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COUNTDOWN TO EURO

Readying for the debut of the Continent’s new currency

By Susan Thorne

During the first few weeks of the new year, retailers will still be accepting payment in the old national currencies but will be giving change only in euros.

When European retailers open their doors to shoppers in the first days of the new year, they will be bracing themselves for some big changes.

As of Jan. 1, the European Monetary Union’s (EMU) 12 member countries — Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain — will be switching over to the new notes and coins of the euro, their common international currency. During the first few weeks of the year, while stores will be accepting payment in the old national currencies, they will be giving change only in euros; after the end of the two-month dual currency phase, only euros will be recognized as legal tender.

Businesses in the EMU countries have been legally required to carry out their banking and bookkeeping transactions in both currencies for some time, and many stores have shown purchase prices in both euros and the national currency for several months. Recently, retailers have also been adjusting prices for the changeover to help people get a feel for the cost of things in the new money. Thus a restaurant menu in Germany might show the price of a cup of coffee as 2.50 euros/4.88 DM (deutsche marks); the convenient, rounded-off euro price will be the amount to pay in the new year. Widespread public education is also readying the citizens for the coming change.

Despite such measures, the switch to euro cash has the potential to be problematic for retailers. It involves preparing staff for the new system and overhauling many in-store facilities, from signage to software. It will also require a degree of cooperation and understanding on the part of customers.

Since September, Delhaize le Lion, the Belgian grocery and specialty store company, has been training cashiers and other customer-service staff to deal with the double-currency period. At special classes, these personnel are getting acquainted with replicas of the seven euro banknote denominations and acting out the parts of cashier and customer in role-playing scenarios. In the first week of January, they will man the aisles and cash registers of Delhaize stores wearing a special button with the words, “L’euro: Je connais” (“The euro: I know”) to reassure shoppers they can assist with questions about the currency change. Delhaize also has had double labeling on shelves and merchandise packaging in both francs and euros since 1999.

Company management hopes all this preparation will avoid delays as well as confusion.

“It’s important not to take too much time [at the checkout],” said Catherine Alexandre, Delhaize Belgique’s communications manager. “Even if each person takes just 30 seconds longer than usual, it will slow things down significantly.”

Delhaize stores are expediting the exchange by handling bills and coins separately: From Jan. 1, each location will have a special booth where shoppers can turn in their Belgian franc coinage for a receipt in the equivalent amount of euros; this receipt, as well as Belgian franc notes, can then be used for payment at the checkout counter. The arrangement means that checkout cashiers won’t be coping with two different sets of coins; cash drawer slots are being divided so that both franc and euro bills can be accommodated.

“As much as possible, we are trying to keep things familiar to minimize the possibility of confusion,” Alexandre explained. While Delhaize won’t say how much it spent getting ready for the euro, it is worth noting that the company’s staff training alone involves one full working day for supermarket staff and one half day at smaller stores throughout the chain’s 650 locations. It is hiring extra staff, but unlike casual help at other times, these temporary employees also need to be trained. The chain is requesting — not ordering — permanent staff not to take vacations during the changeover months.

Some European shopping center managers also are helping to educate and prepare their retailers for the transition to the international currency.

Brussels-based center manager Devimo, part of the Paris-based Ségécé-Klépierre group, has sent informative notices to shopkeepers concerning various aspects of the euro at intervals of 18, 12 and 6 months in advance of the January deadline. Devimo has also provided all its retail tenants with “euroconverter” cards to calculate equivalent euro amounts for Belgian francs (and vice versa), plus comprehensive manuals outlining the main effects of the euro for retail operations and logistics. Jan Bergé, adjunct director of Devimo and a board member of the Belgian-Luxembourg Council of Shopping Centers, says the largest outlay incurred by his company will be the cost of additional security measures during the double-currency period. Because retailers will need to have two types of currency on hand, they will typically have much larger cash reserves than usual in their stores — twice as much, in some cases. Devimo will have an increased security presence at all its larger shopping centers to prevent theft, and retailers will be increasing the frequency of cash pickups from their stores.

Another widely anticipated problem is circulation of counterfeit euro notes or coins, which will be less readily detected in the early days of euro use before cashiers and the public have learned to recognize fakes.

Switching to the euro will involve a learning process for customers and cashiers alike.

The conversion to euros may be more difficult for some retailers than others. Dionyssius Chionis, manager of the 20,000-square-meter (215,280-square-foot) Athens Millennium Shopping Center in downtown Athens, Greece, says smaller retailers, particularly one-unit, owner-run businesses, are likely to have the most acute problems.

“The big chains can convert easily — they have a lot of personnel and software,” he said. “But in smaller shops the owners will have to do everything themselves — they will have to explain everything to customers; they will have to go pick up euros at the bank.”

At his center, which has 35 mainly independent shops, Chionis has been regularly asking retailers whether they’re taking necessary measures to prepare, and said he will check often during January and February to be sure fair exchange rates are used. “But basically this has to be left up to store owners,” he concluded.

Francisco Cernuda also opines that smaller retailers will have a more difficult transition. He is retail director with Rodamco Espana, Madrid, which develops and manages shopping centers. Many of them will continue to carry out transactions in national currencies after Jan. 1, he predicted.

“In January and February they will mostly trade in [Spanish] pesetas,” he said. “People prefer pesetas, and they will wait until the last minute [to exchange them for euros]. I am mainly worried about what will happen after March 1.”

A report released in October by the European Union’s Economics and Monetary Commission confirmed that across Europe, small- and medium-sized enterprises have been slow to prepare for the single currency.

The public’s behavior is another wild card that could disrupt all the well-laid plans of retailers and governments. And Chionis noted that the currency switch may be harder to grasp in some countries than in others. The Greek drachma, for instance, is a very small currency unit (1 drachma is worth around one-quarter of a U.S. cent) with no obvious relation to the equivalent euro amount. “If you buy a newspaper, for instance, it costs about 250 drachmas. That’s around 0.7 of a euro,” he explained. “I’m sure there will be confusion in the first day — particularly from older people, who will have difficulty understanding.”

While Greece’s central bank hopes to get most drachma notes and coins out of circulation in two weeks, Chionis thinks it will take closer to a month.

What about sales levels in the transition period? Could the nuisance of changing money and slower checkout times cause shoppers to avoid unnecessary purchases during January and February? Alexandre anticipates that people might postpone large nonfood purchases, but says that on the whole, “We don’t think people will buy more or less because of the euro.”

However, Christoph Meyer, a retail specialist at MŸller International Retail Services, Berlin, said he thinks consumer uncertainty will harm sales. Shoppers will be unaccustomed to pricing in the strange new euro amounts and may feel unable to evaluate value, he said. Also, shoppers are wary of retail price inflation, which is difficult to detect with the currency change.

“I think they will wait and see in the first weeks,” he predicted. “People are afraid that everything will become more expensive.”

Credit card or bank debit card transactions are expected to hit higher-than-usual levels in the early euro days as shoppers avoid using cash, and Bergé speculates that this may boost sales, since shoppers typically spend more when using plastic rather than cash. But he expressed fears that the heavy demand on electronic banking systems could create problems. Belgium’s “Banksys” had service interruptions this year when it was converted to the euro, leading to a lawsuit by UNIZO, the Belgian organization of independent retailers. Bergé wonders whether the same could happen again.

Whatever the short-term effects, the euro is seen as having positive long-term results for retailers. Bergé anticipates that since tourists will no longer have to pay currency-exchange commissions or fees for each EMU country they visit, they will spend that amount in shops instead. Alexandre points out that things will be much easier for companies with international operations in the common currency area. Delhaize operates in the Czech Republic, for instance, which will likely join the euro zone in the near future.

Chionis also foresees broad benefits from a united Europe.

“I welcome this,” he declared. “It will boost the economy and strengthen it in the long term.”

 

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