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European Retailer Carrefour Marches Ahead in China, Eyes Indian Market

Thursday, July 1st, 2010
carrefour

The largest retailer in Europe is making waves in China and Latin America. Carrefour just recently announced, that this year’s first quarter showed a significant in¬crease in growth in both China and Latin America. The company is proud of the 34 percent market growth. Additionally, the website reported the opening of 16 hypermarkets, 22 supermarkets and 77 hard discount stores.

In China alone, the company reported like-for-like basis sales growth of 4.5 percent and the expansion made up 10 percent of sales. Although sales in some countries in Asia went down, overall the company re¬mains optimistic about continuing a strong presence in the retail business in these countries. Referring to the significant growth sales in China, CEOand Board Mem¬ber of Carrefour, Lars Olofsson announced “Our quar¬terly sales grew on a like-for-like basis for the first time in 18 months in spite of an environment that remains challenging. This performance reflects the heightened attractiveness of the Carrefour brand, our strengthened commercial dynamics and the acceleration of growth in emerging markets, notably in Latin America and China. We are moving forward with determination to imple¬ment our transformation plan to better serve our clients and achieve profitable growth. The Board of Directors’ decision to approve a share buyback plan for up to 6 percent of Carrefour’s capital is a further sign of confi¬dence.”

Where the money is

Going to a Carrefour hypermarket is becoming a wel¬coming habit for typical Chinese shoppers. According to Dai Yan of China Daily, an average Chinese customer spends about of $13.80 (110 yuan) per visit to a Carrefour hypermarket. This figure is significant considering the Chinese consumer population. Dai Yan further pointed out that China’s retail market expansion is projected to soar $2.4 trillion by 2020. With China’s economy getting stronger every year, it is clear that Carrefour has been successful in strategically implementing its worldwide campaign of opening more outlets in the country.

The company has also evidently perfected the ideal retail experience that Chinese consumers seem to love, as there is a steady flow of Chinese customers in Carrefour Hypermarkets. According to a China Daily news report, government mandates such subsidizing energy-saving home appliances have worked in favour of boosting sales. General manager of the North Terri¬tory of Carrefour China and vice president of Carrefour China Claudio Gouveia confirmed the company’s aim to construct 6,000 sq m to 11,000 sq m hypermarkets. Fur¬thermore, Gouveia pointed out that the French compa¬ny is striving to strike a balance on the number of stores among major cities and second to third tier cit¬ies. They plan to open an outlet in the Inner Mongolia Autonomous Region. If this plan is implemented accordingly, Carrefour is going to be the first international retailer in this region.

Carrefour group has been con¬sistent with their performance in the Chinese market for two consec¬utive years. At present the company owns a total of 157 stores in China. Malaysia has a favourable increase of 11.4 percent. However Indonesia, Taiwan and Thailand experienced a like-for-like sales decrease. Follow¬ing its sterling performance in the Chinese market, Carrefour plans to open 20-24 more outlets across China. LSA, a French magazine pointed out how Carre¬four is applying the same strategies used in France such inventory reduction in China to maximize its hypermar¬ket’s performance. Planetretail.com reported that Lars Ollofson in his official visit to China claimed that re¬ducing the time of inventory from 29 to 22 days, would generate 1.5 billion euros ($2.2 billion) of cash flow.

The relationship with China has not always been a smooth road for Carrefour. Back in April 2008, there was an Olympic Games controversy when advocates of Tibetan independence disrupted the Olympic Torch re¬lay. Some Chinese groups promoted boycotting the com¬pany’s outlet stores because of its French background. Carrefour tried their best to disconnect themselves from the Beijing Olympics controversy and eventually emerged stronger than ever.

Carrefour has also been successful in Latin America. The first quarter statistics on the company`s website shows that like-for-like sales in this region garnered a steady 10.1 percent increase. Meanwhile, the other parts of the world seem not to share the same success as Chi¬na. Just in March of this year, Carrefour announced the selling of 8 stores to AEON Group. Carrefour also sold 524 stores in Portugal in April. It seems that the compa¬ny tends to focus on the countries that are having great success and is slowly moving away from countries that are giving the other end result. However, in a Reuters news report, Ollofson insisted that Carrefour remains profitable in all countries that it has outlets in. He also stated that it is not necessary to quickly make the move to withdraw their businesses in these countries.

What makes Carrefour work

There can be a number of reasons why Carrefour has emerged in global retail competition. These reasons may include the group’s vision and global marketing strategy.

Carrefour’s vision includes being the preferred retail¬er wherever its operation may be. That is why Carrefour has been successful in countries like China, because they promote a client-centered culture that heavily depends on customer trust and loyalty. Today Carrefour has an estimated 15,000 stores and four store formats. These are the hypermarkets, supermarkets, hard discount and convenience stores. The company has also sets its standard in terms of product quality. From household and per¬sonal care products to children’s wear and toys, the company en-sures a high standard of safety. Aside from being a retail store, Carrefour also manufactures its own brand products. One big ad¬vantage of a retail chain such as Carrefour is the ability to offer a wide variety of brands. They of¬fer industrial and regional brands including the “first price” items which refer to their own products.

Eyeing India

There have been talks that Carrefour has been eyeing to expand in India for quite some time. Reuters reported recently that the retail king is going to announce its ma¬jor partner in India. The company is said to have been very careful of not launching or acquiring too much too soon. Carrefour reportedly spent much time trying to find the right partner for this potentially historic busi¬ness venture in India. Reuters further reported that in the annual shareholders meeting Lars Oloffson an¬nounced they will soon reveal the new business partner. This announcement came amidst the speculation among Indian media organizations that is Kishore Biyani’s Fu¬ture Group. The Future Group is said to run the largest store chain in India. It is also important to take note that countries like India do not permit foreign companies to own and operate their own retail chains. In order for a retail invasion by Carrefour in India to come true, they have to strike a partnership with local companies. The only exception to this restriction is that the company is allowed to manage cash-and-carry outlets.

Breaking through India is very much crucial to the company’s calculated vision of reigning over Asia in the field of retail.

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