentiate and attract sales from competitors who do not provide the service at a city level. This has led retailers to add a Drive solution at as many points as possible, attaching them to existing stores and at standalone locations. Adding a Drive to an existing store costs retailers an estimated €200,000, while building a standalone site costs about €2 million. The former option, therefore, provides them with a cost effective solution, that could help support the format’s profitability, while the latter extends reach.

Working out how to drive profitability in future will be key for retailers. As soon as Drives are available from multiple retailers in a town or city, so the point of differentiation between them will be diminished. At this point, it will be down to companies to work out how to use Drive as a source of profitable growth, rather than just as a way to increase sales.

Value communication key for shoppers

All three of these strategies, though, are being boosted by value communication, especially in store. The Leclerc we visited made a strong show of the company’s ‘Maxi formats = Maxi economies’ promotion across both brands and private label, while Carrefour used signage to highlight its promise to deliver price co-leadership on 500 branded goods. Also seen in-store at Carrefour was its ‘Operation prix ronds’, which is seeing the retailer offer round pricing on a range of 100 branded and private label products. With price remaining central to shoppers’ decision making, it is clear that such efforts, alongside operating a clear pricing message, will remain key for retailers in France in 2013.