Businessweek Archives

Getting From Rouge To Noir


Top of the News

GETTING FROM ROUGE TO NOIR

When it comes to food and fashion, the French are old hands. But marketing the stuff requires a special flair--one that seems to lose a lot in transatlantic translation.

In recent years, two of Paris' best-known department stores have opened American branches. And French discounters have tried to transplant their Gallic "hypermarkets"--cavernous stores that sell groceries and just about everything else. All have flopped.

Now, two of these French companies, the tony Galeries Lafayette and merchandising maestro Carrefour, are out to prove that retailing a la francaise can make it in America after all. Galeries Lafayette hopes to boost sales by revamping the product lineup at the New York department store it opened last fall. And in Philadelphia, Carrefour will try to pump a profit out of its four-year-old hypermarket by sharing costs with a sister store, opening on July 3.

Their turnaround attempts are far from sure bets, retailing experts say. Galeries' big French rival, Au Printemps, opened a Denver store in 1987 but closed it two years later. And France's Auchan dumped its two Chicago hypermarkets in 1991. A third, in Houston, remains open only as a laboratory to monitor U.S. trends. Meanwhile, U.S. imitations of hypermarkets, including those run by Wal-Mart Stores Inc., haven't fared well, either.

For Carrefour and Galeries, the problem may be that neither of their stores is distinctive enough. There is little to distinguish Carrefour, for instance, from other big discounters. "Hypermarkets work in France because the competition is a little hole in the wall," says Erin M. Anderson, an associate professor of marketing at the Wharton School.

NO VERSAILLES. Galeries Lafayette's big mistake may have been in opening a bland store that lacks savoir faire. "We wanted a modern image of France, not Versailles and the Eiffel Tower," says Stephane Constans-Gavarry, vice-president for international development of Galeries Lafayette. But the store, located in garish Trump Tower, "could be in a suburban mall in Topeka," says consultant Alan Millstein. Moreover, with dress prices typically $1,000 and up, the store is bucking a downscale trend. Galeries lost $3.7 million in 1991. This year, it will lose a similar amount, on sales of about $35 million.

To boost profits, the store plans to push three private-label lines, popular in Paris, that will sell for 30% less than designer brands. Galeries Lafayette, run by Bloomingdale's veteran Eugenia Ulasewicz, also will try harder to hype the store's French roots. How? With Eiffel Towers in its windows.

At the opposite end of retailing's spectrum, Carrefour doesn't need to highlight its French blood so much as it needs more advertising and deeper discounts. The new store, a $20 million investment, should help. "We'll have the power to buy truckloads and cut prices," says Carrefour's president, Michel Pinot. Carrefour's U.S. sales have grown from $65 million in 1988 to $100 million last year, though the company posted a 1991 loss of $1 million. Pinot thinks both stores may show a profit next year.

The U.S. stores are part of both companies' worldwide expansion plans. Carrefour, which invented the hypermarket in 1960, has become the No. 1 food retailer in France, Spain, and Brazil. With $236 million in sales, it is moving quickly into Argentina and Taiwan and is eyeing Mexico. Galeries, which has stores in Singapore and Bangkok, will open a Moscow branch in September and a Berlin store by 1995. A second U.S. store is possible, maybe in Beverly Hills.

For Galeries, the goal isn't just profit. It wants showcases that will draw tourists to the Paris store. There, foreigners accounted for some 30% of last year's $700 million in sales. Carrefour likewise wants to succeed in the U.S.--"the land where tomorrow's retailing is born," as Pinot says. For the French retailers, there may be more pride than francs riding on these turnarounds.Stewart Toy in Paris, with Morton D. Sosland in Philadelphia and Wendy Zellner in Dallas


Toyota's Hydrogen Man
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus