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North Africa Morocco’s competition betting on hard-discount
Morocco’s competition betting on hard-discount
By Julien Clémençot, translated by Olivier Milland
From the parking lot of Carrefour Maxi, which opened in Casablanca on March 16, the new shopping centre stands out from other traditional big retailers.
The facade is no more than a huge glass window, which beams the sun’s rays to the aisles and generates a lower electricity bill. Inside, reduced prices remain the leitmotiv: reduced staff and no plastic polythene bags at the counters, among others.
After a long period of indecisiveness on what strategy to adopt for Metro retailers, who had been bought up in 2010, Label’Vie finally opted for the South American style warehouse store-model. The total costs for overhauling the shop in Casablanca amounted to $1,7m. In the short term two more stores are expected to open in Fez and Oujda.
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“This model could work as long as prices are cut by at least 10 percent, compared to other brands”, judges Abdek Wahab Chaoui, from the consulting firm C&O marketing.
Carrefour Maxi offers regressive pricing, in relation to the quantity or purchases, and targets both the household and business markets. The objective is to get low-income clients who deem it too expensive to do their shopping in regular supermarkets.
Sophistication
The success of this position is dependent on the group’s ability to negotiate lower prices. “For instance, products of the Carrefour brand are penalised with import fees at the Moroccan borders. It is, therefore, of outmost importance that Label’Vie increases the offer on Twimenproducts, which are produced in Morocco,” explains Abdel Wahab Chaoui.
But for the time, these products represent no more than 5 percent of the global offer. Another challenge that Label’Vie faces is to manage a low-cost concept within a group that is generally known for its sophisticated retailers.
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For Morocco’s hard-discount pioneer, the Turkish BIM, it appears to be less problematic. Ever since 2009 the group has launched several mini-markets – 400m² – in working class neighborhoods, the fertile grounds of traditional delis who strongly appeal to the informal sector, with a more competitive pricing.
And while BIM is regularly declared dead, the group has recently announced the opening of 50 new selling points in addition to the existing 76. Ten months back the group was estimated at a value of $13,2m.
However, investment is meagre “as a consequence to [the] strategy that favours renting, rather than acquiring, store spaces”, Tarik El Fekkek from Cabinet Mazars points out. Thereby, the Moroccan subsidiary can count on the parent company when profitability is not forthcoming. Last year the group’s global profits shot up to $158m.
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