Modern thinking

In the interview you gave ‘Eurobuild CEE’ in November 2013, you said that some Carrefour-owned retail assets in Poland, namely Morena, Galeria Zdrój and those in Sochaczew, Olsztyn, Krosno, Rybnik and Grudziądz, would undergo modernisation work. Have you achieved everything you set out to do?

Ronan Martin, BU expansion and shopping malls director and vice-president of Carrefour Polska: With the hindsight of the last few years I can say that the decision taken two years ago was a good one. In that time, more than ever we have faced increasing competition in all of the formats we operate: hypermarkets, supermarkets, convenience and shopping centres. Furthermore, customers are continuing to change their shopping habits and expectations of modern retail. These changes concern both the products and the offer in general, as well as the satisfaction derived from their shopping experience. For us, this has meant that we needed to look carefully inside our operations and answer a few simple questions: how do our shopping trips respond to actual trends and needs, how do we look in the mirror of the market and at the competition, what can we do to sell more and gain more customers? We were answering these questions back in 2013, when we made the decision to start a big investment plan aimed at the modernisation of our assets in Poland. We are answering those questions today, as we secure our investments on the Polish market.

Now, after almost two years, we can see that those decisions are paying off. Back in 2013, we looked at our company as a whole, as well as each of our businesses separately. Our biggest investment at that time was Sonata Park in Sochaczew, where we turned the old Carrefour supermarket into a modern retail park with a new and innovative Carrefour hypermarket as the anchor. We invited to this centre several well-known tenants, such as H&M, the LPP group’s brands, Empik and Smyk. For the local market it was a significant change. The customers were delighted and they still are. This investment proved that the approach we choose was the right one. It has also shown that modern hypermarkets have a place on the market and can provide good like-for-like turnover growth.

Then, after the Sonata Park Sochaczew success, we decided to secure our development in Poland and modernised another five shopping centres in our portfolio: in Tomaszów Mazowiecki, Olsztyn, Puławy, Starachowice and Kędzierzyn Koźle. Each was completed over the last twelve months.

Last year was a crucial one for us. We took the important decision to start Carrefour’s largest modernisation, extension and remodelling project so far – Galeria Morena in Gdańsk. The 33,000 sqm gla mall is now in a major reconstruction phase and close to the end of its re-commercialisation process, with almost 90 pct of the space re-leased. The mall will finally feature not only new, modern architecture and design inside and out, but also several new functions: a cinema, a fitness club, a children’s play area, new food zone and an open terrace, to name but a few. Together with the new visual identification system and marketing, we will completely re-position it locally, to become in Q2 2016, when we're planning the grand re-opening, one of the leading shopping centres in the TriCity. I’m sure that our new commercial offer, with such brands as Cinema 3D, Fabryka Formy, H&M, Smyk, Subway or Duka, will be very welcomed by the local customers. All of our investment in shopping centres though, is just a part of that we have made for the last few months. During this period we have opened, modernised or remodelled dozens of our hypermarkets, supermarkets and convenience stores, we introduce new franchise options, we launched several modified layouts of our stores and many innovations to our business in Poland. We have also acquired two retail chains, RAST and Galeria Alkoholi. We also tackled the energy efficiency of our stores over this period. Now, more than 55 Carrefour hypermarkets use full energy-efficient LED lighting and a few dozens use energy efficient cooling.

To sum this up - we did a great job increase the value of our assets and to offers our customers better shopping trip. Answering the question - yes, we are happy with the results and have achieved our goals. This is encouraging us to be even more ambitious in the future.

What are your further plans for the Polish market? Are you working on new development projects?

At the moment, we’re finalising several further modernisations to the shopping centre, we've started at the beginning of the year. I mean Rybnik and Grudziadz. We are also working on the remodelling and re-commercialisation of Galeria Zdrój in Jastrzębie Zdrój, where we will introduce new interiors and already leased the new space to H&M and Diverse. For this year, we are planning also to start the big extension and remodelling of Galeria Zielone Wzgórze in Białystok, which is now a 12.000 GLA mall. In general, after a detailed analysis of our portfolio in Poland, we can see lots of opportunities and huge potential in certain locations. Carrefour is investing not only in the modernisation of its own assets of course, even though they’re a big part of our business in Poland. We’ve ensured the presence of our new hypermarkets in the most important shopping centres in the country. We’ll be present in Posnania, the biggest mall in Wielkopolska region. Carrefour will also be an anchor in two new GTC malls in Warsaw. In the next two months we’ll open our 85th hypermarket in Poland, located in the first shopping centre in Jaworzno – Galeria Galena. We are also strengthening our position in the Mazowieckie region by opening a new hypermarket in Fabryka Wołomin. If we match this investment with the modernisation plans for dozens of our supermarkets and the opening of 100 new convenience stores this year, this gives us an accurate picture of Carrefour’s dynamic expansion on the Polish market.

You are now launching a new retail format – outlet centres. Could you tell us what was the rationale behind your decision to develop Metropolitan Outlet Bydgoszcz?

As I explained earlier, we’ve taken a careful look through our portfolio, identifying our key strengths. When we analyse the location in Bydgoszcz and put it together with several expert reports, we found out of how to breathe new life into this mall. Together with White Star Real Estate and supported by JLL for the leasing, we have redeveloped and extend this shopping centre into the first outlet centre in the region – Metropolitan Outlet Bydgoszcz. In the first stage, we will offer 11,500 sqm of new space and 60 stores. The new Metropolitan Outlet Bydgoszcz will be opened in Q2 2017 to serve not only inhabitants of Bydgoszcz, but also of other key cities of the region, such as Torun, Grudziądz and Inowrocław. It’s important that Carrefour already operates in several outlet centres across Poland – in Gdańsk, Wrocław and Białystok – and so has quite a lot of experience serving outlet customers. This is another of our key strengths in this project.

In your eyes, what will be the biggest challenge for retail developers in the next few years?

In the next few years more issues will definitely arise related to the saturation of the market in each format. Only those who can respond faster to customers’ needs and changes in their behaviour will survive. Carrefour, as a company with more than 230.000 sqm gla in its shopping centre portfolio, and thanks to its strategy aimed at extension, remodelling and re-commercialisation, is able to offer both tenants and customers new and modern retail space based on solid foundations. This is in contrast to new malls, which need to fight for their customers from scratch. An undeniable strength of our malls is that they feature Carrefour hypermarkets with the best prices, a wide range of goods and a solid position on the Polish market. Shopping centre managers, in turn, will need to face the growing issues of the saturation of the market and e-commerce. With the amount of new projects and the huge supply of the new space, negotiations with tenants have become very tough. Carrefour in this regard can offer attractive and stable terms for long-term cooperation. In 2014 we renewed more than 100 contracts, but in 2015 almost 150 have been renewed so far. We’re also launching more and more innovations to our malls – not only modern marketing, events and animations, but also digitalisation, aromarketing and initiatives aimed at increasing the pleasure and comfort of customers shopping trip.

Do you plan to sell off any assets?

We’re operating in a very competitive market, now facing price deflation. The customers are less loyal than ever. The business needs to be efficient and generate maximum returns on investment. If we look at the ROIs from the last decade, the time needed for returns has been constantly lengthening. We’re investing in the modernisation of our assets to increase their market value. At the moment we’re strongly focusing on expansion and more interested in the acquisitions of other chains and assets.