By Petros G. Kyprianides
Carrefour in French means ‘crossroad’. Indeed, the arrival of this 800-pound gorilla will mark the crossroads of the Cyprus retail market.
After purchasing 50.1% of the shares of Chris Cash and Carry and eventually the balance of shares at 32c a piece, it has prepared its plans for the Cypriot retail market as follows:
Carrefour took over the Management of Chris Cash and Carry on August 18th 2005 after the resignation of the three Directors — Mr. Christos Vakis, Mr. Andreas Constantinides and Mrs. Vasiliki Andreou — and the appointment to the Board of Directors of a) Mr. Jerome Loubere, b) Mr. Michael Hrostoff, c) Mr. Alain Goanvec.
The name Chris Cash and Carry will remain for a period of four years (as per the takeover agreement) and the name GROUPE CARREFOUR will be added to its neon signs and letterheads.
The policy of Carrefour worldwide is to be 3% cheaper than the cheapest retailer operating in the market.
When this policy is adopted here in Cyprus, supermarkets like Athienitis and Orphanides chains, that boast the motto of “Cheaper Than Anywhere Else” (Toso Fthina Oso Pouthena) will have to take a tough decision whether they will allow Carrefour to make them lose their price supremacy.
From marketing intelligence both retailers will not allow Carrefour to gain supremacy and claim that IT is the cheapest.
PRICE WAR
So, we are on the verge of another price war in November that will pave the way for the Christmas shopping spree.
This will be the second price war in Cypriot retailing (the first was in 2002 with all parties losing more than CYP 9 mln).
Price wars, like the products supermarkets are selling, have an expiry date and the outcome of this price war will leave many killed or wounded on the battle field. It will also become easy to buy out supermarkets and perhaps more International Supermarket Chains, besides Lidl which is already here, will forcibly import the EU retail scene on this troubled island. This is not the best outcome for the local retailers that have struggled for decades to arrive where they are today.
The other big problem that will arise with the arrival of Carrefour here in Cyprus is that they will press the wholesalers for better prices and lower commissions and the danger here is that this may lead to the break up of the wholesaler retailer chain and the opening of the Aeolian bags for the direct import of products by each chain. Thus the control exercised before by the wholesalers in the retail price of products will disappear and everybody will be selling at will, also known in the market as the ‘Eleftheri Kerkira’ situation.
Since its arrival in Cyprus, Carrefour has conducted price surveys around the island and has seen that the products they are buying are cheaper in Greece and elsewhere and is preparing its plans accordingly.
OWN LABEL
The giant has already imported 20 private label products under the Carrefour brand and now they are busy unloading containers of non-durable goods such as washing machines, refrigerators, TV screens, and their arsenal will soon be completed.
But let’s take stock of the fleet of Carrefour stores in Cyprus and what it intends to add to this lineup.
Existing supermarkets:
1. Columbia,
2. Cine Volos,
3. Vasiliades,
4. Paphos
5. Larnaca
6. Nissou.
A new addition will be the former Manuel store in Nicosia, that has been leased for 15 years and will open its doors before or just after the OXI day parade.
But Carrefour is out and about trying to buy another two supermarkets in Nicosia as the capital controls 38.5% of the total retail trade of Cyprus, with the market value estimated at CYP 250.3 mln from an islandwide retail and trade total of CYP 650 mln for the food and beverages sector.
Since the remaining supermarket chains are not interested to sell, because they are on an expansion drive, Carrefour has secured a plot of 11,142 sq.m. it bought in Latsia on October 22, 2004 for the price of CYP 1,475,000 and is making plans for a new hyperstore.
NICOSIA MALL
As if all these are not enough, Carrefour is busy talking to the president of the island’s leading group of companies for a more strategic location in Nicosia for a hyperstore within a mall of 5,000 sq.m. and parking for 1600 cars. It’s offering a percentage of sales as its rent but the other side is asking for double the rate Carrefour is offering. The international rent norm in the retail sector is about 2-3% of sales.
The ‘Big Deal’ also entails renting of other retail stores belonging to this group of companies.
It is estimated that the above site has a potential turnover of CYP 22-25 mln per year.
If this ‘Big Deal’ succeeds, then we are certainly talking of a sizeable market share with Carrefour’s percentage share for Nicosia estimated at 16% of the capital’s total value.
Moving on to Limassol, where Carrefour is aiming for the town’s 28% share of the total market value for Cyprus and CYP 182 mln spent in food and drink per year, market rumours claim that Carrefour is busy with a gargantuan 7,500 sq.m. hyperstore at the Old Lanitis Stores, previously bought by Chris Cash and Carry having obtained a town planning permit already.
LIMASSOL WAR ZONE
With this new hyperstore, the Columbia flagship and the refurbishment of the Cine Volos and Vasiliades stores, Limassol will surely smell of gunpowder, so as not to deny the town of its unofficial title.
The retail scene will then move to Paralimni where Chris Cash and Carry has another plot and Carrefour has plans here as well, for supremacy for share of the consumer’s appetite that besides the area’s popular ambelopoulia delicacy, might even be introduced to French frogs legs.
We are indeed at a crossroad in Cyprus retailing.
But, the Cypriot retailers have acquired experience over the years and they may overcome this hurdle called Carrefour as they have been preparing for a while for this imminent invasion and however big a retailer, it has a lot of disadvantages as well.
Perhaps some of the recipes for success are narrow focus, lean expenses and change in the rules of engagement from a price war, which is for a limited time period, to one of appreciation for the customer.
French retailers were forced by their own national legislation where restrictive urbanisation rules make it all but impossible to build new, large stores. Mergers between rivals Carrefour and Promodes have been the avenues for growth, while French retailers were forced by these legislations to become international.
So, the legislation in our own country is obliged to protect the local retails and not grand building permits or changes in town planning zoning for very large stores, thus giving the advantage to imported retailing.
Petros G. Kyprianides is the General Manager of a chain of supermarkets and has spent the last 30 years in international and local retailing.
