France: Changing the Channel

By Bertrand Chovet

Despite the current downturn in our home market, the retail brands that reigned supreme in France last year remain on top in 2013. This fact is a testament to the strength and resiliency of these brands, although the picture is less encouraging in terms of performance details. Sales have been down for months, wholesale price inflation is accelerating, retailers are cutting their purchasing activity and, further complicating matters, unemployment is rising. Eurozone woes aside, all retail brands, including the most successful ones in France, are facing similar challenges: the ability to drive traffic and the omnichannelization and control of the value chain.

Strong brands have the power to hook shoppers

Category leaders such as Sephora, L’Occitane, Decathlon and DIY home-improvement and gardening chain, Leroy Merlin, have demonstrated the importance of mastering the value chain. Innovation, seamlessness between the digital and physical experience and private label development helped these retailers create close relationships with customers and more opportunities for contact.

Successful retailers like these cultivate loyalty by integrating the brand into every touchpoint and offering relevant products and services that also align with their core brand propositions. They engage more frequently and effectively with shoppers than their competitors. However, though these heavyweights continue to lead, they are under increasing pressure from online competitors.

New challenges, even for leading brands

The digitization of our lives and radical shifts in the way we shop, manage our time and understand the word “value” have put pressure on models that have traditionally relied on quality, trust and premium features as points of differentiation. Competition from online channels and discounters is aggressive enough to destabilize the customer loyalty built over the years by retailers like Carrefour or Fnac. Discounting, of course, is a short-term response to tough economic conditions and a trend that could reverse as conditions improve. Online channels, on the other hand, are only likely to see more activity, not less, as the economy improves. Online shopping—and now mobile shopping—is here to stay.

According to current estimates, there are 31 million buyers online in France, spending roughly 1,400 euros (USD $1,845) per person. E-commerce sales have reached 45 billion euros (USD $59 billion), 19 percent higher than e-commerce sales in 2010. Mobile and tablet sales have reached 1 billion euros (USD $1.3 billion), up 195 percent since 2010, with 4.3 million people buying via mobile and 54 percent of those people making purchases from their iPads. In the face of the mobile revolution, traditional brands are revisiting their business models, figuring out how to work with and capitalize on new consumer preferences and developing new strategies both online and in-store. They are finding that authenticity and relevance are the keys to survival—and reinvention.

The retail brands of tomorrow

There are a number of brands one might expect to see among the Best Retail Brands that are conspicuously absent, such as Vente-Privé, Monoprix, Galeries Lafayette, Leclerc and Système U to name a few. Our valuation methodology relies on publicly available information, so a lack of transparency, unfortunately, has excluded many of the most recognized French retail brands.

That said, as we compared qualifying brands with other powerful brands that didn’t qualify for the list, we found, not surprisingly, that these businesses had a lot in common. What characterizes these players is the clarity and consistency of the brand proposition, the richness of the experience (be that digital or in-store), and the flexibility to keep abreast of trends while staying true to their authentic core. These brands put enormous effort into customer service and enhancing the pleasure of shopping. The success of these retailers is proof positive that an engaging customer experience, delivered across all touchpoints, builds strong loyalty and drives performance.

While general economic conditions continue to weigh on the sector, the strongest French retail brands have already demonstrated that they have the power to invent new models, enrich the shopping experience and create outstanding relationships with their customers. However, agility, inventiveness and responsiveness will be necessary to sustain growth in these challenging times.