Costco’s global reach soon to touch France
After four years mired in a thicket of red tape, Costco Wholesale is getting closer to opening its first warehouse in France, a key building block in its slow but sure-footed global push.
Now the hard part begins. When the Issaquah retailer opens the store, possibly next spring, it will land right on the doorstep of some of the world’s most powerful retailers: Carrefour, Auchan and Casino, which run huge hypermarkets selling a dizzying assortment of food and other products.
Costco has been successful from Canada to Australia by offering huge deals on a limited number of quality products. Its French rivals have been mired in a costly price war for two years, gaining market share from existing discounters and making Costco’s advantage less clear, experts say.
“The French retailers, especially Carrefour, are not going to give anything up,” said Jacques Dupri, director of insights and communications at retail consultancy IRI.
Yet others say the price war has made France’s grocery market volatile and could favor Costco.
The French market is a new test for Costco’s international effort – an important component of its future growth as the U.S. market becomes saturated with its huge warehouses. Already nearly half of the warehouses it opens every year are abroad.
France – wealthy, sophisticated and centrally located – would be Costco’s third European base after the U.K. and Spain, and would help scale up its continental ambitions.
Regulatory road
But this is also the country where Uber sparks violent protests from taxi drivers and the government passes laws to protect bookstores from online giant Amazon.com. Similarly, Costco faces powerful incumbent retailers and wary regulators.
Costco’s head of international operations Jim Murphy, said the company would wait “until we have something firm to discuss” before commenting on the details of its French operations.
But Gary Swindells, the head of Costco France, has spoken to the media there often, allowing a glimpse of the company’s ambitions for the country.
These dreams, which began to take shape in 2011, are big. Swindells told a French trade journal that Costco envisions opening up to 15 warehouses in France over the next decade.
As a point of comparison, Costco has about 20 warehouses in Japan, a country with twice the population of France and where it has operated for more than 15 years.
Getting a blessing from France’s punctilious bureaucracy to hang its shingle has taken years, in part because rivals keep petitioning regulators against it. Mostly they’ve objected to Costco’s entrance in a field where they say there are already too many competitors, therefore endangering jobs. They’ve also criticized the pedestrian looks of its proposed warehouse.
A first attempt to build a warehouse in the eastern Paris suburb of Bussy-Saint-Georges, approved by local authorities, was rejected in 2013 by the national agency overseeing commercial development after local opponents appealed.
The government agency determined Costco’s warehouse “wouldn’t be harmonious with its environment,” and its architecture would have a “low quality” aspect, according to a document posted on its website.
In May 2014, Costco had a breakthrough: Regulators greenlighted a 120,000-square-foot warehouse in the southern Parisian suburb of Villebon-sur-Yvette, an area known for its high concentration of research parks – and the site of Carrefour’s global headquarters.
But according to French daily Le Figaro, Carrefour and Auchan appealed, pushing back the estimated opening date from late 2015 to spring 2016. Neither company responded to a request for comment.
Retail workers have also weighed in. Local newspaper Le Parisien reported 200 employees of Auchan in Villebon signed a petition last year against Costco, accusing it of unfair competition due to its very low margins.