Given the scale of change taking place across the retail industry, it’s hardly surprising that both retailers and landlords are pretty much obsessed with understanding all the new channels available to them and their customers.
But last week Europe’s largest retailer formally backed its hypermarkets with a €2bn transaction. This saw a Carrefour-led consortium sign a memorandum of understanding to buy back 127 ‘retail galleries’ (smallish malls based off a large Carrefour) from developer Klépierre, which is part-owned by the world’s biggest shopping centre owner, US-based Simon Property Group. In all, 57 of the centres are in France, 63 in Spain and seven in Italy.
For Klepierre the rationale is pretty straightforward – it wants to focus on its bigger centres and the cash also gives it the firepower to target the potential acquisitions of key malls, very much in keeping with the current vogue for concentrating on prime and large scale retail destinations.
What is far more fascinating is Carrefour’s rationale, which is where we go back to the future. Firstly, Carrefour will pool the acquired centres with the 45 French shopping malls it already owns and, in doing so, will make Carrefour a very big European property player in its own right. Owning both the mall/hypermarket complexes will also bring in rental income, which Carrefour is expected to direct towards the renovation of 150 of its 220 French hypermarkets over the next three years as it fights to lure back lost customers.
In other words, Carrefour has defiantly not given up on the hypermarket format. Indeed, at the World Retail Congress in Paris this autumn, Carrefour CEO Georges Plassat stressed his continuing belief in hypermarkets as a pivotal part of Carrefour’s turnaround strategy and said that he felt that their current under-performance was more about poor execution than fundamental issues about hypermarket popularity.
Plassat believes that sales at hypermarkets have actually floundered because the store environment, facilities and customer services – including staff, queue lengths and convenient parking – have failed to live up to consumer expectations. He wants to spend the new money on putting those basics right and, if Carrefour can achieve that, he is convinced that shoppers will return to the one-stop shop format.
It’s an interesting viewpoint at a time when the UK’s biggest grocery groups are stepping away from their own hypermarket building programmes. They are downsizing new schemes and rejigging existing stores to bring in food and beverage offers and the like to take up the space once dedicated to non-food, sales of which have heavily migrated to their websites.
Carrefour has not had the best of recent times, with constant management upheaval and muddled plans, including the over-complicated Planet Carrefour concept. Plassat is betting big that it is poor leadership rather than the hypermarkets themselves which are at fault for their demise – and we’re about to find out if he’s right.
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