September 11, 2018 / 4:26 PM / 2 months ago

Retailer Leclerc targets French residential power market

PARIS (Reuters) - French supermarket and retail chain Leclerc, will start selling electricity to French households this week, offering a discount of at least 10 percent to regulated prices as it aims to recruit three million clients by 2025.

FILE PHOTO: Michel-Edouard Leclerc, Chief Executive Officer and Executive Chairman of French retailer E. Leclerc SA, attends the third annual tech conference "Inno Generation" organized by French investment bank Bpifrance at AccorHotels Arena in Paris, France, October 12, 2017. REUTERS/Charles Platiau/File Photo

Privately-owned Leclerc is France’s largest food retailer by market share, having overtaken rival Carrefour (CARR.PA) thanks mostly to its focus on low prices.

It joins a growing list of French companies trying to win customers from state-controlled utility EDF (EDF.PA), a former monopoly that still controls the lion’s share — about 80 percent — of France’s power market of 32.4 million customers.

Leclerc hopes entering the market will diversify revenue and boost customer loyalty in a retail world increasingly challenged by technology giant Amazon (AMZN.O) and other innovators.

“This is a long-term and incremental approach. The goal is to serve three million customers and reach a market share of 10 percent by 2025,” Chief Executive Michel-Edouard Leclerc told Reuters by telephone.

In time, Leclerc could seek to supply business clients, he said without providing details.

From Sept. 13, Leclerc will offer households access to regulated electricity prices at a 10 percent discount for at least one year. A discount of 20 percent will be offered to the 14.2 million customers who hold Leclerc’s loyalty card.

The savings to loyalty card holders will be offered as vouchers to use in the network of 681 stores around the country.

SACRIFICE

Leclerc, with sales of 37.2 billion euros ($43.09 billion)in 2017, has pledged that the new service, called Energies E. Leclerc, will be “the cheapest in the market”.

“Our objective is clearly to win market share and that means to sacrifice margins. Very clearly, we will initially favour the customers who know us in order to grow fast,” Leclerc said.

“Leclerc’s strategy is to develop its offers. We will continue to develop our food and non-food offers but we will increasingly grow into services,” he said.

In the 1980s, Leclerc started selling petrol, and the CEO said the firm was now France’s second-largest gas station operator after oil group Total (TOTF.PA).

Leclerc is the second major retailer to enter the French power market following Casino’s (CASP.PA) online subsidiary Cdiscount, which last year started offering retail customers a 15 percent discount to regulated electricity prices.

Cdiscount CEO Emmanuel Grenier said he was not worried about Leclerc’s entry into energy as “each time a new operator comes in, it focuses attention on alternative energy operators”.

Despite the arrival of newcomers in French power retailing, which opened to competition a decade ago, EDF still controls 80 percent of the market.

More than 30 alternative gas and electricity suppliers operate in the French retail market, including Italy’s Eni.

“The energy market is opening up...It’s the right time to enter and secure a market share,” said Yves Marin, partner at Bartle Business Consulting.

Retailers around the world including Wal-Mart (WMT.N) have become involved in energy, often as a way to become self-sufficient on energy, with solar panels and wind farms.

($1 = 0.8634 euros)

Reporting by Dominique Vidalon, additional reporting by James Davey in London; Editing by Emelia Sithole-Matarise

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