French food retailer Leclerc takes on rivals to crack Paris

By Dominique Vidalon and Pascale Denis

PARIS (Reuters) - French supermarket chain Leclerc, which launches a home delivery service in Paris this month, also aims to open click and collect stores and hypermarkets in the capital.

Leclerc is France's biggest food retailer by market share but most of its 681 stores around the country are outside big cities. Tackling the lucrative Paris market is its next frontier for expansion and Chief Executive Michel-Edouard Leclerc said it will take three years to establish a solid foothold in the city.

The home delivery service launches on March 26 and the group hopes to open about 15 click-and-collect stores in Paris to pick up goods ordered online, and 40-50 delivery points, Leclerc told Reuters.

Leclerc currently has no stores in Paris, but in a challenge to domestic rivals Carrefour and Casino, plans to open a hypermarket in 2020 near Montparnasse train station and possibly more hypermarkets in the capital.

"Leclerc lands in Paris the multi-channel way. We need three years to become a major player on the Paris market," Leclerc said in a phone interview.

French supermarket groups have been slow to develop e-commerce but are now trying to catch up, with Amazon's purchase of upmarket U.S. food chain Whole Foods last year fuelling speculation the U.S. online giant could focus on Europe's food sector next.

Carrefour announced plans in January to invest 2.8 billion euros in digital commerce over the next five years, six times its current investment. Casino said in November it would use British online retailer Ocado's e-commerce platform to help expand.

Amazon has run its Amazon Prime express delivery service in Paris since 2016 and approached Leclerc last year about a possible logistics partnership. But CEO Leclerc said the French group had decided against the idea.

"We decided to go our own way. Amazon is great at logistics but it needs to beef up its commercial offering. We did not want to pay a high price and have Amazon use our commercial image," Leclerc said.

He is confident that domestic food retail chains can weather Amazon's expansion on their turf.

"Amazon forces us to react and if Leclerc, Carrefour or Auchan react, they have an edge over Amazon," he said.

"All they need to do is learn how to be good at logistics because they already have a good relationship with consumers. So it is not certain Amazon will be able to disrupt the French food retail market," he added.

Leclerc generated 37.2 billion euros in revenues in 2017, up 2 percent from 2016, and online operations make over 7 percent of the group's food retail sales due to its strong focus on the Click & Collect Drive service.

LOW PRICES

The new home delivery service, to be called 'Leclerc Chez Moi' (Leclerc To My Door), will be launched on March 26 in northern Paris and from May 15 in the south of the city, targeting revenue of around 200 million euros within three years, Leclerc said.

Its operations will be supported by a 10,000 square-meter warehouse in northern Paris carrying 9,500 products, including fruits and vegetables, organic and dry goods rising to 12,000 by year-end.

Home delivery will be free for orders above 180 euros and Leclerc will charge less than 10 euros for orders between 100-180 euros, he said.

(Reporting by Dominique Vidalon; Editing by Richard Lough and Susan Fenton)