Next year, Carrefour plans to open the first store of Brazilian price-fighter formula Atacadão in Europe. What are the success factors of the unique cash-and-carry discount chain, which combines the strong points of several European and American chains?
Response to the purchasing power crisis
It was one of the big surprises during Carrefour CEO Alexandre Bompard’s recent strategic update: Brazilian price fighter Atacadão is coming to Europe. The first French branch will open next spring in Seine-Saint-Denis, one of the country’s poorest departments, according to French trade magazine LSA. The department northeast of Paris is a notorious suburb with high unemployment, home mostly to people from migrant backgrounds. This cannot be a coincidence: with its Brazilian cash-and-carry formula, Carrefour hopes to have an answer to the current purchasing power crisis.
However, Carrefour already has a soft-discount chain, Supeco, which sells a limited range of fresh, food and non-food products from pallets at rock-bottom prices in plainly furnished stores. That format has its origins in Spain and has since been rolled out to France, Italy and Romania. However, the retailer is apparently looking for an even more powerful price weapon. And that should be Atacadão, a Brazilian chain that Carrefour acquired in 2007 and that is now present in Colombia, Argentina and Morocco as well.
High volumes, low prices
It has to be said, Atacadão is still of a different calibre than Supeco, or than the well-known European discounters. In an average area of 3,000 to 5,000 sqm, the retailer sells a range of some 10,000 references – a lot less than a hypermarket or a large supermarket – at prices 10 to 15 % lower than elsewhere. The secret? Buying and selling in large volumes. This seems like a wholesaler rather than a retail outlet for the general public. Indeed, in Brazil, the stores attract a mixed audience of consumers and traders.
At Atacadão, you buy pasta in packs of 5 kilograms, rice by the 10 kilograms, oil in barrels of 25 litres… And the more you buy, the bigger the discount. The chain does not run promotional campaigns, so everything here revolves around just one argument: the lowest price every day. The stores are bare warehouses with the stock on top of the shelves, you will hardly find any well-known brand products here. The concept is hardly comparable to the average European super or hypermarket. The bare layout and volume discounts may remind one of Belgian Colruyt, but there are also some similarities with European formulas such as Makro, and with American cash&carry concept Costco, which also has two stores in France.
Bottom of the market
Does the newcomer have potential? As hard discounters like Aldi and Lidl have moved a bit more towards the middle of the market in recent years, with nicer stores, a wider range of fresh produce and a limited range of national brands, they may have left a gap at the absolute bottom of the market. Especially in times of inflation and purchasing power crisis, this could open up opportunities. However, the recent European debacle of Siberian discounter Mere shows that execution is crucial to be successful in this market segment.
In addition, the question is whether a concept like Atacadão’s will be able to appeal to a broad audience. The concept targets a type of buying behaviour that is fundamentally different from what French consumers (and by extension Europeans) are used to today. Those large volumes may be very inexpensive per kilo or per litre, but you still need to have the buying budget – and the storage space. Whether that is the right offer for small families in cramped flats in the poor city outskirts remains to be seen.