After buying 20 Real stores from German Metro, Auchan Romania reached 10,000 employees and an overall annual turnover of more than EUR1 billion.
Increasing the number of customers is one of the main objectives of the French manager after the leading transaction in Romanian retail was closed in mid-September in Bucharest and Duesseldorf. This transaction creates a group of 31 hypermarkets with a sales area of over 252,000 sq m. The group now competes for a place among the top three companies in food retail – Kaufland, Metro Cash & Carry and Carrefour.
“We plan to boost the number of customers in each Real store by 30% by 2015 and finalize the integration within 12 months,” Espasa told ZF in an interview.
Data presented by Auchan shows that the 11 Auchan stores last year had around 33 million customers (an average of over 8,000 fiscal receipts per store), while the 20 Real stores had 36 million customers, i.e. a daily average of around 5,000 receipts per store.
One of the factors behind these numbers is the difference in the average store area. In Auchan’s case, it slightly exceeds 10,000 sq m, while the Real-bought hypermarkets have an average area of 7,000 sq m.
Espasa says Auchan will be able to boost customer numbers in the Real-bought stores because average prices of Auchan products are 8-10% lower than those in the German store network.
Is there a danger of “store cannibalization”?
The first Real store that the French company will turn into Auchan and rename is the one on Theodor Pallady boulevard in Bucharest, which is 3 km away from the Auchan Titan hypermarket, the French company’s first and best-performing store in Romania.
Could the 30% rise in customer numbers for the Pallady store mean taking customers away from the Auchan hypermarket in Titan?
“This is possible, but our goal is to attract customers from other networks. Anyway, the two networks, Real and Auchan, tend to be complementary [are located far enough apart from one another], so few stores will compete for the same customers.”
The French company will complete the rebranding of Real stores in Brasov, Oradea, Constanta, Sibiu, Satu-Mare and Bucharest’s Vitan district by the end of this year, while the rest of the stores will join the Auchan network in 2014. The investment budget into turning a Real store into Auchan is around EUR2 million – this is the cost of the “pilot project” on Pallady boulevard.
Auchan sees around 4% rise after eight months
The French company is now looking more towards the future, given that consumption is not showing signs of recovery in Romania, and this is apparent in customers’ shopping basket.
“So far in 2013 we can say the number of customers rose in Auchan stores, but the average basket declined slightly. Although customers buy more products, their average price is lower.”
“Overall in the network, excluding the new store openings [last year two Auchan stores were opened in Iasi and Bucharest], sales rose above inflation, by around 4%, while consumption was flat,” Espasa says.
Finance Ministry data shows that Auchan Romania recorded a net turnover of EUR443 million in 2012, up 19% on the year before. The rise was mainly driven by investments in opening new stores.
“As for the Real stores, they recorded a slight turnover decline this year as the transaction left customers confused.” Real Hypermarket Romania, the company that last year operated the 24-store network of the German group, had a net turnover of EUR650 million in 2012, according to the balance sheet submitted with the Finance Ministry.
Auchan has bought only 20 Real hypermarkets and Metro created a new company, Real Hypermarket Magazine, through which it manages the four stores it has left in its Romanian portfolio.
Auchan in 2015: 33 stores and sales of EUR1.5 billion
Although the French group has covered most large cities in Romania with the transaction involving Real stores, Auchan will continue to develop its local network. But only two stores will have priority: those developed by the group’s real estate division Immochan in Bucharest and Brasov.
“We have two development projects, one in Brasov and one in [Bucharest district] Drumul Taberei, where works will start in the coming few weeks, so by 2015 the Auchan network will reach 33 stores and a turnover of around EUR1.5 billion. Building these stores is a big enough challenge, considering they will be built in parallel with the integration and convergence of Real.”
The Auchan group is controlled by the Mulliez family, one of the richest in France. The family mainly operates in retail, where it also controls networks such as Decathlon, Leroy Merlin, Kiabi and Norauto.
(English version by Daniela Stoican)