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Your Move, Carrefour ... Amazon Deal Set To Lift Casino's E-Commerce Credentials: Analysis

By Steve Wynne-Jones
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Your Move, Carrefour ... Amazon Deal Set To Lift Casino's E-Commerce Credentials: Analysis

Amazon's intention to team up with an established player to launch grocery deliveries in France has been one of the worst-kept secrets in retail for some time.

However, this week's announcement that Monoprix will commence selling its products on the Prime Now platform is still something of a game-changer, and perhaps more so for Amazon.

As part of the agreement, between 5,000 and 10,000 SKUs will be available on the Amazon Prime Now app and online channels, for shoppers in Paris and the surrounding area, with shoppers able to avail of free two-hour delivery.

The product selection will largely be drawn from Monoprix's private-label offering, including SKUs under the Monoprix, Monoprix Gourmet, Monoprix Bio and La Beauté Monoprix brands, as well as fresh produce and a number of 'exclusive' ranges.

Monoprix's management are understandably bullish about the deal, with chairman Régis Schultz in top form on Europe 1 radio this morning: “Everyone wanted to try and work with Amazon, but it’s Monoprix [that] has won the day."

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Shares in Monoprix's parent, Groupe Casino, also enjoyed a boost (after a challenging start to 2018), enjoying an initial gain of close to 10% in early trading on Tuesday.

A Solid Foothold

For Amazon, the deal gives it a foothold in one of the largest grocery markets in Europe, which some analysts believe has been harder to achieve than its US ambitions.

"I think Amazon is finding it harder to break into European grocery than they found it in the US, and they arguably struggled with that for over ten years before buying Whole Foods," commented Danny Silverman, CMO at Clavis Insight.

"The French tend to prefer French companies, so Amazon was undoubtedly struggling even more in that market – not to mention the complex dynamics of hyper local assortment in France down to the store location level. It makes sense that they are pursuing highly strategic relationships to expand their footprint, rather than organic growth on their own,” Silverman added.

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So, what could the deal mean for Groupe Casino's rivals in the French grocery space?

Online Structure

As analyst Bruno Monteyne of Bernstein Research pointed out in a briefing note, the Monoprix deal requires 'virtually no capex' and, as such, can be viewed as a profitable venture for Groupe Casino.

'For the retailer, it provides access to capital-light growth in a fast-growing e-commerce market with little risk,' Monteyene wrote. 'Monoprix management seem indeed convinced of the merits of using multiple technology alliances to drive online food & grocery.'

According to Monteyne, the agreement will be not dissimilar to that shared by Morrisons and Amazon in the UK, where the Bradford-based retailer's products have been available on the online operator's platforms for some time.

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Crucially, however, Monteyne noted that Monoprix's management was also sceptical of its rivals' abilities to develop a similarly effective platform.

"[Monoprix's management] was doubtful about the odds of Carrefour being able to learn e-commerce by engaging with itself, rather than proven e-commerce leaders," said Monteyne, "[while Leclerc] lacked the brand strength to build a strong online food business in Paris."

Competitive Moves

The timing of the Monoprix announcement is also notable, as it follows hot on the heels of the launch of Chez Moi, a new Paris delivery service launched by Leclerc.

Just this week, on 26 March, the service was launched in the northern neighbourhoods of Paris, with the remainder of the French capital expected to be covered by mid-May.

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Meanwhile, at Carrefour, new chief executive Alexandre Bompard has made online growth a key tenet of the Carrefour 2022 strategy, with the group aiming to generate €5 billion worth of sales in France by 2022.

Carrefour recently entered into a partnership with Sapient, part of the Publicis Group, to achieve its online aims, and it will be consolidating its web platforms into a single website, Carrefour.fr, later this year.

In the case of both retailers, such strategies have only just been launched, and positive results will, therefore, be a while in coming.

On the back of Monoprix's announcement this week, expectations are likely to be heightened.

Starting Point

At the same time, there are suggestions that the Monoprix agreement may just be a starting point for Amazon's grocery ambitions in France.

Talking to Le Journal du Dimanche earlier this month, the company's general manager for France, Frederic Duval, outlined his intention to someday launch Amazon Fresh (a service operated independently of any traditional retailer) in the French market someday.

“[Food] is a strong development axis for Amazon since the launch of our Amazon Fresh offer in the US in September 2016,” Reuters reported Duval as saying. “We would very much like to launch this service in France, but everything in its own time. A launch represents an investment."

Could Monoprix, therefore, be but a stepping stone towards a greater goal?

"For Monoprix, this seems to be all about 'learning'," said Monteyne. "In their view, food is still a very small part of Prime Now, however, the obvious question is: could that change? How? By partnering with Amazon, they get a prime seat at this table, however, in our view, this is a high-stakes poker table: are they providing Amazon with all the learning they need to become a much bigger threat than they are today?"

Elsewhere, Barclays European Food Retail Equity Research pointed out that the deal is not exclusive to Monoprix.

"On the negative side, the partnership with Amazon is not exclusive for Monoprix, implying that Amazon will continue to sell food items from other third-party sellers on its marketplace [e.g. Fauchon and Bio c' Bon]," it said, "and there is no reason to believe that Amazon will refrain from launching its own Amazon Fresh service in Paris at some point."

Something tells us that this game of chess is only just beginning ...!

© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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