November 24, 2006

Leclerc boss on why he is still a rebel

Dr. Michel-Édouard Leclerc, President of Leclerc  (photo: Les Linéaires)
Michel-Édouard Leclerc: "We put our social and political vision before money-making" (photo: Les Linéaires)
Michel-Édouard Leclerc, president of leading French retailer co-operative E. Leclerc, is a living legend in France.

This self-styled Robin Hood of French consumers, who has declared a personal crusade against higher prices in favour of "la vie moins chère", is seldom out of the media.

Our newspaper's film team cornered the charismatic Frenchman at the retailer's ultra-modern headquarters in Ivry-sur-Seine on the outskirts of Paris.

This is where all the independent retailer members of 'le mouvement Leclerc', which grossed revenues of €35bn last year, are expected to invest a third of their time (tiers temps) helping the collective. But none of them may run more than two hypermarkets or three supermarkets.

So we asked Dr. Leclerc to explain the exceptional corporate culture created by his father in 1949.

A buddy of Alain's
Michel-Édouard Leclerc's close personal friendship with fellow Frenchman Alain Caparros, CEO of German food retailer Rewe Group, has also given new impetus to the European retail alliance Coopernic.

Despite his debonair style, Dr. Leclerc looked a little disconcerted when our film team arrived at his serene, book-filled office overlooking the Seine. This included a number of burly cameramen with pony-tails and a tattooed photographer with ear rings from Australia.

So, as Leclerc spoke philosophically about his company in quiet, gentlemanly tones, frequent interruptions included: "Tell him not to look so stiff!" or "What's the French for showing too much shirt cuff?"

Also, the interviewer had to squat on Dr. Leclerc's office floor out of camera view. Small wonder then that the interviewee looked from his desk as though saying to himself: "How strange these English are!"

"Just creating prosperity
doesn't lead anywhere"

Michel-Edouard Leclerc (photo: Anna-Maria Barten)
Michel-Édouard Leclerc (photo: Anna-Maria Barten)
Dr. Leclerc, do you think that your independent shop owners understand more about retailing than the store managers at the high-street multiples?
The multiples are more oriented towards pure commercial logic. We are retailers and not financiers. Of course, we want to make money, but that is only a secondary goal. Our main aim is to enhance our performance as a retailer, increase market share and raise the level of customer satisfaction.

What are the main requirements made of a Leclerc member?
The store owner must agree to act price-aggressively and never to endanger our reputation for low-prices. A member must also make a contribution to central office division and show social engagement. He or she should promote the social development of his staff and participate in local sponsorship activities. The member must be the cultural soul at each store's locality and work for humanitarian goals.

That sounds like a retailer goody-goody...
...our members can grow and become prosperous through their work, but only if they continue to show solidarity with their fellow members. As independents we emphasise the importance of independence, but the individuality of each individual can endanger this very independence. That is why members must primarily orientate themselves towards a set of values whereby independence is preserved within a framework of solidarity.

What form does this solidarity take?
It can take the form of adopting new members, camaraderie, mutual support and joint work. My father taught me that one's personal financial goals must be linked to social interests. They must serve social progress. If one combines these two factors, society will accept the striving for profit.

Why do you term Leclerc a 'movement'?
We do not see ourselves as a group because the stores under the Leclerc banner do not belong to my family or to a holding company quoted on the stock exchange. We are an association of independent retailers. It is a network in perpetual motion, so why not call it a movement?

What tasks does a member have to do as part of the movement?
Low head office costs are one of the reasons for our organisation's strong performance. Head office costs are so low because the store owners devote a large part of their time to serving the movement. Our members form work groups in Paris and in regional centres in order to negotiate buying terms with suppliers.

But aren't those who sacrifice a lot of their time for the greater purposes of the movement at a disadvantage compared with those who don't?
In reality, it is exactly the opposite. It is the very best members who sometimes work three or four days a week for the movement. They are often the most prosperous ones.

What advantage does a store owner have if he or she works without pay for head office?
Such members gain an overview of supplier terms & conditions at each store throughout the country. They can then decide whether they want to negotiate with individual suppliers directly, or via regional centres, or together with three or four other store owners. Work at head office also expands the intellectual horizon.

In what way?
The first two generations of our movement were often small regional retailers who had not undergone any higher education. They ran the risk of not being able to keep pace with the multiples in, for instance, technical matters. Through working at head office they came into regular contact with well-trained managers.

If a retailer wants to advance intellectually and be more than a petit bourgeois capitalist ensconced behind a till, then he must free himself from the constraints of his locality.

Is every store owner obliged to work three or four days per week at head office?
There is no contractual obligation to do so, but there is certainly a moral one. You should remember that a member also works for himself at head office. He or she can gain tremendous insight into buying and delivery terms & conditions. Also, no profit goes to head office in Paris.

How free are store owners regarding the choice of assortment?
Our store owners can compliment their assortment with regional, national and international products as much as they see fit. They are under no obligation to buy these via Galec, our central buying office in Paris.

Our members know the buying terms & conditions and can decide on what profit they want to make. They are totally free. After all, they are the owners of the stores.

Who looks after the stores when the owners work at head office?
When they work in Paris, they must see that they employ the very best store managers so that everything runs well while they are away.

How many full-time specialists are employed at head office?
Around four to five hundred people. In addition, we employ 20 to 25 managers and 100 staff at each of our 16 regional distribution centres. Our head office costs amount to around 0.17 per cent of annual revenues, which is one of the lowest levels in European retailing.

Why do you limit the number of stores which individual members are allowed to run?
The owner of a Leclerc store is sitting on a small gold mine. He can make a huge profit margin from day one. This is a big temptation for someone who only wants to earn a lot of money without adhering to our corporate philosophy.

My father and the founders of our system were always worried about the negative effects which multiple structures could have on our movement. That is why they limited ownership to two big or three small outlets per member.

Is it really such a danger?
We have witnessed this danger even at fellow retailer cooperatives Système U and Intermarché, where members can own four or five stores and buy other ones in their region. This gives rise to the danger of petit bourgeois money-spinning. We all face this danger, whether it be Leclerc, Rewe or Edeka.

How do you recruit new members?
Due to today's strict planning acts, we can only offer, with a good conscience, 30 to 40 married couples the chance to buy an outlet from within our store network. The new store members are usually recruited from store management.

Instead of increasing the salary of store managers who have worked well for us for five to ten years, which would increase our cost structures unnecessarily, we believe that it is more motivational to offer them the chance to buy their own store.

How do you organise the selection process?

We let potential candidates work in various management roles for three or four years, depending on the size of the outlet concerned. When we consider them mature enough, we send them out on a three to four-month tour of other stores. During this time they will be evaluated by the store owners. Later on, the store owners initiate a small sponsoring committee which presents the candidacy for store ownership.

Can you expand fast enough using this procedure?
We do not have a central real estate division to stimulate the movement's expansion. Every store owner tries to find a second store, or to extend his existing store, or to find a better site.

Of course, the big retail groups are able to raise more money for the purposes of expansion, especially abroad. On the other hand, our store owners are more familiar with their local area, have better local contacts and therefore can usually obtain planning permission more easily.

Hasn't your cooperative reached the limits of what it can finance?
Of course, we are not able to tap the stock exchange for their funds, which increases our costs. However, we do not have any difficulty obtaining financing because five to ten members are always prepared to guarantee a new store owner as part of our inter-company solidarity.

How do you finance your foreign expansion?
Here we were obliged to create a joint fund to which French members make a yearly contribution. We were also obliged to abandon our principle of independent retailers and now act like an international multiple. However, the fact remains that big international retail groups are able to expand more quickly abroad than we can.

What must the retailer do to meet today's consumer needs?
Consumers have matured and have new needs. Only ten years ago, demand determined supply. Consumer purchases were made on the basis of competing with the neighbours. So retailers simply contented themselves with arranging what brand manufacturers offered.It is different today: supply determines demand. Consumers don't know what they want to buy in advance.

What are the consequences of this?
We retailers must display offers, explain products and differentiate ourselves via the merchandising as though we were brand manufacturers. This development means that the relationship between the retailer and the consumer has become far more complex today.

We are no longer mere distributors of goods; we have become veritable service providers in the fields of sales, consumer information, product guarantees and customer service.

How do you define yourself? Are you a socially-minded capitalist or a commercially-minded socialist?
When I was young, I was a member of various left-wing movements. I am still a rebel in many things, and I refuse to accept a complacent, bourgeois society. As far as I'm concerned, it's not a question of being for or against the capitalist system, but rather how financial capital, technical know-how and human capital can be organised most effectively in order to optimise their social use.

Do you really believe that such idealism will help you in day-to-day business life?
Just creating prosperity doesn't lead anywhere, if it doesn't do anything for society. That is very easy to understand, but this simple message is often forgotten by many managing directors. We are not philanthropists, but we do have a social and political vision which we put before mere money-making.


Lebensmittel Zeitung with its online sisters (photo: LZ)
Lebensmittel Zeitung with its online sisters
Read in German: 'Ich bleibe Rebell' by Mike Dawson & Bernd Biehl on page 35 of
Lebensmittel Zeitung, no. 47, 24.11.2006

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