PARIS WHEN IT FIZZLES
Byline: Katherine Weisman
PARIS — It’s official. The French are suffering their most significant crisis in consumer confidence since 1987, according to INSEE, France’s national statistics office. No wonder. Store owners are still picking up the pieces after a poor second half of 1995, which featured transportation strikes from the end of November through most of December, scattered bombings beginning last July and really nice warm weather in October, all of which hurt sales terribly. “The climate in France is not favorable to consumption. The government keeps saying they will take major steps which have never yet been applied. People are scared that their buying power will be reduced or that they will lose their jobs,” explained Jean-Michel Girardin, the director of marketing and communications for Galeries Lafayette.
“It’s a political and economic problem that has taken shape over the last year,” he added.
Many of France’s most powerful fashion retailers were reporting monthly sales down as much as 40 percent by mid-December, especially at Paris branches, where the transport strike virtually paralyzed the city. And even with a late-month comeback once the strikes ended, department store sales fell 12.7 percent compared with November.
Discounters and hypermarkets suffered less, thanks in part to their suburban locations.
While stores outside the French capital suffered less than Paris locations, retailers across the board are nervous about the year that has just started. The government-regulated, biannual, end-of-season sales began in Paris on Dec. 26, and outside of the capital on Jan. 2. What retailers and economic observers remarked is that many stores were offering 50 percent off on a huge selection of goods right off the bat, whereas in previous seasons, sales periods began with markdowns of 20 and 30 percent, working up to bigger discounts. But with plenty of stock left over, and the appeal of half price, retailers are reporting a strong sales period, with current sales during the end-of-season promotions running roughly 15 percent ahead of the same period last year.
At the same time, customers who did not buy for themselves in October, who could not buy in November and postponed their purchases in December awaiting the sales are finding lots of choices and their sizes during this sales period, thanks to the sizable and rather complete stocks.
While there is no way to recoup lost sales from December, Galeries Lafayette’s performance during the sales is positive. “In the provinces, we are up about 15 percent so far, compared with the same period last year,” noted Girardin. “That 15 percent is also true for Paris.”
But as most stores attest, the strong after-Christmas sales will not repair the damage incurred at the end of last year. “Last year was particularly difficult. There were [the bombings], a very warm fall, a weak dollar, which meant fewer tourists. We had everything [against us],” Girardin. “We had a great last week of the year, but no one knows about 1996.” Last June, Galeries announced that as part of ongoing restructuring plans, it would close stores and lay off some 1,000 employees over the next few years. Thanks in part to last year’s poor second half, this is being accelerated, and Galeries management is meeting with the company’s Comite d’Entreprise (workers council) at the end of this week to discuss the potential closings of Galeries units in Avignon, Evreux, Lyon, Nevers and Valence. Like other store executives, Le Bon Marche president Philippe de Beauvoir, who is also the president of specialty store Franck et Fils, noted that the return of transportation, which began over the weekend of Dec. 14, did not help his store recover losses. “We were down 40 percent until Dec. 20, but improved and ended the month at minus 17 percent,” de Beauvoir noted. “Our sales are good so far. Right now for fashion, we are running ahead roughly 10 to 12 percent compared with the same sales period in 1994.
“There are two reasons for this: One, we had very big stocks, so clients are finding a lot more choice than sales in previous years,” de Beauvoir explained. “The other is that the [holding back of spending] in December has helped sales of bigger and more expensive items like coats.”
The post-winter sales at Le Bon Marche will end on Jan. 20, but there will be an area set aside in the store to close out the remaining end-of-season items until February. And starting on Jan. 22, customers will be able to find spring-summer merchandise in the specialty store. “You don’t need to be a big-time analyst to understand the problem [in France],” de Beauvoir said. “When you have an unemployment rate hovering at 11 to 12 percent, it’s clear there will be a crisis of consumer confidence. People are scared and have no hope. In every family, no matter what level of income, there is someone out of a job. People aren’t spending, but their level of savings has soared,” as a shield in the face of unemployment. Given this climate, de Beauvoir argued that stores should not enter into the dangerous cycle of off-and-on sales promotions. “Today, the problem is not one of price; prices haven’t been lower. The problem is one of service and quality,” he noted. “Stressing those is how we will fight.”
At Printemps, sales for the month of December were down 20 percent at the Paris flagship compared with December 1995, according to Jean-Pierre Glarmet, Printemps’s senior vice president, central buying and marketing. Sales in Printemps locations outside of Paris were flat. Provincial stores were less affected by the December strikes, but in Printemps’s case, “the provincial stores were helped by our ongoing program of renovation,” Glarmet explained. “These transformations led to a change in clientele, and we are now seeing a return on our investment.”
Also, Glarmet said the store’s upgraded product offerings, especially in apparel and soft goods, helped boost provincial stores’ performance while it insulated the Paris flagship from harsher damage. Printemps’s Parisian business at the end of last year picked up the week before Christmas, as public transportation was being restored, “and, starting Dec. 26, selling activity became very strong.”
For the current sales period, Printemps is running roughly 13 percent ahead of the 1995 sales period for the entire chain. Glarmet noted that Printemps’s stocks were not dangerously big for the current sales. Reordering was cut off mid-fall when it was clear that merchandise wasn’t moving. Slow-moving apparel was shipped in coherent series to other Printemps locations, as it was for the sales. Thus, for the sales, Printemps stores are offering customers a broad range of items and sizes, unlike other seasons where sales are more hit or miss.
Independent specialty shops in Paris were also squeezed by the second half of last year. “We are going into the new season heavily penalized by the last one,” noted specialty boutique owner Maria Louisa Poumaillou of the Maria Louisa designer shop on Rue Cambon. “We still have to finish paying last season’s expenses, so for the first three months of this year, we will be essentially working for nothing. There is no other solution. It’s not a very optimistic situation.”
Like Galeries Lafayette, Louisa remarked on the absence of tourists during the last months of 1995, attributing their scarcity to the bombings and the high exchange rate of the franc against many other currencies. “They were all in London,” she observed. “Most of us [independent stores] will need help from the banks, but once you say you sell fashion, it’s as if you have the plague.
“I got help, but, of course, I have to pay it back,” she notes.
In the face of this, Poumaillou said that critical buying is key. “There are too many names on the market that all look the same. It’s useless to waste your time on these kinds of resources,” she explained, citing brands like Et Vous, Kookai and APC. “I won’t buy anything unless I really love it. I started this about a year and a half ago, and given the current circumstances, I am even more convinced.”
Poumaillou said that the most expensive items in her store, like cashmere sweaters from Lucien Pellat-Finet, are the bestsellers, noting that for this line, the high price is justified by high quality. “Now, there is no place for mediocrity, or the little idea that will last two days,” Poumaillou concluded.