An Individual Project Report

on

Hard discounters in France

Content
The hard discount model 2
The hard discount growth in France 3 The beginning of hard discount in France 3 The customers 3 Main players 4
The decline of the model in France 6 A period of slowdown 6 The competition of traditional formats 7 The national brands 8
How to end the slowdown? 8 Actual strategy of hard discounters 8 Toward an evolution of the concept 9 Proposition of strategies 10
Bibliography 11

The hard discount model

The business model of hard discount is attractive because it offers low prices every day on a limited selection of items, concentrated on food products, all in a relatively small store format accessible from the city centres. The hard discount strategy is to focus on private label products. The promise to the customer is simple: everyday products at the lowest prices. (La prédominance des grands magasins discount sur le marché)

This business model is profitable since it is based on the industrialization of the functioning and the operation of mass flows on limited references. Indeed, as the sales by reference are high, this distribution format has a very high assets turnover (stocks and turnover per square meter) and aggressive purchasing conditions to a limited number of manufacturers. (Georges, 2010)

Besides, the small gross margin is compensated by small operating costs. There is almost no service offered and the sales environment is rough. The use of pallets on the ground and ready-to-sell supports decreases the handling costs, which allows reaching a high productivity on the shelves stocking. So employee costs stagnate between 3 and 5% of the turnover instead of between 8 and 11% for the hypermarkets. (Georges, 2010)

In addition, there is no animation in stores, advertising and catalogue expenses are kept to a minimum.

The use of private labels has the same advantage than for traditional