Supermarket sweep poses threat to French high streets
Published 29/04/2008 | 08:59
France, the land of the small shop and the thriving small town high street, faces a lurch of commercial power towards supermarkets and hard-discounters. Looked at another way, France, the land of high prices and cosy commercial arrangements, faces a boom in free competition and a drop in prices for food and domestic goods.
A draft law on the "modernisation of the economy" unveiled yesterday threatens, according to its supporters and some of its critics, to revolutionise shopping in France. Other critics suggest the draft law is too timid. Large French shops will mostly remain closed on Sundays. Little effort will be made to diminish the regional domination of French supermarket chains.
The draft presented by the Economy minister Christine Lagarde will make it simpler to build medium-sized supermarkets. That should encourage "hard-discount" chains such as Lidl and Aldi, which have a relatively small share of the French market.
If approved by parliament, the law would also abolish the existing complex rules which, in theory, forbid sale below cost and force manufacturers to provide goods at the same wholesale price to hyper-markets and village shops.
With inflation gathering pace and wages stagnating, the law is intended to help to fulfil the President Nicolas Sarkozy's promise to increase the purchasing power of French people.
The federation of large shopowners predicted that the law would reduce prices of food and basic household goods by 2 per cent. Serge Papin, head of the Système U chain of supermarkets, predicted price cuts of up to 3 per cent.
Michel-Edouard Leclerc, head of the Leclerc chain, said the law would "cut inflation in half" by allowing shops to refuse the "excessive price rises" demanded by manufacturers. He predicted a "vast spree" of price-cutting from September, if the law is passed.
Many members of M. Sarkozy's own centre-right party, the Union pour un Mouvement Populaire (UMP), have expressed misgivings about the draft law. They fear that the relaxation of competition rules and controls on shop-building will sign the death warrant of the thriving high streets of small towns.
The Socialist-led opposition also plans to oppose what it sees as a transfer of economic power to the five large supermarket chains. By forcing price cuts on smaller manufacturers, the Socialists complain, the law will drive companies out of business or encourage the relocation of jobs abroad.
The centre-left newspaper Libération said: "The quality of urban life depends on the survival in town centres of businesses which are not all banks or clothes shops. By crushing wholesale prices, the hypermarkets will also crush the life of the small and medium-sized businesses which employ the majority of French people."
The federations of food companies and the farm unions protested that the draft law had been altered to give too much power to supermarkets. An earlier draft, approved by retailers and manufacturers, forced retailers to guarantee longer-term and larger contracts. Those provisions disappeared from the final version.
Other critics complained that the government had baulked at allowing large shops to open on Sundays, as they do in most other EU countries. They also protested that there was nothing in the law to break down the regional monopolies which prevent proper competition between the five large supermarket chains.
The government pointed out that the draft law will make it simpler to build supermarkets with up to 1,000sq m of floor space, rather than 300sq m at present. That should open the door to hard-discount stores, which have only 13 per cent of the French market.