Label’Vie is looking to roll out its Supeco discounter format nationally in Morocco and take on Turkish discounter BIM, but it faces a tough challenge to find the right concept.
Label’Vie, Carrefour’s partner in Morocco, has already opened 4 Supeco stores. All are in Casablanca – in the Oulfa, Moulay Rachid and Ain Sebaa neighbourhoods. By contrast, at the time of writing, there are 418 BIM stores across Morocco, with a target of 500 stores in 2019.
Supeco is an existing Carrefour retail/cash and carry brand, which has been rolled out in Spain since 2012 to take on Lidl, among others. There are currently 17 Supeco stores in Spain, typically between 1500m2-2000m2 in size, with the latest opened in June 2018. The banner is also present in Brazil, where Carrefour has one store, and also in Romania.
Supeco in Morocco is, however, a different format: stores have a much smaller footprint and are situated in high traffic neighbourhoods, rather than standalone destinations.
Label’Vie stresses that Supeco will not take on BIM directly
Label’Vie stresses that Supeco will not take on BIM directly, although it’s nearly impossible to see the banner as anything less than direct competition. Existing Supeco stores are 100m2-400m2 and target low and middle income earners. The stores stock a limited range of SKUs, all basic products designed to be price competitive and attractive to budget-conscious consumers.
Like BIM, Supeco will limit the number of brands it stocks and focus on volume purchases to lower prices. Like BIM, Supeco will also offer price promotions on Fridays. Like BIM, Supeco will also aim to streamline its back office, logistics and operational costs to enable it keep retail margins lower (and pass those cost savings onto consumers). Like BIM, Supeco is designed as a small format store, ideally between 150m2 and 200m2, to make it easier to source suitable properties and enable faster store rollout.
So where will BIM and Supeco differ?
On positioning, apparently.
According to the company, while BIM targets upscale neighbourhoods, Supeco will aim at working class neighbourhoods. While BIM typically stocks 600-800 SKUs, Supeco stores will stock 3,500-4,000 SKUs. Label’Vie also stresses that Supeco is still in pilot phase, and key elements of the concept may change.
We suspect that Supeco will quickly find it necessary to cut the number of SKUs it offers if it wants to compete on price with BIM. We also disagree with the characterisations of its target market and BIM’s target market.
Firstly, BIM’s store network is in a mix of neighbourhoods – including working class areas – and the retailer has strong appeal with low and middle income earners on account of its highly competitive pricing.
Secondly, low and middle income consumers typically want quality and price above choice. We see little value in Supeco delivering quality and choice on essential items to these consumers if there is a BIM store nearby that beats it on price. This is the whole point of the BIM format, itself modelled on Lidl: consumers will forego choice if they get great value.
Bear in mind the challenge Label’Vie faces on price and value: BIM has the buying power of more than 6,450 stores in Turkey and two decades of experience in the hard discount business. Label’Vie will need to rely heavily on Carrefour’s scale in order to deliver quality products competitively. [On that note, the new Carrefour-Tesco buying alliance plays in its favour.]
Otop, Leader Price and the growth of discounters in Morocco
Supeco executives, instead, point to Otop, the new hard discount neighbourhood supermarket format from Cofarma (Marjane). Otop has opened two stores in Casablanca, which makes it a convenient and soft point of comparison for Supeco. Otop is Marjane’s second attempt at a hard discounter. In 2014, the retailer launched the now defunct Xpress Market format, designed to be a halfway between Acima supermarkets and a true hard discount model.
At the same time, Leader Price, the Casino soft discount franchise is also present in Morocco. Having entered in June 2016, there are now five Leader Price stores in Morocco, with plans for more than 50 stores by the end of 2021. These stores, which at 500m2 are larger than Supeco stores and will offer a wider choice of product, serve to increase the pressure on Label’Vie and its Supeco format.
The bottom line
we entirely understand the sentiment not to take on BIM directly. However, we question the logic of having a wider choice than BIM AND trying to compete on price while also targeting low and middle incomes. It runs a serious of risk of leaving the door open for BIM to simply outcompete on price. While also leaving BIM the option, as it has done in Turkey, of building larger stores with wider selections to offer more selection to consumers when they have nailed down the discount sector.
