Is there a future for hypermarkets?

Carrefour is expected to report on Thursday that Q4 like-for-likes at its French hypermarket division have declined by 5%. This follows last week’s dreadful UK numbers from Tesco. With this in mind, let’s take a look at whether big-box stores can reverse their fortunes.

The sixties was a momentous decade for retail. In 1962, America’s first Walmart, Kmart and Target stores debuted. Across the Atlantic, the world’s first ever hypermarket – a Carrefour store in Sainte-Geneviève-des-Bois, France – opened for business the following year and by 1968, Tesco launched its superstore concept in Crawley, West Sussex.

These events changed the world of retailing for years to come, with many shoppers attracted to out-of-town megastores for three primary reasons – low prices, a broad assortment and the convenience of buying everything under one roof.

Fast forward fifty years and there is a more relevant format for today’s shopper that ticks those same three boxes – the internet.

In Philip Clarke’s words, big-box stores today are becoming a “less potent force” as more and more people buy non-food items online. The growth of smartphones and tablets will only accelerate this growth, albeit at some expense to traditional e-commerce. Meanwhile, pure-play e-commerce retailers have turned it up a notch – last month, Amazon rewarded US shoppers with a 5% discount online for price checking products while in a competitor’s physical store.

Online retailing, although certainly a thorn in the hypermarket’s side, isn’t the only concern. An ageing population and more single households are favouring local shops over bulk buying.

So what’s a hypermarket to do?

How big is too big?

How big is too big?

Hypermarkets must adapt – first and foremost by accepting that retail is rapidly moving online. They can in fact be a part of this movement by streamlining and leveraging their store base - fewer stores and more services such as click & collect and instore kiosks are needed to offer a holistic multichannel approach.

The key thing is giving shoppers an incentive to drive to an out-of-town superstore. This can come in the form of creating a compelling instore environment although, as we have witnessed with Carrefour Planet, this can be too costly for a wide-scale roll-out. Exclusive products will play a much bigger role going forward, not only as a means of avoiding direct price comparisons but also driving shopper loyalty. The new Shops at Target concept, which debuted in New York last week, features limited-time merchandise from several boutique retailers across the US. This injects an element of excitement into the instore experience – and few mass retailers do this better than Target – however the big risk for both Carrefour and Target is loss of identity. But perhaps that’s not such a big sacrifice given the broader challenges.

Comments are closed.