Dive Brief:

• Amazon is interested in acquiring or partnering with a grocery retailer in France, according to a reports from Le Monde and Fortune. 
• The e-tailer has been in talks with Casino, Systeme U and Intermarche, sources told Le Monde. The newspaper reported that Casino does not intend to sell, while representatives at the other two retailers could not be reached.
• Speculation has also swirled that Amazon might make an offer for French supermarket operator Carrefour. 

Dive Insight:

France has the world’s sixth largest economy and a vibrant grocery industry comprised of established players and newcomers offering everything from giant hypermarkets to sleek, fresh-focused urban stores. The country also has a very advanced online grocery industry, with close to 6% of fast-moving consumer goods purchased through e-commerce channels, according to Kantar World Panel.

Key to online grocery’s high penetration has been the Drive model, first introduced in 2004 and now available at supermarkets throughout the country. It operates similar to the click-and-collect model U.S. consumers and retailers are familiar with: Shoppers place their order, drive to the store, and an employee loads orders into their car. What’s different about Drive is its speed and efficiency of service, as well as its strategic deployment by companies like E. Leclerc, which heavily promotes its private label products through Drive. Today, E. Leclerc sells around 7% of its products through Drive, and accounts for 47% of the market share among grocers that use the platform.  

Drive also relies on kiosks and pickup centers to fulfill orders, with more than 3,000 locations dotting the country. As a result of these investment in speed and convenience, French consumers shop online for groceries more frequently than in-store, and typically build bigger baskets, according to a report from Fung Global Retail & Tech.

Amazon would no doubt love to tap into that demand. The e-tailer currently offers Prime delivery throughout the country, and last year launched Prime Now delivery of fresh as well as shelf-stable groceries and wine from local retailers. As with the U.S., the company has realized it needs to obtain a brick-and-mortar presence if it hopes to grow significantly.

Reports have noted that Amazon may try to acquire the struggling giant Carrefour. The chain, which pioneered big-box stores back in the ‘60s, has failed to adequately evolve these hypermarkets, and has steadily lost both customers and value, with its stock down 70% from its high in 1999. One of its biggest problems is Amazon, which has pummeled Carrefour on sales of non-grocery items.  

Carrefour recently hired a new CEO, Alexandre Bompass from electronics retailer Fnac Darty SA, who is quickly working to improve the retailer’s online grocery performance, which currently stands at a paltry 9% market share, according to Kantar. Those improvements could very well become a joint effort with Amazon, which likes the chain’s market value, footprint and will to evolve its offering.

One question that lingers is whether Amazon’s ambitions in France will face more pushback from officials, who dislike how the company has steamrolled other retail businesses. In 2013, France’s culture minister said Amazon was a “destroyer of bookshops” and passed a law that banned online retailers from shipping books for free (Amazon, in response, charged just one cent). Last year, Amazon’s Prime Now expansion in Paris met with a less-than-enthusiastic welcome from the city’s mayor: "While this operation is liable to severely destabilize the commercial equilibrium of Paris, this large American enterprise only decided to inform authorities a few days before its launch," the mayor's office noted.

If Amazon does complete a brick-and-mortar grocery deal in France, it could prove a major asset to its U.S. and European ambitions. Operating in a more advanced online market could fuel innovation that the company could then bring to its Whole Foods stores.