Can France’s E. Leclerc fight off the colossus that is Amazon?

The top French retailer invests $1 billion to improve its online sales.

Leclerc may be a giant in the retail market in France, but in the competition to attract French consumers online, the French company is playing David to Amazon’s Goliath.

Leclerc said it is spending more than $1 billion to boost its online sales capabilities in order to compete with the global powerhouse Amazon, which is also seeking to boost its share of the coveted French online marketplace.

Leclerc, a cooperative association of stores, is one of the largest retailers in France with more than 600 stores and annual revenue of $40 billion in 2015.

A disruptor of several product monopolies in French retail after it launched more than six decades ago, E. Leclerc now ironically finds itself in danger of being disrupted unless it can hold onto customers who are flocking from physical stores to convenient e-commerce sites.

Company pivots to digital sales

Company president Michel-Edouard Leclerc said it was vital that E. Leclerc grow its internet sales. “Digital will shape the entire customer relationship,” Leclerc said.

His father established a reputation as an entrepreneurial visionary after he founded what would become one of France’s biggest food distributors and a successful hypermarket chain from humble beginnings after World War II.

The father opened his first grocery store with 5,000 francs. Buying oil, soap and biscuits directly from factories, he was able to set prices 30 percent below the competition.

During the 1950s, Leclerc popularized discount shopping – the “movement E. Leclerc” – disrupting retail competitors in the process.

Retailer broke key monopolies

In the 1980s, the company played a critical role in breaking retail monopolies of health and beauty products and books. In 1986, Leclerc began selling gold jewelry at a discount, bypassing the traditional distribution system. The company eventually became the country’s top seller of gold jewelry.

The chain grew to sell everything from groceries to clothing, jewelry, books, and automobile gasoline, striving for highly competitive prices.

Environmentally minded, Leclerc also was the first French retailer to supply shoppers with reusable bags.

Son takes over company leadership

In 2004, the family sold the Leclerc name to its member retailers for $135 million, and Michel-Edouard succeeded his father as president of the group, which is based in Ivery-sur-Seine.

In addition to its stores in France, the company operates several dozen stores in Poland, Portugal, Spain, Italy, and Slovenia.

In 2015, E. Leclerc reported total revenue from its French operations of $40 billion – up 3.4 percent from 2014 – and a total if $51 billion in revenue in Europe.

A E. Leclerc “hypermarket”

Twenty percent market share

The company has seen steady growth and has a market share of 20 percent in France.

The company posted an increase of 20 percent in revenue from its internet sales channel with online sales driving about one third of its growth in 2015.

Still, the company’s position in online sales is small compared to in-store sales. E. Leclerc revenue from online sales was $2.3 billion, less than 2 percent of total revenue. According to Statista, France generated total online sales of more than $55 billion.

Ecommerce News listed Leclerc as the top retailer in e-commerce in 2013 with sales of more than $1 billion.

Amazon expands in Europe

But Amazon has set its sights on expanding sales in Europe, where it launched sites in Germany and the United Kingdom in 1998 and in France in 2000.

With total revenue of $107 billion in 2015, Amazon is the largest retailer in the United States. It generated more than $30 billion in sales abroad, primarily from Germany, the United Kingdom and Japan. Amazon also operates in Italy, Spain, China and Canada.

Revenue from France was estimated at less than $2 billion. But the U.S. company is looking to expand French sales.

Last year, Amazon launched a grocery site in France, where the total market for online groceries is estimated at $7.4 billion.

Amazon buys French shipping company

Amazon is also in the process of buying a French shipping company as it attempts to reduce delivery costs while improving delivery times. Amazon purchased 25 percent of Colis Privé in 2014 and is set to purchase the remaining 75 percent this year.

Amazon recently moved to end a long-running tax dispute with the French government by agreeing to report revenue specific to the French market and pay tax on it. Previously, Amazon had been reporting all European income in Luxemburg.

Leclerc has some advantages in its battle to grow online sales and keep Amazon at bay.

For one thing, French consumers are notoriously loyal to national companies – and skeptical of foreign ones. For another, the French government has moved to protect national companies, including passing a law banning free shipping, which forced Amazon to charge for shipping or be banned from selling in France. Amazon, however, responded by charging the miniscule rate of 0.01 Euro for shipping.

The race for online customers

Still, ease of use of the online sales platform as well as pricing, the range of products, and cost and speed of delivery are most likely to determine the winners in the prime French online marketplace.

Michel-Edouard Leclerc in 2015 launched a three –year, $l billion plus effort, to transform and grow its online sales operation, which Leclerc said would create about 10,000 jobs in the process. The goal is to significantly increase online sales by consolidating websites, improving delivery, and reshaping brand marketing.

Leclerc said he did not foresee abandoning physical stores but he believes the digital transformation will result in sweeping changes in sales patterns.

While the company has experienced steady growth in sales, Leclerc said it must be ready as more and more consumers shift to online purchasing.

“We know this is the future. We have an obligation to act. We have built our strategy so digital will shape the entire customer relationship,” Leclerc said.