Carrefour low prices up to 25%, the largest drop in history

Carrefour announced today that it has launched "the largest price drop in the history of Spanish distribution, applying discounts of up to 25% in an average of 10,000 items per establishment.

Price declines, which are kept on a permanent basis, apply on the brands of products on the label, the group reported in a statement.

The aim of the company is "adapt" its prices in all local schools for their position "anywhere in the country" as the distribution company cheaper.

Carrefour estimated annual savings of 500 euros on the average cost of a typical family in basic food and non food. As pointed out, the savings are concentrated in products of greater importance to consumers, ie those identified as more sensitive in their purchases and also adapted to the demands of each school.

Thus, to apply discounts, has taken into account the composition of the basket at each location and the location of establishments.

Carrefour noted that its price-cutting initiative complements the "joint work" done business with 12,000 national, regional and local. Company and suppliers working together to increase sales and reduce costs, obtaining a commercial offering based on the best price with the broader range, "the group.

In this regard, he insisted that his strategy is a further step in its policy to provide "a permanent" the best market prices, so that "continuously" reinvested in price improvements in management, while advocates "aggressive" dynamic trade.

Red Phone

Convinced of being "the dealer with the most competitive prices in the Spanish market, Carrefour has enabled the 'hotline', which, if consumer sales are any items cheaper in Carrefour in another distributor, the company lowers the price in 24 hours.

The strategy of the main distribution of the country in the current crisis and slowdown in consumption is focusing on price cuts to attract demand.

So Mercadona claims to have reduced the price of the basket of their clients to an average of 10% in the last four months, while Lidl said last week that since last October has reduced the prices of some between 16% and 34%, the impact of cheaper raw materials.

For its part, Eroski has launched a campaign to celebrate its 40th anniversary, which over the next two weeks will offer discounts of 40% on hundreds of products in all their institutions, both as a manufacturer's own brand.



Expansión 05/03/2009

Carrefour opens a new front in the war with Mercadona
Julie Brines

Mercadona opened the season with its strategy to remove the linear products sold less. Now, the French chain lowers the basic basket to 25%. Consumers appreciate the price, but the strategies are different.

Supermarkets are facing some changes in the relationship with customers and suppliers. Last year saw an important rise in prices, in part from raw materials and food to a greater extent by the rise of oil and its derivatives, which urged both the packaging and transportation. The rise in the shopping cart, in a context of economic crisis, makes the consumer more in setting the price.

Therefore, won the overall objective to apply on the lower prices. The situation has encouraged the process. Oil has fallen and many raw materials. It is estimated that in the past four months, the plastic containers have fallen by 20%, diesel by 12% and flour 30%.

The new strategies necessarily include a change in the relationship with suppliers

How? The promotion system has been widely used. Except Mercadona, which ceased to apply in the early nineties, has been a practice used by all channels that are still used and is unlikely to disappear, according to dealers. Carrefour has been traditionally used as advertised, but now no longer seems sufficient, therefore, is to implement new sales.

Brand

The commitment to the brand itself is another formula. Something like that Carrefour Mercadona were using long, like the cooperative Eroski and Consum German and chains such as Aldi or Lidl. Even small supermarkets are increasingly turning to central purchasing own brands to offer more competitive prices.

According to TNS, these brands accounted for 32.5% a year in sales, compared to 29.9% in 2007. But now he had to do something different, and we had to do this work would be the costs of the distributors and the relationship with suppliers. But there are ways to address it.

Yesterday, Carrefour announced what is now the way you work. Apply a general lowering of prices, which in some cases reaching 25%. The products are not the same in all stores, but rely on schools and areas.

Carrefour says it is unaware of the sales margins to apply their suppliers

The average discount of references in each of ten thousand and will affect products that are sold at each site. To detect it, Carrefour has used information from more than eight million card customers in its loyalty club, which show trends in customer to customer consumption.

Discounts are applied on three categories of products: the purchase (such as bread, milk, rice ,...), the perishables (meat, fish, meat ...) and some food that are not recurrent (socks, kitchen towels ...).

Where does the savings

But the question is who will bear the cost of such savings. Carrefour sources explained yesterday that will reduce the margin by product unit that will try to compensate with an increase in sales.

To sell more, "we will sit with suppliers to jointly develop the sales plan. These sources indicate that, instead of negotiating with them the price is going to negotiate the sales plan, coordinating the logistics and information systems, among others, in addition to regular meetings between the teams. They add that at no time will seek cuts in prices and margins for suppliers, or are going to recall products. "We do not know their margins," he said.

Yes I will ask some changes in formats and packaging to suit the customs. For example, comment that has been detected rarely buy one at a tube of toothpaste, which will incorporate three packaging tubes, without removing the linear individual tubes. "We want to move from pure bargaining agreement with suppliers," he said.

Mercadona has always said that 'transparency' interaction with margins

Part of the savings will also come through the reduction of costs in administration and other areas of the company that have no commercial impact, although Carrefour acknowledged that the bulk will come from the other side.

Another policy of suppliers

Mercadona has also lowered its price by changing its relationship with suppliers, but in another way. Valencia chain has not hesitated to remove the products from the shelves with little rotation, at least one product per store, per day, which has eliminated 800 references, and private label manufacturer, in equal shares. States that since October has achieved a saving of 10% in the basket.

The involvement of suppliers in the logistics of Mercadona was already long since amended their formats to many systems of logistics centers. The group also said that working together with them to reduce the costs of products, applying the reductions that have occurred in the raw materials. Unlike Carrefour, Mercadona has always stated that "transparency" with suppliers and that this implies that both know their respective margins.

Despite claims that Mercadona labels have been removed and others, the reaction of suppliers has not been the same. Among the manufacturers of the product recommended, the firm called interproveedores and largely working almost exclusively for the chain, the reaction has generally been positive. Ensure that they have generated a sales increase, while some have had to modify and remove packaging formats.

However, there has been an adverse reaction among vendors who sell their own brand, considering that the chain has acted unilaterally. The answer will have the consumer. Today, the results will be known Mercadona president and will report how the strategy is working.

Mercadona is not the only chain that has withdrawn brands. Although for other reasons-lack of agreement on price, the Belgian Delhaize has dispensed with 250 products from Unilever. Britain's Asda is also removing between 20% and 30% in some categories. According to some analysts point cited by the British publication The Grocer 'Asda could face the wrath of customers if not handled properly the revision of the set.

Two ways of looking at lower prices


Less range but selling more

The chain of French origin says that it will lose half of 10,000 products, but basic. "The consumer does not serve anything that you download a lot of product that is not in their usual purchase," says one manager.

Chicken, bread, rice or socks are among the products that will notice the cuts. The company hopes this will do to sell more to compensate for reduced margins that it assumes only, without applying it to the suppliers, with which it intends to negotiate further sales strategies that prices of products. The group says that for an average family could lead to annual savings of 500 euros.

Remove what is not sold

Mercadona has released 800 of its stores and product references that had little rotation. This has gone some brands of many of them, but depending on zones. For example, Calvo and tuna is only found in supermarkets in Spain, because we do have the required rotation, says the company.

They also point out that return, ie if it detects that a product should be removed in linear recovers. The signing was done, for example, some forms of water with smaller gas to avoid that the product will spoil the open homes.