Hypermarket Re-invention: Carrefour Lyon · CONFIDENTIAL & ©RetailNet Group, Page 1 Hypermarket...

CONFIDENTIAL & ©RetailNet Group, www.retailnetgroup.com

Hypermarket Re-invention: Carrefour Lyon Carrefour, known for pioneering the hypermarket concept, is now at the forefront of the format’s re-invention. Starting with one store outside of Paris in 1963, the retailer has expanded the concept across the globe. In 2009, Carrefour operated 1,350 hypermarkets in 21 countries around the world with annual sales of €55.2B ($75.8B USD) or 44% of their global sales of €125.8B ($172.8B USD). Their stores account for 11% of all hypermarket stores and 21% of hypermarket sales worldwide.

While there is still ample room for growth internationally for the format, there is little room in their home market, France. In 2009, Carrefour was the largest retailer by €35.5B billion ($48.8B USD), with 5,550 stores across multiple formats and banners and with total annual sales of €64.5B ($88.6B USD). Hypermarkets accounted for 35% of these sales with 231 stores. Their hypermarket sales have also flattened in Europe as people turn to local food outlets, and department and specialty stores for the items found in hypermarkets.

Thus, it became necessary for Carrefour to adapt the format to better meet their consumers’ wants and needs in order to grow. This is exactly what Carrefour started attempting in 2007 with the re-invention of their hypermarkets. A few years into this project we take a look at one of these re-invented stores, and point out some of its key aspects, including:

Revamped format Private Label – Carrefour Discount brand PromoLibre – Consumer-chosen promotional program

Revamped Format

In 2007, Carrefour started revamping their hypermarkets and by the end of the year had updated 25 stores to the new format. The main goal of the process was to move from an “all-under-one roof” to a “multi-specialist” concept. The hope was to create a more logical and open layout that increased the merchandise assortment and improved the customer’s ability to find products. The retailer also introduced more private label in high growth categories like apparel, tableware, and computer equipment. Some of the highlights of the new formats include:

A central aisle giving access to all the sections of the store Improved sight lines with lower shelving in general merchandise areas Emphasis on fromagerie, deli, bakery, and meat with differentiated ambience Fresh food brought to front of store Large amount of space dedicated to seasonal items


Wide aisles, clear sight lines

Carrefour Lyon Part Dieu


Improved ambience creating a more upscale feel


Private Label

Private label plays an important role in Carrefour’s hyper re-invention. In their 2009 Annual Report, Carrefour boasts that “at hypermarkets, 9 out of 10 customers buy a Carrefour product.” In-store, Carrefour’s own label is given prime shelf position across categories and is marketed with overhead signage. Looking at this Carrefour hyper in Lyon, it is unsurprising that private label has overtaken national brands in grocery sales in France. Of particular note is their OPP private brand, Carrefour Discount, which stands out in its white packaging (very similar to Walmart’s Great Value) to communicate its discount message.


Notice the very similar white packaging and blue lettering used in the world’s top two retailers’ stores

Carrefour Lyon Part Dieu Walmart Torrance, CA



PromoLibre

This past February, Carrefour launched an entirely new promotional strategy and loyalty program coined PromoLibre. Carrefour claims that PromoLibre is the very first permanent promotions scheme 100% chosen by the customers.

Each week, Carrefour labels a number of products (private label and national brand) in different departments with PromoLibre. As it was initially advertised, the customer could choose any three items in grocery, and the cheapest of the three will be refunded automatically to their loyalty account. For non-grocery items, the customer could choose any of the PromoLibre items and receive a 20% discount. This delineation has since changed, however, and the two different types of discounts are currently employed across departments. The promotion is available at all Carrefour banners in France, including their hypermarkets, supermarkets, Carrefour City’s, and Contact convenience stores. This massive pricing change comes on the heels of an IFOP survey which found that 41% of French consumers feel that store promotions are not in line with their needs, whereas 95% were in favor of being able to choose their own promotional products.



Needless to say, PromoLibre is critical to Carrefour’s overall growth strategy in their saturated home market, and this is reflected in their marketing campaign. In February and March the company launched a media campaign that included television spots, billboards, and radio and internet ads. The program is still heavily promoted on Carrefour’s website, with a game on the home page and a full page dedicated to it. Customers can shop PromoLibre products online, and see which will be discounted in their local stores. There are a number of flyers featured on their website which call attention to the customer-centric nature of the program:


Promotional flyer from Carrefour’s website

Obviously as this is a company-wide program, it is also important to Carrefour’s hypermarket strategy. There is prominent overhead signage in-store calling out the loyalty program as well as shelf-talkers and smaller signs showing which specific products are included that week. The buy two get one free promotion can be seen in the Beauty department below, a sign that their strategy has already shifted since its inception.


Carrefour Lyon La Part Dieu



As pointed out in a Bank of America piece on the hyper re-invention, it is hard to tell the impact of the program since it is employed category-wide. Although in a later analyst report they reported that while like-for-like sales were down 1% in hypermarkets for Q2, this significantly exceeded the consensus forecast. They found that this improvement was partially attributable to Promo Libre which is helping with sales and price perception.

Implications

Three years into this re-invention process, the process itself is undergoing a re-invention. After interviewing 50,000 households about their likes and dislikes of their hypermarkets, Carrefour revealed their new Carrefour Planet hypermarket concept in Ecully and Vinissieux, France on August 25th of this year. At an August 24th press event at one of the new


stores, Carrefour CEO Lars Olofsson said the new format includes highly differentiated categories and more floor space given to categories like frozen and organic foods, beauty and fashion. The stores will have a focus on fresh foods and services; the first store in Ecully features a sushi bar and free babysitting. The new format will undergo some final changes in the coming months, and the final version will begin to roll out in the retailer’s largest sites next year, according to Olofsson. The company will hold an analyst presentation on September 16th, in which some details of the financial impact of the new format will be revealed.

Be on the lookout for an upcoming RNG store tour of this new pilot store and analysis of the financial impact of these store changes in the near future. It remains to be seen whether this new format will be a driver of growth in Carrefour’s home market or simply a series of store refreshes. Either way, the improved shoppability, private label promotions and pricing strategies appear to be a step in the right direction.

Hypermarket Re-invention: Carrefour Lyon · CONFIDENTIAL & ©RetailNet Group, Page 1 Hypermarket...

Documents

Transcript of Hypermarket Re-invention: Carrefour Lyon · CONFIDENTIAL & ©RetailNet Group, Page 1 Hypermarket...