Auchan: Successfully Traversing the Russian Retail Landscape?
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Case Code: BSTR589 Case Length: 17 Pages Period: 2002-2019 Pub Date: 2019 Teaching Note: Available |
Price: Rs.500 Organization: Auchan Retail Russia Industry: Retailing Countries: Russia, France Themes: International Business, International Marketing, Consumer Behavior, Strategy Formulation |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Auchan's Early Days in Russia
When Auchan entered Russia in 2002, it set up its stores under the hypermarket format in urban areas, primarily in the Moscow region. Auchan’s flagship hypermarket stores in Russia were spread out over an area of 15,000 square meters. Industry observers thought that Auchan demonstrated an in-depth understanding of the Russian consumer behavior. Auchan understood that the Russians had an element of pure curiosity that made them prone to ‘window shopping’. Keeping that in mind, Auchan tried to position the shopping experience at its hypermarkets called 'Auchan City', as a convenient stroll around an outdoor market...
The Roadblocks Leading to a Change in Strategy
Auchan's smooth run in Russia encountered unexpected roadblocks in the form of changes in Russia's political landscape that even raised questions about the company's future in that country. In 2014, Auchan faced serious damage to its sales figures due to the Ukraine conflict that had led to fighting between Ukrainian troops and pro-Russia rebels. The conflict resulted in an unfavorable exchange rate for Russia and negatively impacted Auchan Retail's results as well. Vianney Mulliez, Chairman of Auchan France, added, "The Group's (Auchan Retail) performance was significantly impacted by foreign currency effects, notably in Russia and Ukraine." ..
The First Steps of Transformation
The dramatic changes in the Russian retail environment and the company’s poor business prospects prompted Auchan to take certain corrective measures to boost business. In 2015, there was a change in Auchan’s top management with Wilhelm Hubner, GM of Auchan Russia being made the Management Board Chairman of Auchan Retail....
Bringing in a Full-Scale Transformation
At the end of 2017, Auchan began implementing a plan to transform its business model in Russia, with the main focus being on re-launching the retail format and re-branding its supermarkets. At that time, the company had four retail formats, namely, hypermarkets, superstores (the store size was somewhere between that of a hypermarket and a supermarket), supermarkets, and neighborhood stores...
Future of Auchan in Russia
Some analysts thought that there was still scope for Russian hypermarkets to grow as they did not suffer from several of the drawbacks plaguing the hypermarkets in other countries. In a special report on Russian hypermarkets published in November 2017, Fitch Ratings, Inc. (Fitch) observed that these hypermarkets “…tend to be smaller and closer to urban areas than those in Western Europe, with a lower proportion of space assigned to non-food...
Exhibits
Exhibit I: Russian Economy and its Impact on the Retail Industry
Exhibit II: Revenue by Geographic Segments, as of 2018
Exhibit III: Russian GDP in Constant Prices (2012-2019)
Exhibit IV: Financial Performance of Auchan (2015-18) (in Billions of Roubles)
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