Carrefour China Market Entry Strategy
250 cities with a population over 1 million and a steady rise in living standards… For the mass-market retailing, China offers limitless opportunities; more than for any other market segment. However, along with opportunities, foreign brands come up with numerous challenges regarding customers’ tastes, which are highly accurate in China. International brands, which are currently leading the market, had to adopt sophisticated marketing strategies to gain the interest of new customers when entering the long market time ago. Carrefour, when targeting Chinese market in 1995, was facing considerable challenges before it became a market leader. Our focus is on Carrefour China market entry strategy.Read the French version here
Chinese Traditions cannot be neglected when entering China market
A part of Carrefour China market entry strategy, adopted by the firm when entering the Chinese market in 1995, was “learning-by-doing.” At that time, the market was not well explored by researchers and international companies, which could give a reliable advice on Chinese customers’ tastes. As a result, at the first stages, Carrefour was exploring the market, observing customers’ behavior and correcting existing marketing strategies. Before entering China, Carrefour was operating in Taiwan for seven years. This experience largely helped the company to suit new customers tastes as long as both Eastern cultures are quite similar. In 1995, foreign investors could not directly operate retail stores. Therefore, the company entered the market as a local partner of Shanghai Hualian Company, which had a close relationship with the government at that time. This “partnership” led to rapid expansion of Carrefour in Shanghai. Carrefour China market entry strategy was primary to target first-tier cities, which were not saturated with many producers at that time. Location plays a major role in the market strategy of the company. Shops are primarily located at the crossroads, where one of the roads must be a thoroughfare. “Carrefour” in French means “crossing.” In Shanghai, the company has located its shops in the areas of above average income level including major business districts and central residential areas.
The Chinese name of Carrefour is “家乐福” (Jia le fu), which means “family, happiness, and love.” These three characters are equally important in Chinese culture; 福 (fu) is traditionally used during Chinese New Year.
Chinese Consumer tastes vary across China’s regions
To optimized Carrefour’s China market entry strategy, local consultants did in-store observation and surveys. If the majority of customers are foreigners, as in the Shanghai Hongqiao Carrefour store, the company imports foreign products, in particular, wine and cheese. On the contrary, if Chinese customers are prevailing, shops have a greater variety of brands and longer shelves. This is because Chinese customers traditionally appreciate the variety of food and like to compare and contrast different types of products. Moreover, Carrefour learned that the clients’ tastes differ across China. For example, the beer Tsingtao is consumed by everyone in Quingdao, but in Beijing, everyone drinks local beer. It learned that customers in coastal cities preferred to buy fresh fish while West and Middle China gave preference to frozen fish. When Carrefour adopted this strategy, fish sales went up by over 30%.
As it was mentioned above, market entry strategy is critical when entering the Chinese market. Even a powerful brand as Carrefour, which is highly popular among Chinese customers now, had to face various challenges in its first stages in China.
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