August 13, 2020

Système U president Schelcher talks prices

Système U express (photo: Hans-Jürgen Schulz)
Hans-Jürgen Schulz
Successful formats: Système U's supermarkets under the "Super U" logo have been riding the corona crisis very nicely, thank you. The independent retailer is also diversifying into convenience with its "Système U express" fascia
There are grocers who boast. Others will overdramatise a specific point in order to gain a strategic advantage in the media over their competitors. There is also a rare breed of managers who speak so soberly that it takes a while to understand the significance of what they are actually saying.

Dominique Schelcher, President of Système U, France's third-largest retailer cooperative, belongs decidedly to the last of these three categories. When, for example, our newspaper asked him whether the current wave of insolvencies and redundancies in France will make local consumers more price-sensitive, he quietly answered that "price will be one of the big themes when school starts again" on September 1.

Friends, don't underestimate this, it means nothing less than a price war. Given the fact that Gallic retailers have already had to stem hundreds of millions of euros in coronavirus costs, there will be blood on the floor. And France will not be alone...

But this mild-mannered Alsatian, who runs his own store in Fessenheim, is as far from being a dramatizer as it is possible to conceive. So let the man speak for himself*, while you, dear reader, must judge for yourself:

"Price will be one of the big themes"

Dominique Schelcher, President of Système U (photo: IMAGO/Panoramic)
Dominique Schelcher
Monsieur Schelcher, will customers become more price-sensitive as a result of the corona crisis?
The economic consequences are substantial. Increasing unemployment and fears as to job security will make consumer spending power subject number one in the public debate. Therefore, price will be one of the big themes when school starts again, and competition among retailers will be correspondingly strong.

What extra costs have you incurred during the crisis?
We have implemented all the safety measures required by the public health authorities. All shop staff have been provided with protective masks and disinfectant hand washes. We have also installed plastic screens to protect our check-out staff at the tills.

Have you also paid special bonuses to your staff in recognition of their services?
We are a retailer cooperative where each store belongs to an independent entrepreneur. Thus, any payment of a 'Covid bonus' is the responsibility of the individual owner. To date, however, the overwhelming majority of our members, i.e., around 92 per cent, have paid each member of their staff a bonus of nearly €1,000. At a central services level we have paid bonuses to more than 5,000 employees who work predominantly in logistics.

How high have your costs been overall?
It is difficult to define these for individual stores, and we haven't compiled any national statistics. However, these costs are certainly not trivial. At a central services level I would estimate them to be around several dozen million euros.

How has the crisis affected member businesses?
In quite different ways. Some stores have seen their sales rise, while others have taken a hit. The worst affected are hypermarkets, seasonal shops and stores who normally have a lot of student customers. To date, medium-sized convenience shops have fared best of all. But even these have experienced quite a drag on their operational results due to the extra costs incurred during the current pandemic.

Do you believe that independent retailers have a structural advantage over the multiples?
Actually, I don't think it is a matter of corporate structure, although we independents can certainly react to changes in a more flexible way. I think that the size of the store and its relative proximity to the customer are the decisive factors in terms of competition. This is because customers want to shop as near as possible to their own homes and to spend as little time as possible in stores during the current crisis.

So your big stores have been hit the hardest?
Yes, our hypermarkets have suffered the most during the lockdown. All the usual arguments for shopping with them have fallen by the wayside during the pandemic. Fortunately, customers are returning now that the long lockdown is over.

How well prepared are you for a second wave of the coronavirus?
We are continuing to apply all our security measures. It was also definitely the right political decision to make the wearing of protective masks obligatory when shopping in France. Customers now accept this as a matter of course.

And how secure is the supply of goods now?
At first, customer demand focussed almost exclusively on a few essential products. Then, pictures of empty shop shelves on the TV only served to increase consumer worries regarding possible shortages. Fortunately, the whole supply chain adapted rapidly to meeting this extraordinary demand. Suppliers, for instance, concentrated on making just one product such as macaroni within their total brand portfolio. This enabled their factories to make goods around the clock.

Customers then quickly realised that they weren't going to go without essential products such as pasta or toilet paper.

* The order of these questions has been partially changed, and some of the answers have been condensed so as to enhance readability for an English-speaking audience. In case of doubt, the French original, which is available to readers on request, pertains and shall be the only authorised version.

For those who love facts & figures: According to statistics provided by the company, Système U grew sales by 3 per cent to just over €20.5bn in 2019. This would rank the retailer cooperative as France's number four grocer after Leclerc, Carrefour and Intermarché. As per 30.12.19, Système U comprised over 1,600 outlets, including hypermarkets, convenience stores and, above all, supermarkets.

Lebensmittel Zeitung with its online sisters (photo: LZ)
Our German retail B2B newspaper, Lebensmittel Zeitung, in print & digital
Read in German: 'Preis wird zum Thema Nummer eins' & 'Frankreichs Händler erwarten den Preiskrieg' by international editor Mike Dawson on page 8 of Lebensmittel Zeitung, no. 33, 14.08.2020

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