Leclerc reaps the benefits of low-price policy

Total turnover from the independent retail group was €27.2 billion in 2003, up 4.8 per cent compared to the previous year. The lion's share of this (€26.1 billion) came from the French operations, whose sales improved by 4.2 per cent during the year.

In contrast, main rival Carrefour saw its French sales (from hypermarkets, supermarkets, convenience stores and discount stores combined) increase by just 1.7 per cent in 2003.

Leclerc​ said that the increase in sales helped it extend its leadership of the French retail market, adding 0.4 percentage points to its market share which now stands at 17.2 per cent. Carrefour is the number two operator in France with a share of 14.9 per cent, although its value sales are in fact greater than those of Leclerc at €35.7 billion.

Outside France, the picture is somewhat different, with just €1.1 billion in sales coming from Leclerc's 36 stores in Spain, Portugal, Poland, Slovenia and Italy, compared to Carrefour's €25 billion from its European operations alone.

Leclerc claimed that its ability to perform well in tough market conditions came as a result of strategy of offering the lowest possible prices across the board. "Over the year we have seen a strong correlation between the improvement in our pricing structure and the rise in turnover,"​ the company said in a statement this week.

The chain has launched a high-profile advertising campaign focusing on what it calls "the defence of consumer spending power"​, suggesting that official figures showing a 1.2 per cent improvement in 2003 were far from the truth - in reality, consumer spending power decreased by 1.1 per cent in 2003, it claimed.

According to Leclerc, the loi Galland​ legislation voted in 1997 and designed to prevent major retail groups from exerting too much pressure on its suppliers by cutting prices, has had the perverse effect of handing the power to food manufacturers instead. As a result, Leclerc claims, prices of branded food products have increased steadily (+3.3 per cent in 2002 alone, according to Leclerc).

"Purchasing power is the main driver of increased consumption,"​ the company said, "and consumption will be the key element in improving the French economy in 2004. The loi Galland has prevented French consumers from benefiting from the effects of commercial negotiations between retailers and suppliers and is in need of urgent revision."​

Whatever the justification for them, low prices are always appealing to consumers, and Leclerc has certainly benefited from this policy. Its 2,100 standard own label Marque Repère products are at least 25 per cent cheaper than branded equivalents, the company claims, while the Eco+ discount own label is the cheapest on the market, and will be extended to 850 products this year as part of the continued low-price strategy.

Leclerc's own label products accounted for 26 per cent of its total sales in 2003, some 1.1 per cent higher than in 2002, reflecting their price differential, the company said.

The chain said that it also planned to extend its low-price policy to more branded products this year - gambling that the lower margins this will inevitably entail will be offset by increased sales as shoppers increasingly seek to take advantage of the lower prices.

French retailers in fact have very little leeway when it comes to cutting prices. The loi Galland​ allows them to offer promotional coupons and customer loyalty card schemes, but major price cuts are restricted because of fears that these will be passed on to suppliers - although this does not prevent retailers from eating into their own margins in a bid to offer lower prices.

While this system keeps France's food industry in business, it does little to help consumers, Leclerc argues.