|Key Market Trends
Growth despite economic downturn: France witnessed the beginning of the economic downturn by the end of 2008 which drastically decreased the purchasing power of the consumers in France. Taking the full year into consideration, the French retail market showed stable growth in the year 2008. The overall retail growth in the first half of the year was partly due to a strong performance in nongrocery retailing. Other factors that supported the retail growth were rising grocery prices and the growing adoption of online retailing. However, as the recession set in towards the end of 2008, the retail market in France started to lose its impetus with a consequent slowdown in sales.
Changing Consumer Behaviour: With recession hitting the French economy, the budget deficit is forecast to increase to 140 billion (196 billion) in 2009, which accounts for 7.5% of GDP as compared with 3.4% in 2008. The deficit will make it harder for the government to put money in consumers' wallets through tax cuts or public spending. It may also lead to expectation of higher taxes ahead which would persuade people to save more. Consumers in France are likely to reduce their expenditure, including food and clothes, in order to save money for the tough time ahead.
Key Channel Trends
Discount stores benefit in recession: In the second half of 2008 as the economic downturn was setting in, discounters gained share in the grocery sector as consumers resorted to lowprice goods. Discounters continued to attract new customers in spite of their lowend positioning in terms of quality. The trend is expected to continue as the French government has plans to modify the grocery retailing pattern leading to further reduction in prices.
Increase in home improvement & gardening trend: The nongrocery retail segment outperformed grocery retailing in France in the year 2008. The sales of nongrocery retailers were driven primarily by home and garden specialist retailers, with a trend towards home improvement and gardening amongst French consumers.