SEATTLE -- After four years of red tape, Costco Wholesale is closer to opening its first warehouse in France, a key step in its global expansion.
The new store, possibly opening in the spring, will place the company on the doorstep of some of the world's most powerful retailers: Carrefour, Auchan and Casino, which operate huge hypermarkets.
Costco, based near Seattle, has been successful from Canada to Australia by offering deep discounts on a limited number of quality products. Its French rivals have been mired in a costly price war for two years, gaining market share from existing discounters and making Costco's advantage less clear, experts said.
"The French retailers, especially Carrefour, are not going to give anything up," said Jacques Dupre, director of insights and communications at retail consultancy IRI.
Others said that the price war has made France's grocery market volatile and could favor Costco.
The French market is a new test for Costco's international effort -- an important component of its growth as the U.S. market becomes saturated with its warehouses. Nearly half of the warehouses it opens now are abroad.
France would be Costco's third European base after the U.K. and Spain.
"It begins to look like a European network," said Yves Marin, a Paris-based senior manager at management-consulting firm Kurt Salmon.
But this is also the country where Uber sparks violent protests and governments protect bookstores from Amazon.com. Similarly, Costco faces powerful entrenched retailers and wary regulators.
Costco's head of international operations, Jim Murphy, said the company would wait "until we have something firm to discuss" before commenting on the details of its French operations.
But Gary Swindells, the head of Costco France, has spoken to the media there often, allowing for a glimpse of the company's ambitions for the country. Swindells told a French trade journal that Costco envisions opening up to 15 warehouses in France over the next decade.
As a point of comparison, Costco has about 20 warehouses in Japan, a country with twice the population of France and where it has operated for more than 15 years.
Getting a blessing from France's punctilious bureaucracy to hang its shingle has taken years, in part because rivals keep petitioning regulators against it.
Mostly they've objected to Costco's entrance in a field where they say there are already too many competitors, therefore endangering jobs. They've also criticized the pedestrian looks of its proposed warehouse.
A first attempt to build a warehouse in the eastern Paris suburb of Bussy-Saint-Georges, approved by local authorities, was rejected in 2013 by the national agency overseeing commercial development after local opponents appealed.
The government agency determined Costco's warehouse "wouldn't be harmonious with its environment," and its architecture would have a "low quality" aspect, according to a document posted on its website.
In May 2014, regulators greenlighted a 120,000-square-foot warehouse in the southern Parisian suburb of Villebon-sur-Yvette, an area known for its high concentration of research parks -- and the site of Carrefour's global headquarters.
But according to French daily Le Figaro, Carrefour and Auchan appealed, pushing back the estimated opening date from late 2015 to spring 2016. Neither company responded to a request for comment.
Retail workers have also weighed in. Newspaper Le Parisien reported 200 employees of Auchan in Villebon signed a petition last year against Costco, accusing it of unfair competition due to its very low margins. The local leader of the union, Myriam Cherati, didn't respond to an emailed request for comment.
Costco still doesn't have a French website, and a Link-edIn search yields only a few employees, including a head of human resources who previously worked with Starbucks in France. Nevertheless, French retail analysts are confident that the end of the regulatory road is near.
According to an internal presentation slide available on the Web and dated April, Costco aims to get 50,000 members by its opening date and 100,000 within a year.
Costco's entrance into the market is bound to make a splash, as there's nothing exactly like it: It sits between richly stocked markets like Carrefour and "cash and carry" wholesalers that sell only to other businesses.
As a result, "the traditional hypermarkets are nervous," says Marin, the Kurt Salmon management consultant.
"The time is right for Costco," he said, as the cards are all up in the air, and Costco can use its global heft to strike extra good deals with suppliers for the limited universe of products it purveys. (Costco typically stocks 4,000 different types of products, versus up to 80,000 for a Carrefour hypermarket.)
Business on 08/18/2015