Caroline Véran
Published on 3 June 2023
Opinion column by Caroline Véran and Laurent Vernat on the incredible challenge facing supermarkets in the face of pressing CSR issues. Published by LSA Green in the Tribune d’experts (February 2020).
Supermarkets have to face up to new, more responsible and committed modes of consumption, which run counter to their original business model based on low prices offset by high volumes, and their hypermarket distribution model, the temple of over-consumption on the outskirts of city centers. When faced with the challenges of CSR, supermarkets cannot be satisfied with an opportunistic approach. It needs to work on a genuine CSR strategy, inventing new business models to guarantee its economic sustainability.
Retail, in conflict with its own model
Since the 1960s, the business model of low prices offset by high volumes has locked distributors into a relationship with their suppliers based almost exclusively on a dominant-to-dominant model. But it is also a model that has locked distributors into margins of around 1.3%. This price and market share war has been made all the easier by the concentration of players and buying groups (Carrefour, Auchan, Leclerc and Intermarché) acting as steamrollers. This left little room for smaller suppliers, those with higher production costs but more certain quality.
The balance of power can sometimes be reversed with the resistance of certain companies who, because of the historical importance of their brand and its appeal to consumers, are unwilling to cede ground. Such is the case with Coca-Cola, which is waging open war with Intermarché and its discount chain, Netto. And yet, Les Mousquetaires’ stated aim was laudable: to reduce the weight of the multinational’s soft drinks (a market down -3.2% year-on-year) in favor of more local beverages, with less harmful ingredients and more eco-responsible packaging. It’s a commitment that the Atlanta-based company doesn’t seem to share, as it’s determined to maintain its entire range.
If Intermarché has the courage and the possibility (faced with the potential loss of customers) to maintain this arm wrestling match, and if other retailers have the same audacity vis-à-vis Coca-Cola, then perhaps they will succeed in shifting their model by taking positive action in favor of greater responsible diversity in their supply chain.
Employment at risk as the GD business model is transformed
The law on business growth and transformation (loi PACTE), aims to give companies the resources they need to innovate, transform, grow and create jobs. But here again, the transformation of the mass retail sector is not taking place without collateral damage to employment.
After announcing in the spring the sale of 21 hypermarkets and the loss of 700 jobs, Auchan seems ready once again to cut 1,000 jobs. Carrefour, in the midst of restructuring to reduce the size of its hypermarkets and the proportion of non-food products, is also planning to cut 3,000 jobs.
On the positive side, major retailers are once again taking an interest in local retailing through urban superettes with formats closer to consumer expectations. Numerous entrepreneurs have launched local grocery stores under the banner of the big names in mass retailing. The U2P (Union des Entreprises de Proximité) reminds us that, for equivalent sales, downtown retail generates three times as many jobs as a supermarket on the outskirts. To be continued, in order to truly assess the balance between job destruction and creation…
Faced with today’s challenges, supermarkets are forced to forge ahead with the transformation of their business model. Minimal integration of CSR can help to respond to changes in legislation and improve image by offering more responsible consumer products. But CSR must be strategic, and focused entirely on the creation of new business models to restore added value for the consumer and financial value for the company.
Caroline VERAN, Laurent VERNAT