Sunday, February 22, 2015

What Is Going On In The Retail Business In France Right Now

I don't know if much International retail experts are paying a close attention to what is going on in the retail world in France, but it is fascinating. Indeed, France is as I have said several times, a land of retailing. The land where International tycoons such as Carrefour, Auchan or Casino have thriven before going abroad. A land where independant retailers are blossoming and succeeding with Intermarché & Leclerc.

Economical situation in France has been tough the past few years, but despite this economical slow down, retailers have been able to maintain every year growth, even if it was minimal. But after couple of years of growth gained by opening new stores, massive promotions and lowering prices, retailers have come to a complicated situation.

And this is the reason why they have started to restructure the market, by allying each others. Carrefour is allied with Cora, Casino with Intermarché, and Auchan with Super U. 

Hence, you have now 4 groups(with Leclerc) that accounts between 20 to 25% each of the market shares. What is unsusual in the approach, is that in other countries with high concentration of retailers, most of the time, it is based on buyouts, or mergers. But here, it is based on joint venture of the purchases.

Indeed, those alliances were made to have a higher power of negociation with suppliers, in order to maximize their purchases, and hence, earn more profitability to fight now, with 4 powers from equal sizes.

Obviously, the first annual negociations with this spectrum are going on right now, and it is tough to see how the situation will unfold. But it will be to me obviously one of the most interesting topic to follow in the world of retailing: How those alliances will last in time? Who will really win? Will there be new forces coming up from those alliances? Will it help the market to raise? Will this strategy be copied in other countries?