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Mintel’s Month in Retail highlights the stories that have made headlines in the European retail markets over the past four weeks, with exclusive analysis from Mintel’s expert retail team on potential implications.

Germany: Amazon Fresh launches in Germany

Amazon Fresh has now launched in Berlin, Germany. Through a partnership with DHL, Amazon is now offering consumers in Berlin a range of over 85,000 grocery products, including fresh fruit and vegetables, meat and fish, milk and refrigerated products, as well as fresh bakery products and organic products. Amazon Fresh is available for Prime members for €9.99 per month. This gives the customer unlimited free deliveries with a minimum order value of €40.

“Online grocery within Germany is not as developed as in other Western European countries, but it is growing. Mintel’s Supermarkets Germany 2016 report found that 12% of grocery shoppers do their main weekly shop online, whilst 18% do some of their top-up shopping online. When asked why they do not shop online, the majority of grocery shoppers said they were concerned about the quality and freshness of products, while others claimed they prefer to choose products in person. Amazon may be able to convince shoppers of the quality, and the quick delivery may alleviate concerns around freshness, however many of the barriers to online shopping are intrinsic to any online grocery service. Nonetheless, Amazon has greater potential for disruption in Germany, as it is entering a developing online grocery market rather than a more mature and fiercely contested one as in the UK. This will mean Amazon will have to work harder to convert physical shoppers into online ones – particularly challenging in a market with an abundance of physical grocery stores – but it will turn out potentially more rewarding if successful.”


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UK: Tesco’s like-for-like sales rise 0.9%

Group sales at Tesco rose 4.3% to £49.9bn in the 2016/17 full year. Operating profits before exceptional items increased 29.9% to £1.3bn. Tesco delivered positive growth in UK like-for-like sales for the first time since 2009/10, driven by improvements in the core offer, better service offer and a reduction in promotional activity.

Dave Lewis, Chief Executive, commented: “We are ahead of where we expected to be at this stage… We are confident that we can build on this strong performance in the year ahead, making further progress towards our medium-term ambitions.”

Impressive results, ahead of expectations both in the UK and abroad. There’s like-for-like growth in the full year in the UK, in spite of deflation through the year. Margins recovered even though they are still wafer thin and well below where the business wants to be. It all comes from concentrating on the basics of the business, being price competitive against the discounters, investing in the stores and in the product offer. Tesco now looks much more soundly based: the business is performing well and the balance sheet is in better condition.”


UK: Debenhams unveils new strategy amid declining profits

Debenhams has announced a new strategy. The Debenhams Redesigned strategy aims to drive growth by becoming “a Destination, Digital and Different; and to drive efficiency by simplifying and focusing our business”. Debenhams is hoping to become a ‘social shopping’ destination, tapping to the rising leisure spend and offering more digital and mobile interaction.

“The strategic review looks interesting, especially in the way that Debenhams wants to integrate mobile into everything customer facing. The “fix the basics” plan to improve service and make the stores easier to shop looks equally promising. However, if we have one reservation it is that not enough emphasis is being given to the state of the stores. There will be major refits for stores in major shopping centres (though how many is not specified) and the rest get refreshed but will that be enough?”

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France: Casino progresses in France

Casino total group sales rose 11.6% in the first quarter of 2017. In France, gross food sales rose 2.0%, while in Latin America organic sales increased 7.7%. Cdiscount (the second largest e-commerce operator in France after Amazon) grew net sales by 2.8%, but its total sales (including its marketplace) were up 7.7%.

“Good results overall, but mainly due to the strong performance in Latin America. Casino has been reducing its hypermarket space as this format continues to underperform in the country. Non-food sales in particular have been falling, a problem which is affecting all the operators in this area, in part due to the growth in online shopping, but also due to changes in how people shop. Growth areas for Casino’s hypermarkets were fresh foods and organics as well as the Drive click-and-collect service.”

Germany: Dm-drogerie reaches €5bn turnover

Dm has announced that in the first half sales reached over €5bn for the first time, representing a 6.3% growth across the 12 countries it currently operates in. In Germany alone, Dm achieved 5.6% sales growth, reporting more than €3.9bn turnover. During the period, Dm continued to expand its store network with 31 new openings, with a further 58 due to open in 2017.

“As we saw in Mintel’s 2017 Beauty Retailing report, 51% of adult Germans had bought beauty items online. DM came late to the party, only launching online in 2015. However, only 6% of our survey had shopped online at a drugstore, with online only retailers far ahead, at 21%. In-store drugstores remain the most popular destination for beauty shopping. This suggests a huge missed opportunity for DM, and it now seems to be investing to use omni-channel to build the business. Increasing the amount of organic products is also tapping into the current zeitgeist of wanting more natural and ethical products of all kinds.”

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Primark performs well in the UK and Europe

Sales at Primark rose 21% to £3.2bn in the first half period ending 4 March 2017, up 11% on a constant currency basis. Operating profits rose 3% to £323m, but fell 2% on a constant currency basis. Primark performed well in the UK, where like-for-like sales rose 2% and total sales grew 7% driven by new store space.

Sales in continental Europe were reported to be ‘strong’ in the 26 week period. In the Netherlands, where Primark added 32% new selling space, total sales grew 18% but like-for-like sales were in decline. The value retailer said it is continuing to develop and evolve its US store offer, although no sales figures were given.

“Excellent figures, especially in the UK where the company achieved 2% like-for-like growth. That may not be on the sort of scale we would have expected a few years ago, but Primark is close to maturity in the UK and the clothing market was not easy during the period. Continental Europe will be the main driver over the next few years and there was exceptionally strong growth there as well.”