France - Country Commercial Guide
Distribution and Sales Channels

Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
 

Last published date: 2021-10-26

Overview

The distribution channel includes all activities supplying goods and services to consumers. This includes eCommerce, retail business, hypermarkets/supermarkets and specialty stores.  With over 508,000 firms, 3.4 million employees and a consolidated turnover of over $548 billion, retail distribution is an important, dynamic, highly sophisticated and competitive sector of activity in France with a versatile array of cutting-edge marketing and selling concepts. Retail industry interests are well represented by a federation of industry specific retail associations, “Conseil du Commerce de France”, that issues an Extensive Survey of Retail Trade in France in close cooperation with the French statistical agency INSEE every year.

One of the challenges for U.S. SMEs interested in breaking into the French market is dealing with highly concentrated retail distribution chains and networks, as well as occasional French global manufacturers/suppliers that have strong control over the retail networks they are using.  In many sectors, independent wholesale/retail outlets are disappearing rapidly and being replaced by retail distribution chains and networks that have significant market shares in France, but also in the other neighboring European Union territories.  Many of these large retail networks have extremely well-organized buying offices that have put very stringent selection processes in place for products and services distributed.  High retail mark-up, ongoing competitive market innovation, and creativity combined with constantly changing theme designs are prerequisites to keep up with retail trends.  Complete data on buying offices of French key retail networks (all sectors inclusive) can be acquired from Panorama Trade Dimensions.  The American Embassy’s Paris U.S. Foreign Commercial Service Consumer Goods and Distribution Retail Trade Specialists, Caroline.deVilloutreys@trade.gov  and Rose-Marie.Faria@trade.gov  can assist U.S. firms approaching the French retail market operators.

The Retail Network Food & Non-Food

France possesses a diverse and comprehensive retail network, which increasingly resembles that of the United States, from the largest department store chains to the smallest individual proprietorships. French distribution channels are demonstrating some significant new trends that could affect how products are sold in France. Small- and medium-sized family-owned firms, which traditionally accounted for most French wholesale and retail trade, are rapidly losing ground to hypermarkets— large retail outlets carrying a wide variety of products at discounted prices and to a myriad of convenience stores. At the same time, online sales, and specialized chain stores have shown strong growth. All these trends have been accelerated by the Covid 19 pandemic and the lockdowns that favored on-line purchasing as well as all digital form of convenient services.  To face and adjust to the sanitary crisis, most retail players had to either create, develop, improve and implement digital services to overcome and compensate the closure of stores.  In the food sector, those who accelerated their multichannel options saw record growth rates in 2020 with sales volumes of home delivery and drive options increasing by more than 45% in a year.

The food & non-food retail sector is generally defined by six types of establishments: 1) hypermarkets, 2) supermarkets, 3) hard discounters, 4) convenience, 5) gourmet centers in department stores, and 6) traditional outlets.

  • Hypermarkets (Hypermarchés): Hypermarkets are defined as stores with a minimum selling area of 2,500 square meters. French hypermarkets offer 25,000-40,000 products for sale at competitive prices, of which 3,000-5,000 food items and 20,000-35,000 non-food articles. Generally located in suburbs, they cover a total sales area of 11.8 million square meters. As of 2020, there were 2,257 hypermarkets, employing over 330,000 people. The top hypermarket companies are Leclerc, Intermarché, Super U, and Carrefour.
  • Supermarkets (Supermarchés): Supermarkets are smaller versions of hypermarkets, with a selling area between 400 and 2,500 square meters. They usually carry 3,000-5,000 items, of which 500-1,500 are non-food products, and cover a total sales area of 7.1 million square meters. As of 2020, there were 5,716 supermarkets, employing over 160,000 people. The top supermarket companies are Carrefour, Intermarché Super, Carrefour Contact, Franprix, and Casino.
  • Convenience Stores (Magasins de proximité): Convenience stores are generally located in city centers of small-to-medium size towns but are now flourishing in major cities. Currently, there are more than 7,140 outlets with an average sales area of 177 square meters. Since around 2009, convenience stores have become more popular and hypermarket/supermarket chains began creating local convenience stores with their brands, Click & Drive: Click and Drive has become popular among consumers over the past few years.
  • Thanks to increasing internet accessibility, stores such as Le Drive Intermarché, Leclerc Drive, Carrefour Drive, Leader Drive and Auchan Drive have met the high demand for convenient shopping by offering services that allow a consumer to order groceries online that will be ready for pick-up. In 2020, there were 4, 162 click and drive services. Le Drive Intermarché dominates the market with a total of 1,257 click and drive centers, followed by Courses U with 742 and E. Leclerc Drive with 701. Over the past few years, the number of click and drive centers has increased tremendously and the Covid 19 pandemic accelerated the growth with surge in sales of 80% for some retailers. Almost all large hypermarkets propose a click and drive option and the success of it is now being implemented by smaller players with a pedestrian variation of the service “drive piéton”.
  • Department Stores (Grands magasins): The number of Department stores has been declining to a few dozen over the past few years. Paris has the most department stores of any French city with five of the ten top-selling stores located within the city. Department stores have lost some market share in all areas except in the medium-to-high price range. A unique feature of the French department store is that many non-food products are sold by the branded-mark’s own sales staff which can account for up to 20% of the store’s total sales force. Some department stores in Paris such as Galeries Lafayette, Au Printemps, and Le Bon Marché have gourmet food sections. Although they do not account significantly for total food sales in France, they set the quality standard for product presentation.  With the Covid 19 pandemic department stores were hit hard by their closures and the absence of tourists who are their traditional target audience.
  • Discounters (Magasins discount): Compared to hyper/supermarkets, hard discount stores offer a smaller range of goods for lower prices. At the end of 2020, there were 3,430 hard discount stores in France. The top four hard-discount companies are Lidl, Aldi, Leader Price (Casino). Despite the economic crisis, the hard discount stores did not gain substantive market shares and decreased in number of stores. Conventional supermarkets/hypermarkets have heavily stocked their low prices shelves in order to hinder the hard discount expansion.
  • Large Specialized Stores (Grandes surfaces spécialisées): Large specialized stores offer an extensive choice of goods in a specific category at a competitive price and with an emphasis on customer service. This dynamic sector included over 13,800 stores, including such store categories as toys, health and beauty, gardening, and media/books/music. Textiles are the most common (3,175), followed by beauty/heath stores (2,513) and do-it-yourself equipment stores (2,220).
  • Multi-Channel Retail Groups (Groupes de distribution multicanaux): The distinctions made above between hypermarket chains, supermarket chains, etc., are becoming blurred. In recent years, major multi-channel retail groups owning chains of different types of stores have emerged. Pinault-Printemps and Nouvelles Galeries Réunies fall into this category, because they own chains of specialty and convenience stores.
  • Traditional Retail Food Outlets (Magasins de détails traditionnels): Traditional outlets include a broad array of establishments, from corner grocery stores, bakeries, and neighborhood butcher shops, to open air markets, to frozen and gourmet food stores. The aggressive expansion of mass distribution outlets threatens these traditional outlets, which account for some 20% of the country’s total retail food distribution.  With the Covid 19 pandemic, to survive, these outlets in addition to flexible store hours, product variety and better quality, had to develop or improve their digital presence and offer special services such as home delivery, or click and collect.
  •  Gas Station-Marts (Boutiques de stations d’essence): Gasoline companies, having lost about 60% of their gas sales to hypermarkets,
  • have equipped their gas stations with small, self-service food stores. These outlets are frequently used for stop-gap purchases and accounted for about 1% of French food sales..
  • Central Buying Offices (Centrales d’achats) : In addition to contacting the largest store chains listed above, introducing products via central buying agencies is an excellent distribution method. A complete list of French central buying agencies, the Atlas de la Distribution, is from: Mass retail distribution Directory: Panorama-Trade Dimensions France

Contact: Tradedimensions.france@nielseniq.com

Using an Agent or Distributor

U.S. firms entering into agent/distributorship/franchise agreements with French firms should ensure that the agreements they put into place are in accordance with EU and French legislation as outlined in the French Code du Commerce.

Another good source of information is the document prepared by the Business France Agency on Doing Business in France.

Information is also available from a number of business organizations such as Business France, the American Chamber of Commerce in France, the European-American Chamber of Commerce in France, and the French-American Chamber of Commerce in the United States. As a member state of the European Union, EU directives must be transposed into French legislation and implemented locally.

Companies wishing to use distribution, franchising, and agency arrangements need to ensure that the agreements they put into place are in accordance with EU and member state national laws. Council Directive 86/653/EEC establishes certain minimum standards of protection for self-employed commercial agents who sell or purchase goods on behalf of their principals.  The Directive establishes the rights and obligations of the principal and its agents, the agent’s remuneration, and the conclusion and termination of an agency contract. It also establishes the notice to be given and indemnity or compensation to be paid to the agent. U.S. companies should be particularly aware that according to the Directive, parties may not derogate from certain requirements.  Accordingly, the inclusion of a clause specifying an alternate body of law to be applied in the event of a dispute will likely be ruled invalid by European courts.

The European Commission’s Directorate General for Competition enforces legislation concerned with the effects on competition in the internal market of “vertical agreements.” U.S. small- and medium-sized companies (SMEs) are exempt from these regulations because their agreements likely would qualify as “agreements of minor importance,” meaning they are considered incapable of impacting competition at the EU level but useful for cooperation between SMEs. Generally speaking, companies with fewer than 250 employees and an annual turnover of less than €50 million are considered small- and medium-sized. The EU has additionally indicated that agreements that affect less than 10% of a particular market are generally exempted (Commission Notice 2014/C 291/01).

Key Link on  Commission Notice 2014/C 291/01

The EU also looks to combat payment delays. The new Directive 2011/7/EU, which replaced the current law in March 2013, covers all commercial transactions, both in the public and private sector within the EU, primarily dealing with the consequences of late payment. Transactions with consumers, however, do not fall within the scope of this Directive. Directive 2011/7/EU entitles a seller who does not receive payment for goods and/or services within 30 days of the payment deadline to collect interest (at a rate of 8% above the European Central Bank rate) as well as €40 as compensation for recovery of costs. For business-to-business transactions, a 60-day period may be negotiated subject to conditions. The seller may also retain the title to goods until payment is completed and may claim full compensation for all recovery costs.

Key Link :  Directive 2011/7/EU

Companies’ agents and distributors can take advantage of the European Ombudsman when victim of inefficient management by an EU institution or body. Complaints can be made to the European Ombudsman only by businesses and other bodies with registered offices in the EU. The Ombudsman can act upon these complaints by investigating cases in which EU institutions fail to act in accordance with the law, fail to respect the principles of good administration, or violate fundamental rights. In addition, SOLVIT, a network of national centers, offers online assistance to citizens and businesses who encounter problems with transactions within the borders of the single market.

Key Links: European Ombudsman ;  SOLVIT

Establishing an Office

Establishing a subsidiary/branch office in France is advisable for some industries. The French government encourages the formation of new enterprises. In conjunction with the Paris Chamber of Commerce, chambers throughout the country and business incubators, the French government offers extensive counseling and assistance in setting up an office in France. Detailed “how to” guides are available from the various chambers of commerce and numerous American consulting firms present in France.

Key Links:  Doing-Business in France

Franchising

U.S. businesses looking to franchise within the European Union will likely find that the market is quite robust and friendly to franchise systems in general. There are a number of laws that govern the operation of franchises within the EU, but these laws are fairly broad and generally do not constrain the competitive position of U.S. businesses.  The potential franchiser should look not only at the EU regulations, but also at the local laws concerning franchising. The US franchisor should increase vigilance in the drafting of franchise agreements, by avoiding provisions which arguably “have an effect on the organization of work and working conditions” such as fixed working day and week schedules.  France’s extensive and complex labor laws have a special emphasis on employee rights and protections. 

Legal Issues in Franchising

France is the first country outside of the United States of America and Canada to regulate franchising, with the adoption of the so-called “Loi Doubin” (Law Number 89-1008 of 31 December 1989). Loi Doubin is a general disclosure law that applies to franchising, stipulating that a disclosure needs to be provided at least 20 days before signing an agreement or paying any money. Although the law has fewer specific disclosure requirements than other disclosure laws, the general obligations also include a requirement to provide a franchisee with a description of the general and local market conditions for all franchised products and services as well as the outlook for development of the market, which is a singular requirement of France. In addition to the enumerated disclosures, the Loi Doubin requires the disclosure of all information necessary to assess the business experience of the franchisor and its management.

The franchise agreement is more specific than the Franchise Disclosure Document about the terms of the relationship between the franchisor and franchisee. The franchise agreement includes information about the franchise system, such as the use of trademarks and products, territory, rights, and obligations of the parties: standards, procedures, term (duration) of the franchise, payments made by the franchisee to the franchisor, termination and/or the right to transfer the franchise, training, assistance, and advertising. The franchise agreement is the legal, written document that governs the relationship and specifies the terms of the franchise purchase. A prospective franchisee should closely review the franchise agreement and consult with a professional advisor, such as an attorney or an accountant, before making a final decision.

Covid-19 Impact

Both wellness and hospitality segments were hard hit, as were many restaurant brands. Some retailers with company-owned and franchised outlets are assessing and restructuring their business.

In October 2020, Gap announced that it is transferring retail stores in Europe, including France, to franchisees.  Those that do not transfer will likely close.

There will be no complete return to a pre-COVID world. But smart franchise systems willing to apply the lessons learned may emerge from the pandemic with new and improved business models ready to meet the needs of post-COVID consumers.

Opportunities for U.S. companies

A wide variety of American franchises such as Burger King, Century 21 and more recently Five Guys, Tutti Frutti Frozen Yogurt are enjoying success in France, which proves that the French market is open to foreign franchises. More information on specific legislation can be found on the website of the European Franchise Federation

The French franchise sector ranks first in Europe in terms of sales and has doubled over the last ten years. Although very competitive with 1927 franchisors and 78,032 franchisees, the French market offers many opportunities for innovative U.S. franchises. In 2019 the French franchise market employed over 668 837 people (direct and indirect jobs). 7% of franchises operating in France are foreign, of which 22% are American. In 2019, total franchising sales were estimated at $75.27 billion (€63,88 billion). The potential remains for U.S. franchisors to explore additional sectors, such as food & grocery retail, home services and personal services. However, it is important to note that for the past 30 years, direct investment or area development expansion methods have proven more successful in France than the traditional Master Franchise model.

France is also:

  • A large market - The 7th largest economy in the world, the 3rd largest economy in the European Union after Germany and the United Kingdom. America is the first country of foreign origin for franchises that have been established in France
  • Centrally located in Europe
  •  Known for its high-quality workforce

Trade event

The most important franchise trade show takes place each year in March in Paris.

Franchise Expo Paris is the international hub connecting investors from 83 countries with the most renowned franchisors looking to expand their concept worldwide.

The show is organized by Reed exhibitions and will take place Porte de Versailles from March 20th to March 23rd, 2022.

72% of the visitors state they are there to learn how to establish a business and become a franchisee.

Challenges

Beyond regulations, there are several things a company should consider before entering the French market:

  • Some American concepts are sometimes not suitable to the French market. They need to adapt to local tastes and cultural norms. Also, high rents and labor costs can hurt the business. In France employment costs run high due to the payroll taxes that employers are required to pay. For example, a food franchise often closes between 2:00-7:00pm to avoid the high labor costs and low food traffic.
  • The language barriers, as documents provided by the franchisors are very often in English, while the DIP and contract must be written in French.
  • Some Americans are more interested in master franchises, which can be complicated in France. While master franchising typically allows the franchisor to shift a significant portion of the foreign development costs onto the shoulders of the master franchisee, if the franchisor is not prepared or able to invest sufficiently in the expansion, it becomes a major issue.

Resource:  French federation of franchise membership list:  Fédération française de la franchise :  franchise-fff/enseignes

Contact: U.S. Embassy - U.S. Commercial Service Commercial Specialist: Isabelle.Singletary@trade.gov  Tel: +33 (0)1 43 12 70 63