US retail giant Costco Wholesale brings bulk brie to France

Bloomberg

About a half-hour south of Paris, a uniquely American import has opened for business.
The store’s aisles brim with beauty and bulk, side by side. One-kilogram (2.2 pound) wheels of Mont D’Or cheese sit near $5,509 Breitling watches. The Yanks demand that the locals fork over an annual fee of $42 just to walk in the door.
France, meet Costco Wholesale Corp. In June, the world’s largest warehouse-club chain opened in the suburb of Villebon-sur-Yvette, between Orly Airport and Ecole Polytechnique. Having succeeded in spreading its treasure-hunt shopping experience across North America, Asia and the UK, Costco is infiltrating the global heart of refined taste.
The stakes are high for Costco. Its US customers are shopping less frequently as they get older, new locations are cannibalising existing ones, and the younger set is spending more online. That’s spooked investors—Costco’s shares have barely budged this year despite solid sales growth—and put more pressure on stores outside the US, which account for about 28 percent of Costco’s $129 billion in revenue.
“They’ve done well in the US, but the competitive landscape there has changed dramatically,” says Arun Daniel, a senior fund manager at J O Hambro Capital Management in Boston.
“They cannot sustain that long-term, so where can they show growth? Internationally.”
In a historical sense, France is a natural for Costco. The idea of putting a wide range of affordable stuff under one roof came from a Frenchman, Aristide Boucicaut. He took over a modest Paris shop called Bon Marche in 1852 and expanded it from 300 square metres to 50,000, inventing the modern department store. In the 1960s, French retailer Carrefour SA pioneered the “hypermarket,” combining a Wal-Mart-like selection of dry goods with groceries in suburban big-box stores.
The French are also among the biggest retail spenders per capita in Europe, according to researcher PlanetRetail RNG, and the nation is on track to see its strongest economic growth since 2011 under business-friendly President Emmanuel Macron.
However, the French are focussed on quality rather than quantity, and prefer to patronise small neighbourhood merchants.
But the success there of fast-food giants like McDonald’s Corp. and Subway Restaurants debunks the stereotype of the snooty, exacting shopper. The French spend nearly half their food and household goods budgets at hypermarkets.
The 500 billion-euro French retail market is crowded and cutthroat. A half-dozen companies control most of it, and they’ve spent the past decade engaged in a brutal price war. German discounters Aldi and Lidl have elbowed in, too.
The price war has taken a toll. In August, Carrefour, France’s biggest retailer, suffered the biggest-ever drop in shares after saying business wouldn’t improve in the second half of the year. Casino Guichard Perrachon SA, another big player, reported the first revenue decline in two years at its French hypermarkets as more spending goes online.
“The climate has been punishing,” said Ray Gaul, an analyst at Kantar Retail in London. “Each operator fights the others to gain fractions of market share.”
Costco is famous for keeping expenses low and refusing to take more than a 15 percent markup on its limited assortment of items, betting that manufacturers will accept the lower price in return for higher volumes.