February 12, 2001

EUROPEAN RETAILERS NOT YET READY FOR THE INTRODUCTION OF THE EURO

Findings from a recent survey from Cap Gemini Ernst & Young
and the Association for the Monetary Union of Europe

There is still a lot of confusion among retailers across Europe about the transition requirements for EMU, and many risk missing the 1st January 2002 deadline for the currency change-over, according to a new survey commissioned by Cap Gemini Ernst & Young and the Association for the Monetary Union of Europe (AMUE).

The survey aims to gauge the extent of EMU preparedness of large organisations in the eurozone. In-depth interviews with 133 retailers across Europe were recently conducted, revealing worryingly low levels of euro preparedness.

An alarmingly low number (18,8 per cent) of retailers declared their euro projects to be completed. While the majority of large retailers have already initiated a euro changeover project, there is a strong indication that they will run out of time, with less than 12 months to go. Analysis and past experience by Cap Gemini Ernst & Young has found that industries like Retail will require a changeover period of at least 12 months while 70 per cent of the retailers interviewed estimated that such a project would take less than that to complete. Roughly a third of the respondents are only in the very early stages of their changeover projects while slightly more than 15 per cent have not initiated any IT changes whatsoever in preparation for the euro.

The survey found that low levels of preparedness can be linked to a lack of information or knowledge about the EMU transition rules. Indeed, a fourth of the businesses across Europe think that they can keep internal accounts and bookkeeping in present currency units after 1st January 2002, whereas a number of countries have announced that there will be penalties for not keeping internal accounts and records for taxation purposes in euro in 2002.

Slightly more than two thirds of the retailers dealing with credit cards indicated that they intend to accept these in the present national currency units after the 1st of January 2002. This clearly demonstrates that they seem to be unaware of the fact that the national currency will cease to exist as legal tender for all non-cash transactions after the 31st of December 2001. When it comes to dealing with the new notes and coins, a very low percentage (8%) of retailers claim to be ready for their introduction. Nearly a third of the retailers have not yet addressed this issue.

The survey also highlighted the frequently missed opportunity for organisations to link organisational changes, necessary to prepare for EMU and developing their e-business strategy; only 16 per cent of organisations had linked the two initiatives.

"Our survey shows two worrying trends," said Gerlof Osinga Retail manager, Cap Gemini Ernst & Young. "Firstly, organisations seem to overlook the business impact and complexity of their eurochangeover. We believe they need to move quicker if they are to be ready on 31st December 2001 and exploit the new opportunities."

"Secondly, few companies have recognised that euro transformation and e-business programmes will impact the same areas. They could be overlooking the benefits of linking these large-scale projects, which both call for a major reassessment of existing processes.

"With the euro and the Internet both growing in acceptance, a new era of a true European Union online marketplace is beginning, and organisations will have to be part of it if they are to survive. Together with more effective treasury operations, transforming a business to the euro now could reap real rewards for the forward-thinking organisation," said Bernard Schellenberger of euroTRANSFORMATION Services, Cap Gemini Ernst & Young.

Since retailing is one of the pivotal industry for introduction of the euro, they need to prepare early in order to fulfil their customers needs or it will cost the industry dearly. It is vital to involve the entire supply chain and staff in the euro changeover project, to generate a snowball effect inside and outside the company.

Note to Editors

· The overall sample covered 1,000 organisations in the euro zone: Austria; Belgium; Finland; France; Germany; Greece; Ireland; Italy; Luxembourg; Netherlands; Portugal; and Spain. The retail sample covered 133 in the same countries.

· Of those organisations, 15% had between 200 and 499 employees; 30% had 500-999 employees; and 55% employed more than 1000 employees.

· The overall sample covered organisations from 8 other industries apart from Retail: Administration and Government; Banking; Insurance; Manufacturing; Media/Communication; Telecommunications; Transportation; and Utilities.

· The survey was conducted by research specialist Infraforces in September and October 2000

About AMUE
The Association for the Monetary Union of Europe (AMUE) was founded in 1987 by European industrialists who agreed on the objectives of monetary stability and a Single Currency for the success of the single market. Companies and banks, which are members of the AMUE, employ about 8,000,000 people. The AMUE is a private, non-profit association located in Paris and active in all countries in the European Union. More information is available at www.amue.org.

About Cap Gemini Ernst & Young
Cap Gemini Ernst & Young is one of the largest management and IT consulting firms in the world. The company offers management and IT consulting services, systems integration, and technology development, design and outsourcing capabilities on a global scale to help traditional businesses and "dot companies" continue to implement growth strategies and leverage technology in the new economy. The organisation employs more than 59,000 people worldwide and reports global revenues of about 8,5 billion euros (2000 pro forma).
More information about individual service lines, offices and research is available at www.cgey.com

About Infraforces
Infraforces is a market research company that provides expertise in the running and co-ordination of a full range of European business-to-business surveys. Since 1985, its objective has been to assist companies in their understanding and anticipation of market trends and expectations. More information is available at www.infraforces.com.