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Why French supermarkets are in the throes of a price war

Par Vitisphere Le 10 mai 2015
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Why French supermarkets are in the throes of a price war
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price war is currently being waged amongst the major supermarket chains and wines are being affected by it. According to Olivier Dauvers, a multiple retail specialist and former journalist with leading French trade publication Rayon Boissons, there are four reasons for the price war. The first is linked to macro economics: “Growth in consumption is flat whereas the range of products on offer is increasing, leading to a rise in the footprint of stores that are opening”, explains Olivier Dauvers. “To compensate for declining financial returns, they use prices as a variable that can be rapidly activated*.”

The second reason identified by the multiple retail specialist is increased competition from non-food e-commerce websites. Indirectly, e-commerce has a negative impact on sales in multiple grocers because “growth in online sales causes lower footfall generally in stores”. 

The third cause stems from the strategy of France’s leading grocer in terms of price, Leclerc, whose “selling point is its pricing and nothing else. They are also the best at it”, explains Olivier Dauvers. “As soon as they come under attack from other retailers, they are therefore compelled to react, which explains the downward spiral in prices across-the-board”.

The fourth and final reason is quite straightforward: “Because, quite simply, low prices work!”, he says, adding the quote: “Poor people need low prices and rich people love them…They save money to spend it on other things”.

 

*Olivier Dauvers was speaking at the national French Independent Wine Growers’ conference in Cahors in April 2015

 

[Source: Vitisphere; Illustration: Systembolaget]

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