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Can French Retailers Survive Amazon?

For centuries super market business in France has been simple, you know who your competitors are and outside companies are non-factors due to government protection. Well, this golden age is about to end, and all of this is due to Amazon.

In the past, French supermarket industry is dominated by few major players with each of them controlling relative equal share of the market. These retailer purchase directly from French producers who often have a higher price than the rest of the world. The reason why these supermarket purchase from domestic producers are because of the high tariffs the French government charges on imported products especially when it comes to agriculture industry. This allow these supermarkets to develop relationships and buyer powers over domestic producers creating a barrier of entry for potential new players. This however all changed with Amazon starting to make inroad into the French Market. The model of Amazon allow it to lower the cost of its products due to the fact that it has low overhead cost like rent for the physical retail stores. This change has caught the entire French supermarket industry off guard and they are scrambling to adjust.

Recently, Carrefour, one of the largest supermarket chains in France has struck a purchasing agreement with Systeme U in an effort to gain purchasing power over its suppliers. This is largely to cut cost, so it can compete with the low prices offered by Amazon. Another French retailer Casino is also in talk with Auchan to develop a similar partnership.

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Another way that these retailers are cutting cost is by forming closer relationships with Chinese manufacturers of non-food items. This method should allow retailers to decrease prices but it does come with the cost of running into bad publicity with the French public and government who supports its domestic manufacturers.

There are also talk of stricter government regulation to block certain supply chain access for Amazon. In fact, all of the retailers are investing a lot of effort lobbying for the support of the French government. Facing with the dilemma, French president Emmanuel Macron has promised additional funding for domestic agriculture products, as well as minimal farm prices to protect domestic farmers. These efforts will slow down Amazon's footstep, however it will draw fire from other nations and the European Union, as it defeats the whole campaign promise of Macron which is the greater unification of the EU.

In the end, French retailers need to reinvent themselves in order to compete with Amazon. Relying on the government is simply not enough to be successful in the long run.

Source: https://www.reuters.com/article/us-carrefour-systemeu/carrefour-strikes-deal-to-become-biggest-buyer-in-french-retail-idUSKBN1HW0JV

https://upload.wikimedia.org/wikipedia/commons/5/56/Carrefour_Market%2C_Italie_2%2C_Paris_5_https://www.bordbia.ie/industry/manufacturers/insight/alerts/pages/impactofthe2014frenchretailbuyingalliancesin2015.aspx