EU: Carrefour to price match Ahold
Improving price perception in Belgium
The price matching scheme is a local initiative, which will see two Carrefour stores pay customers five times the price difference if they find the same product cheaper at the nearby Albert Heijn store. Heavily advertised in-store, the scheme is aimed at improving customers' perception of Carrefour's prices amid toughening competition in Belgium. According to a Carrefour spokesperson, it will not be introduced nationally.
The arrival of Albert Heijn, which benefits from a lower cost base due to its stores being supplied by its warehouses in the Netherlands, has put retailers in Belgium under pressure. This has led Colruyt to cut prices, Delhaize to instigate a turnaround strategy to enable it to invest in price and now Carrefour to take a localised approach to competing on price. While the strategy will not be rolled out across the country, its effect locally should benefit Carrefour and, if successful, could be added to stores near to Albert Heijn, which will only have a presence in Flanders in the short term, which should mean that there is no need for it to be extended to all stores.
Pricing in focus in France and Spain
Price is also of concern for Carrefour elsewhere in Europe. It has launched a financing plan in Spain which will particularly help customers in the run-up to Christmas; interest-free loans of up to EUR2,000 can be used for purchases of food and non-food in hypermarkets and supermarkets, providing a discount equivalent to the VAT on purchases.
In France, Carrefour continues to make cuts, with prices in November reaching their lowest ever level according to reports. Casino also improved its price positioning in November, as both retailers compete with Leclerc. Ongoing deflation on branded products in France is likely to continue to put pressure on retailers’ and suppliers' margins into the first quarter of 2015, which is likely to impact further on the supply chains of both parties by requiring them to cut costs in order to maintain profitability.
IGD's view
Improving its price positioning globally has been a focus for Carrefour for some time, although it is more important in some areas (e.g. the French hypermarket business) than others; even the connected hypermarket at Villeneuve-la-Garenne has an 'Ă©co-corner' which carries a range of brands at low prices. In Spain, the Supeco format is being used to target shoppers looking for value. Work to date is having an effect, as CFO Pierre-Jean Sivignon pointed out in the first half results, however Carrefour will want to maintain momentum and stay ahead of rivals in such a competitive environment.
Source: retailanalysis.igd.com
