Suddenly, Europe's Shopkeepers Are Making Nice
Every 90 seconds, a bus or tram disgorges eager shoppers into Centro, a sprawling new $1.4 billion shopping complex in Oberhausen, smack in Germany's industrial heartland. To battle the Teutonic disdain for service, Centro offers its 200 retailers a three-day course to teach their clerks the art of smiling. Shoppers can munch sausages or sip champagne. Wheelchairs and baby carriages are free to use. A Kinderland takes care of kids. That's a key attraction for Kirsten Lindner-Janssen, 35. "Centro is outstanding," she beams, as her five-year-old son darts for the toys.
Faced with sluggish consumer spending and mounting competition from the U.S., Europe's retailers are searching for new ways to pry open shoppers' wallets. Some are discovering old-fashioned service. Others are pushing into such nontraditional businesses as financial services. A few are experimenting with high-tech retailing, and others are locating in new venues, from designer outlets to regional supermalls. Sure enough, European shopping habits are changing. Instead of making daily trips to the butcher, baker, and fruit stand, many Europeans now travel to out-of-town supercenters for a weekly grocery shopping expedition.
TIGHT CONTROLS. But with European retailing in the doldrums since 1993, shopkeepers badly need new ways to persuade shoppers to part with their hard-earned francs, German marks, and lire. Across Europe, retail sales are flat, with department stores, chains, mail-order houses, and hypermarkets selling less by volume in 1996 than they did three years earlier, according to the most recent Organization for Economic Cooperation & Development figures. Britain and the Netherlands, whose economies are relatively healthy, posted good Christmas results. But across much of the Continent, the European Union reports that personal consumption flagged in 1996 and is expected to remain poor this year.
Compounding the problem are the tight regulations that have long hampered European retailers. Opening hours, discounting, and opportunities to build out-of-town stores remain firmly controlled--ostensibly to defend small shopkeepers and city centers against huge suburban malls. Now, the first cracks of deregulation are starting to appear on the Continent. On Nov. 1, for instance, Germany began allowing retailers to stay open longer on weeknights and Saturdays.
But the outlook for consumer spending remains bleak. On top of wallet-squeezing economies, Europe's home-team retailers face a new wave of competition as foreign chains pile into their slowly opening markets. The U.S. specialty chain Sunglass Hut International Inc. plans to expand to 400 stores in Europe by 2000, up from around 110 now in 11 countries. Already, Foot Locker and Toys `R' Us each have more than 200 stores across Europe.
To combat the U.S. chain-stores invasion, some European retailers are teaming up with the enemy. France's top hypermarket chain, Carrefour, for instance, has a joint venture with Office Depot Inc. Others are copying American formats. Britain's Next PLC chain has "done the Gap in the U.K. very successfully," says Jonathan Reynolds, a fellow at Oxford University's Institute of Retail Management.
The competition is also forcing retailers to rethink their service philosophy. For the first time this Christmas, shoppers at France's Galeries Lafayette could drop off their kids' wish lists in the toy department and return later to pick up their wrapped gifts. Italy's SMA, a supermarket chain controlled by the Agnelli clan, offered a first-time Christmas special: For $40, shoppers could get a complete Christmas dinner delivered to their homes, with a menu that included lobster. And Tesco PLC, Britain's No.1 supermarket chain, kept 16 of its stores open 24 hours a day during the holidays.
Another strategy to boost sales has been to squeeze more revenue out of existing customers. Pushing to sell stocks alongside socks, the London-based Marks & Spencer PLC chain now offers its customers mutual funds, consumer loans, and personal equity plans, as well as its famed chicken Kiev and conservative suits. Launched in the mid-1980s, financial services are now the fastest-growing part of M&S's portfolio, with sales up 15% through the half-year to Sept. 28, to $167 million.
Britain's biggest supermarket chains are following M&S's example. Last November, Safeway Stores PLC, a spin-off of the U.S. chain, announced a deal with Abbey National PLC to offer an interest-bearing debit account. Money that is kept on deposit to buy groceries earns 5% interest. Tesco recently introduced a similar account. J. Sainsbury PLC, the No.2 chain, has even applied for a bank license.
Among the biggest changes is the spread of big-time shopping beyond the concentrated urban centers. Jalla, a French manufacturer that makes linens for Yves St. Laurent and Christian Dior, recently opened its first outlet store at the year-old Boutiques de Fabricants in Troyes. Britain's BAA PLC, which controls airports and airport shopping, is working with U.S.-based developer MacArthur/Glen Europe to build outlet malls across Europe.
Even more new-fangled is electronic retailing. Nestle, for instance, is selling directly to Swiss consumers as part of an interactive tv trial with Swiss Telecom. French mail-order house La Redoute Catalogue recently introduced an interactive CD-ROM. Quelle Schickedanz, a $5.3 billion German mail-order house, has leapt into the burgeoning home-shopping market by buying 29% of Home Order Television, Germany's first tv shopping network modeled after the U.S. QVC. Founded a year ago, hot already reaches 6.5 million households. Quelle is also offering a CD-ROM version of its catalog and is taking in $43 million a year, or 2% of sales, across the Internet. Its goal: to get 10% of sales from such new media within a decade.
MANY DEALS. A more traditional way to gain clout in the market, of course, is to consolidate. That's what France's Carrefour did when it announced last month that it would buy 33% of Grands Magasins Bouriez, which controls smaller rival Cora, for an estimated $1 billion. The deal gives Carrefour a presence in northeastern France, an area where it had few stores before. In the Netherlands, supermarket chain De Boer last year bought a smaller group called Unigro, and Albert Heijn supermarkets acquired Primarkt.
European shoppers seem to appreciate the friendly new retail environment. In the wealthy Brussels neighborhood of Uccle, shop owners kept their stores open longer on the Sundays before Christmas--and were rewarded with a last-minute jump in sales. "People waited until the last moment," says Computer Square owner Patrice Cholewka, whose sales were up 5% this Christmas over last year. Perhaps when more customers realize that Europe's retailers are going out of their way to make shopping easier, they'll open their wallets at last.
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