Monoprix Wants to Be French Whole Foods in Amazon Partnership

(Bloomberg) -- An iconic French retailer is cozying up to Inc. in the hopes that convenient services will help it fight off lower-priced competitors in the key Paris region.

Monoprix, known for stylish packaging of its store-brand groceries and clothing, is now filling orders for subscribers to Amazon’s Prime loyalty program in Paris through a two-hour-delivery partnership that launched Wednesday.

The chance to tap Monoprix’s brand image and supply chain is a breakthrough for Amazon Prime in France, where the Seattle company has said it wants to make fresh food a priority. But the choice by a high-margin city retailer to team up with Amazon -- whose maxim has long been “your margin is my opportunity” -- has critics in France asking if the deal might backfire. It’s a view Monoprix’s chief executive officer refutes.

“There’s very little risk of cannibalization,” CEO Regis Schultz said in an interview. The advantage of having access to Amazon Prime’s customers outweighs the risk of Monoprix customers defecting to Prime, where many of the French retailer’s products will have to compete with cut-price options, he said. “This is a growing market, and when you add services, you make it grow more.”

Higher Margins

Parent company Casino Guichard-Perrachon SA enjoys higher margins than competitors like Carrefour SA thanks to a high exposure to the Paris market via its Monoprix and Franprix banners, whose dense store networks keep a grip on shoppers too busy to hunt for low prices.

But E. Leclerc, the closely held competitor whose market share has climbed thanks to a reputation for consistent low prices, has designs on Paris: The company is adding physical stores well as launching a next-day delivery service with prices an average of 32 percent lower than competitors’, according to a study by the French magazine LSA.

With hard discounters like Lidl and Aldi encroaching in the city as well, Monoprix is doubling down on its premium positioning. “If you’re looking for the Whole Foods of France, it would have to be Monoprix,” said Schultz, referring to the premium grocery chain Amazon bought last year for $13.4 billion.

With e-commerce expected to take a bigger share of “non-emotional” purchases like diapers in bulk, he plans to sharpen Monoprix stores’ focus on fresh and prepared foods, as well as adding new services. “I see our stores becoming a sort of urban hub,” said Schultz, who joined Monoprix from appliance retailer Darty when it merged with Fnac in 2016.

Profit Slice

Monoprix is giving a slice of its profits to Amazon in exchange for offering and delivering its products. Competitors who run leaner, low-margin businesses to keep prices low wouldn’t be able to sell through services like Amazon Prime and still make a profit, Schultz said.

The stakes are high for Monoprix to keep up its performance: Shares in parent Casino are down 40 percent this year amid steep competition for French retailers, a turbulent climate for its Latin American subsidiaries, and investor concerns about its complex holding structure and high levels of debt. The holding company Rallye SA, through which Chairman Jean-Charles Naouri controls Casino, will face high borrowing costs to service its debts if the grocer’s share price continues to decline.

Schultz said Monoprix’s margins are sustainable, and that its prices are competitive for higher-quality products like organic bananas and fair-trade milk.

“People in France are starting to wake up,” he said. “They realize that after a certain point, lower prices mean bad quality.”

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