Carrefour moves closer to customers

Carrefour moves closer to customers
Retail giant Carrefour has vowed to adapt store formats to fit localised catchment areas, after a year-long Spanish supermarket trial has revealed the potential of neighbourhood discount stores.Results from the Spanish trial, which saw the retailer tweak its underperforming Champion banner, have indicated the Carrefour brand works well as an express-style format in mature markets, and as a mini-hypermarket in local neighbourhoods.
It trialled three new formats in the country through 2005 – Carrefour branded mini-hypermarkets of 3,000-4,000 sq. metres, Carrefour Express soft discount supermarkets of 1,500 sq. metres, and Maxi-Dia discount stores only carrying private label products – and claims all have been a huge success with incremental sales of 40 per cent in each category
“This has been not only a commercial success; it's been an economical success. We are having much better sales per square metre [in Spain] and with the synergies we are obtaining with one brand we are lowering our costs,” chairman Jose Luis Duran said at an investors meeting in Barcelona this morning.


Thinking big
Mohammed Adil, CEO of Geant Saudi Arabia


Mohammed Adil, CEO of Geant Saudi Arabia, believes that there is one very good reason why the arrival of the large hypermarket is good for Saudi Arabia: Customers are getting a better deal. Today, he says, the Saudi consumer can buy pretty much everything he or she needs in one place, at better prices than before and with around 500 products on promotion at any one time.That, he argues, is in sharp contrast to how things were before. “They [supermarkets] were poor quality, low standard,” says Adil. “Today, when a consumer goes into a hypermarket, he’s offered almost 55,000 SKUs. Previously, he was offered 10,000 plus or minus. There were no promotions; it was only shelf selling. Today, when he enters my hypermarket he gets 500+ promotions.”The benefits of hypermarkets for the consumer are now well known, but Adil believes that Geant is doing much more than driving down prices and giving consumers convenience and choice. He believes that the hypermarket business model is bringing about fundamental changes in the way that suppliers work, changes that are good both for retailers and suppliers themselves. Such has been hypermarkets’ impact on the country’s retail scene that Adil is confident Geant Saudi Arabia can top one billion dollars in annual revenue within just three years.Geant Saudi Arabia is the result of a franchise arrangement between Groupe Casino, the French retail group that owns Geant, and Fawaz Al Hokair Group, a diversified company with interests in real estate, retail and construction. The company already operated around 700 stores in Saudi Arabia, holding the rights to names such as Zara and Marks & Spencer.Winning the Geant franchise rights represented an opportunity for the group to move into the potentially lucrative FMCG retailing market. Tying up with a hypermarket selling a very broad spread of products meant that Al Hokair Group could also claim to be going in with something unique and different. The choice of Geant, in particular, was a logical one because of Adil’s previous experience in Bahrain, where he had been involved in BMA Group’s opening of the first Geant store in the Gulf. Geant Saudi Arabia opened its first store in Riyadh in April 2004 and has just opened in Al Khobar in the Eastern Province. A second Riyadh store is set for August, Jeddah follows in September and Qassim, in the central Najd area, is scheduled for its first Geant in December. Another four stores will follow next year, bringing the total to nine, and a total of 15 should be in operation within three years. Each outlet requires initial investment of around US $15 million and is expected to do US $65-75 million in annual turnover in the long term. The sales area of each Geant store ranges from around 9500m² to 13,500m² in size.Despite coming to the market with something a little bit different, Geant Saudi Arabia has still faced plenty of challenges. In fact, one of its greatest advantages — its breadth of products, in particular its non-food offerings — could also have turned out to be one of its greatest challenges. Prior to the arrival of Geant, most supermarkets were carrying 10,000 SKUs, according to Adil, and distribution was usually to a central warehouse. The hypermarket model, however, requires 50,000 or more SKUs and direct to store delivery, all of which places much greater demand on suppliers.Adil confirms that it did take suppliers some time to readjust to this new way of working. “We had our challenges and we overcame them, but there’s still a long way to go for the local distributors to cater to direct to store delivery,” he says. “They’re used to the central warehousing facilities of existing chains