The international retail scene is increasingly characterised by consolidation. In such an environment, many independent retailers are seeking refuge as part of large voluntary or buying groups, organisations that allow independents the chance to achieve greater collective buying power and a stronger brand identity.
Elsevier Food International, Vol. 6, Number 4, November 2003
Christiane Weinberger

Conversely, some of the major grocers such as Carrefour are using independent franchisees to expand, which is a low-risk and low-cost route to growth. There are various degrees of independence, and it is increasingly the case that independents operate under the wings or umbrella of larger organisations, be they buying groups, voluntary groups, symbol groups, wholesalers or larger retailers.

Internationalisation

Rewe's giant discount format XXL will be rolled out in Romania.

While consolidated multiple retailers enter new markets through acquisition or organic store
openings, voluntary groups must enter into partnerships with existing organisations or recruit independent retailers or chains active in the target market. The results of voluntary groups' internationalisation have been mixed, with some decent successes. Rewe, lTM and IGA represent some of the retailers for which international expansion has proven largely successful.
IGA, which claims to be the world's leading voluntary supermarket group, has expanded its presence to over 40 countries. Its major international markets include Canada (via Sobeys) and Australia (with Metcash): The IGA business in Australia is doing well, generating US$3.6 billion in annual sales and taking third place in the competitive market. A recent boost was the purchase of 120 Franklin stores through IGA franchisees. FairPrice, IGA's member in Singapore, plans to expand the Cheers convenience store franchising model for faster growth hoping for improved competitiveness with the 7-Eleven chain. A total of 100 stores are planned for 2003.
ITM's international operations focus on Europe and include stores in Belgium, Bosnia & Herzegovina, Germany, Italy, Poland, Portugal, Romania and Spain. With the exception of Germany, international operations are progressing well with foreign sales representing about 30 per cent of total company sales. In 2003, expansion has focused on Poland where ITM invested around US$90 million for future store openings.
Spar International has overseen significant international expansion, granting new franchises for markets such as Russia and Ukraine, and has a vast network of both independent and multiple retailers operating Spar stores around the world. Its operations are conduced through a mixture of wholesalers (such as in the UK), independents and even consolidated multiple retailers such as Spar Austria. Its largest operations are in Germany (controlled by lTM), Austria, the UK, Italy, Japan and South Africa.
Due to ever-narrowing profit margins in its home market, Germany, Rewe's recent expansion has focused on international operations. In 2003, Rewe acquired the Bon Appetit Group in Switzerland, with 2002 sales of €2.1 billion. The acquisition could increase international sales to €10 billion. The retailer is continuing to expand its Billa supermarket banner in Eastern Europe's emerging markets Ukraine, Romania, Croatia and Bulgaria, while its Penny chain has grown strongly in Italy. Although its international operations are performing well, the question remains how Rewe can reinvigorate its German operations. Carrefour's franchised operations are of increasing importance. Its international sales in Europe, Asia and the Americas represented 49 per cent of company sales in 2002, with 42.6 per cent of its store base operated by independent franchisees. Since the bulk of international sales come from Europe with 34.2 per cent (excluding France), future expansion focuses on the reinforcement of European sales and the continued development of both company-owned and franchised chains. Its key franchised operations include a c-store network consisting of four different banners in the retailer's home market and even franchised discount stores in some European countries. While some voluntary retail groups have already successfully expanded into overseas markets, others have traditionally focused on domestic affairs and are only now looking to international opportunities. This is notably the case with Leclerc whose international operations in Italy, Poland, Portugal, Slovenia and Spain remain modest at three per cent of company sales. The number three retailer in France, Leclerc has established partnerships in an attempt to build a pan-European network of independent retailers better able to compete with consolidated retail chains. Partnerships have been reached with Système U in France and more recently with Conad in Italy. Through the agreement, the two retailers are to develop the hyperrnarket format in Italy with the goal to operate 30 co-branded outlets by 200S. Joint buying and best practice sharing represent a second priority of the agreement. Concerning future market entries, Leclerc plans to broaden its presence in Eastern Europe with anticipated market entries into Romania, Bulgaria and Croatia.

Organisational changes
Increased centralisation and joint buying efforts are multiplying among independent retail chains. A more centralised buying structure ensures greater control over buying, more significant buying

Spar International has seen sifnificant international expansion, granting new franchises for markets such as Russia and Ukraine. In Moscow, Spar has plans to build more stores after opening its first Eurospar outlet in 2001.

power can improve supplier negotiations and reduces the costs of operating through a large number of regional offices.
Spar International has centralised buying for products for resale as well as non-resellables. Although it still grants its members and affiliates a high degree of autonomy, there are signs that Spar is seeking to create more uniformity across its global activities through the introduction of common products and common store concepts such as Eurospar, Interspar, Spar and Spar Express. Despite these developments, Spar has no international centralised purchasing for the bulk of the items that Spar retailers carry and this is the reason why many national Spar organisations have created a corporate structure for themselves or are part of broader retail groups.
Edeka began its process of reorganisation in 2001, converting its structure of 12 regional cooperatives into a centralised corporate structure. The number of cooperatives was gradually reduced from 12 to six and the creation of Edeka KG ensures the shift from decentralised to centralised buying.
While Rewe is decentralising the buying structure of its supermarket formats (MiniMal and HL) to better reflect regional demands and to give greater power to its subsidiaries and franchisees, it plans to develop partnerships with other European buying companies in the DIY segment. A joint buying agreement has been reached between its Toom DIY stores,Edeka's AVA DIY division and Baumax.
Leclerc began restructuring its buying process from a decentralised to a more centralised structure in the late 1990s. The retailer and Système U created a joint buying office called Lucie in 1999. Through the latter, the two retailers manage the purchase of gas and first-price products, the development of own brands and imports. An enlargement of the cooperation to include ITM is anticipated.
ITM has entered a number of joint-buying agreements to optimise its operations. For its German arm Spar AG, it created the Agenor joint-buying company. Concerning its international buying, ITM and Spanish retailer Eroski created ALI DIS, a single buying structure for the joint acquisition of basic products for Spain and other international markets. Both retailers share the development of private label ranges, merchandising and management systems, with the goal to improve sales and buying power on a European level.

Format development
In addition to international expansion and organisational changes, independent retailer groups have developed strategies of format consolidation and/or diversification to address market challenges.
In Indonesia, the IGA representative Matahari will set up a supermarket in the same complex as one of its department stores, thus creating a valuable one-stop shopping experience. Canadian IGA member Sobeys is to streamline over 20 formats to just five banners: Sobeys, Sobeys Express, IGA Extra, IGA and Price Chopper. Metcash, the IGA operator in South Africa, is to consolidate its five banners into the single Friendly concept to improve profitability and cut costs. In order to attract a more affluent consumer base, Fairprice, the IGA member in Singapore, developed new in-store concepts, including 'The Pasar', a fusion of a traditional wet market and the fresh food department of a modern supermarket.
lnterrnarche's German subsidiary Spar is to abandon its complete ownership business model in Germany. Consolidated Eurospar and lnterrnarche stores will be closed, sold or integrated into the franchised Spar business model by 2004. Spar Germany will consist exclusively of franchisees and the discount format Netto. Thus, non-food discount format Kodi and the cash & carry stores have been sold.
To face stagnating retail sales in Germany, Rewe has turned to the development of non-food formats and the expansion of the discount format. Rewe intends to increase the number of its Penny discount outlets and is currently looking for new suitable real estate sites.
In France, Leclerc increased sales through the addition of ancillary services to its existing hypermarket outlets. It operates 225 jewellery stores called Manege a Bijoux, 55 cultural centres, 121 travel agencies and 73 pharmacies with combined 2002 sales of approximately
€671 million. In addition, Leclerc operates 479 petrol stations. In Eastern Europe, Leclerc has been replicating its French hypermarket format. In Poland, the stores are state of the art, but the price level is higher than in other retail chains. The question remains whether this approach will enable Leclerc to reach its desired sales levels in a retail market where the average consumer is less affluent than in Western European markets.

Merchandising

Sobeys in Canada consolidate its private label portfolio, while in Eastern Europe Leclerc has been replicating its French hypermarket format.

The optimisation of assortments and private label portfolios as well as joint merchandising efforts have gained in importance among independent retailers in the past few years.
Both lnterrnarche in France and Sobeys in Canada plan to consolidate their private label portfolios. These retailers seek to strengthen throughout Edeka's store base while leaving franchisees enough freedom to fine-tune assortments to meet local consumer demands. In Germany, the UK and South Africa, Spar hopes to increase its competitiveness through the expansion of private label product ranges and an assortment restructuring. In Germany, 'Die Sparsamen' ('the thrifty') will be relaunched as a first price private label and will be expanded to 300 products. In the UK, Spar has expanded its private label lines to include ready meals, ethnic foods and fresh foods. In South Africa, Spar plans to extend its private label lines to comprise more upscale and premium priced products.
Auchan and Casino's merchandising efforts are coordinated through joint venture company International Retail and Trade Services (IRTS), which has three main objectives: joint international product development, enhanced buying power, and the development of relationships with small and medium-sized suppliers. The cost reduction associated with international product launches and reduced pricing will allow Casino to pass on benefits to its franchised and independent retailers.

Benefits of franchising
While the aforementioned organisational changes, format developments and merchandising initiatives are not unique to voluntary retail groups and franchisers; their method of international expansion represents a number of advantages. The inclusion of new franchisees represents a valuable store expansion method in markets where the access to and cost of real estate is problematic. Notably, this is the case in Europe and Asia, where building regulations and expensive real estate sites make an organic store expansion programme quite challenging. The franchising system also allows retailers to retire more easily from a market in which they find themselves unprofitable, such as Laurus' withdrawal from Spar activities in Belgium. However, it is important to note that voluntary retail groups and franchised chains only work because of the main feature of international retail - consolidation. Truly independent operators can no longer prosper without the support of a larger organisation and it seems likely that most independents will continue to seek safety in numbers.