Auchan Adds Two New Concepts in France

GLYNN DAVIS

LONDON — Fierce competition in the French retail market has led Auchan to create two new innovative store concepts, which are enabling it to fight off the threat from the hard discounters in the grocery area and to meet consumer demands for a high-value/low-cost proposition in the nonfood arena.

Andre Tordjman, director of the new concepts group at Auchan, said the first concept he helped recently develop was “Self Discount,” which was created as a result of research that showed 70% of Auchan customers also shopped at the hard discounters Aldi and Lidl.

Speaking at the IGD Global Retailing 2007 conference here this month, he said he believed as much as $400 million was potentially being lost annually to these two growing chains. His innovative solution was to develop a hard-discount concept that would sit inside Auchan's own hypermarkets.

After much internal wrangling, Tordjman convinced senior management to assign him about 2,800 square feet (from within the 110,000 square feet of a typical Auchan hypermarket) that he would stock with 700 SKUs, consisting of a new range of “loose” products comprising fresh fruit, vegetables and other perishables. Customers have to bag and weigh items themselves before a price sticker can be created, and they can then pay at the checkout.

The company initially disliked the concept, Tordjman recalled. “The buyers did not want to create a new range of products, as they believed there would be cannibalization and margins would come under pressure. And they had an issue with the [handing over of] 300 square meters!”

However, after the creation of a prototype and a successful three-month trial, Auchan committed to a rapid rollout of the Self Discount concept — leading to 100 locations after only 10 months, which contribute nearly $340 million in sales.

Since this represents 8% of total sales at these Auchan stores, and with 20% of customers at these outlets buying food from within this section, the innovative thinking of Tordjman and the investment by the company has been fully justified, he said.

His second new concept, “Little Extra,” is described as a “colorful” stand-alone store that is tapping into the desire by consumers for “combining price with pleasure” when shopping. “Polarization of high value and low cost isn't working — consumers want both. The requirement for shoppers is price, ambience and pleasure,” explained Tordjman.

The stores are divided into separate sections including “Little Cuisine,” “Little Office” and a children's area — “Little Little” — with prices fixed at 1, 2, 3, 5 or 10 euros (1 euro equals about $1.35), which makes calculations easier at the checkout. As with the Self Discount initiative, Tordjman says he quickly developed a prototype store and undertook swift trials before a decision was made to roll out the concept.