French News Archive

Business in France

The Future of Small Shops in France

Thursday 15 May 2008

France has a stronger tradition of artisanal and boutique shopping than most other countries in Europe, but commercial pressures have been taking their toll, and proposed measures of deregulation will pose a new challenge.

As the table below amply demonstrates, over the past ten years there has been a significant reduction in the number of local shops.

The main losers have been in the food sector, with cheese shops and charcuterie, in particular, each losing nearly half of their number.

Bakeries, fishmongers, butcher's, and grocer's have also been badly affected, losing around one third of their number.

Arguably the decline in ironmongery shops has been compensated by the growth in DIY stores, whilst that for clothes and shoes by the development of a stronger retailing offer in the main urban centres.

Despite extra taxes on cigarettes and campaigns against smoking, the local tabacs increased by 10%, to 4,670.

Table: Small Shops in France

Type of shopOutlets 1996Outlets 2006Variation (%)
Cheese shop1,8521,107-40.2
Fruit & Veg6,3495,213-17.9
Leather goods2,8602,055-28.1
Household Electrical13,17610,000-24.1

Source: INSEE

Other local services that have also managed to maintain a presence have been the chemists and florists, the former mainly because of the manner in which the whole industry is regulated by the French Government, coupled with the growth in the French elderly population.

Chief amongst those services that have been able to buck the trend have been local bars, with the number opening their doors having increased by 20% in the last ten years to reach 4,741 today!

Deregulation Poses a New Challenge

Nevertheless, further pressures are soon to be heaped upon the small retailer, with Government proposals to relax controls on the opening of new supermarkets, and end a system of wholesale price controls.

Both proposals form part of a wider plan to open up some parts of the French economy to greater competition, with the hope that this will drive down prices. In the past year, prices in French hypermarkets rose by 5.7%.

At the present time, any proposal for the installation of a store of over 300m² is subject to a special approval procedure, over and above the normal planning procedures. To some limited extent this procedure has constrained the growth of large stores, to the benefit of local shops.

However, the system is open to widespread corrupt practices, with local councillors, officials and local building companies often receiving personal favours. Alternatively, a retailer might organise works to be carried out in the commune, or ensure local companies were awarded a contract on the project, all in return for a consent being granted.

It has also created local monopolies, with the big three chains (Carrefour, Auchan, Leclerc) carving up the local markets between them. Indeed, a recent study showed that Carrefour had about 40% of the total national market. This is often because the local decision makers prefer to agree to an extension of an existing store, rather than to the approval of a new one, as this is less likely to incur the wrath of the local small retailers.

The study also showed a price difference of up to 20% in the same products as between those areas where competition was present, and those where the local hypermarket had a dominant market position.

The Government is proposing that the threshold figure for the present approval procedure be increased to 1000m², with the hope that more stores will open, notably low discount operations.

The Government is also proposing to relax wholesale pricing controls between suppliers and retailers, a change that is being bitterly resisted by the powerful agro-industrial lobby, as the present system at least offers a degree of price protection to them.

Nevertheless, any change is inevitably going to be to the detriment of the smaller retailer, unable to negotiate the volume discounts that will become available to the big retailing chains and competing against even lower comparative prices in the big stores.

All the signs are that, as food prices continue to escalate in France, the protection of the small shopkeeper is having to give way to the higher political priority of dampening inflationary pressures.

You can read more at Plan for France's Economic Growth and Deregulation for Supermarkets

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