Carrefour in China
Carrefour SA is the second largest retailer in the world. Since 1995, the French supermarket chain Carrefour SA launched its stores in China and now operates 238 supermarkets in 70 cities. This coming year, the firm plans to open 15 new stores in China. One of Carrefour’s strategies (In Chinese 家乐福) is the development of its e-commerce activity and a new operational structure, is about to be launched with the intention to gain ground in a market that was affected by what a frugal consumer environment.
The Overview of Carrefour in China
Carrefour has opened 11 hypermarkets in China last year and closed 8 stores, but it is still well established in China for over 20 years. Carrefour has gradually started to extend internationally in other countries in 2007. Carrefour pays special attention to Asian markets which offer great potential.
Carrefour has studied the habits of customers and established a brilliant marketing strategy, Carrefour has changed along their business practices to meet the Chinese customer’s demand.
The overall strategy selected by Carrefour in China was to establish a decentralized system of the activities. The company has been divided into four parts: South China, East China, North China and Middle China. with a staff essentially managed by local people. In addition, Carrefour is adapting its offer to the local demand. The firm is well known for its large size stores. In China, Carrefour had originally planned to open 10,000 square meter stores, but after taking into consideration the local environment, the Carrefour’s stores have been resized to 3000 square meters large.
From Launching to Present: Carrefour’s Strategies in China
In 1995, Carrefour has entered in China’s market by forming joint ventures with local companies. The firm indeed, has signed direct agreements with the local governments in various provinces, to obtain the licenses to set up its stores. In the early 2000s, Carrefour is known as the largest foreign retailer in China. The strategy used to operate in the country is different from its former strategy, Indeed, Chinese people goes to the supermarket to buy daily groceries in small quantities. Most products sold in Carrefour stores in China have specific formats, and the store managers have been trained to meet the local needs.
In order to suit the local preferences, Carrefour has customized its offer to suit to suit local preferences. Today, the firm also need to follow the digital trend in order to stay competitive. Last year, Carrefour.cn has been launched, with special sales for grocery and household items. From now on, this service is available in Shanghai, but it will be soon extended to other cities.
Carrefour plans to create a series of treatment centers to serve both its stores and online orders. The first center has been opened and is located in Kunshan, near Shanghai. Carrefour plans to create around six other centers in China by the end of 2016. Carrefour is indeed a latecomer in the sale of online grocery products in China. Moreover, its development in tier-two and tier-three cities didn’t reach the expectation of the multinational.
A difficult time for Carrefour in China
It is perhaps too early to talk about a withdrawal of the Middle Kingdom, but it is known that Carrefour is going through a shady period in China.
With the emergence of other retail giants in the country, Carrefour continues to lose its market. According to reports revealed in 2014, Auchan has 14% market share in China to Walmart (12.2%), and Carrefour occupies only the fourth position with 9.9%. The turnover of Carrefour fell 5.7% in the first nine months of 2015 compared to the previous year. With competition becoming stronger, the business climate has changed in the country.
According to some experts, the hypermarket model is the origin of the different problems of Carrefour China. For most consumers, the hypermarket model no longer responds to their requests, it indeed no longer fits with consumer habits with the rise of new consumption models, such as online marketing.
The future of Carrefour in china
Carrefour has announced plans to open seven new Carrefour convenience stores in Shanghai by the end of the year. The retailer opened its third store last month. The total number of stores in Shanghai will reach 10 convenience stores by the end of the year. Once this objective achieved, the retailer will focus on other cities in China.
New investments in the multichannel retailer are committed to meet the needs of all its customers, he decided to focus on the supply of various trade channels. Carrefour continues to open hypermarkets in major cities of China and invest in e-commerce, for example with its click and collect which was launched in June.
The branding and the customer experience of Carrefour China raised the retail sector in smaller cities. Indeed, many customers prefer to travel long distances by bus to Carrefour rather than buying the same products in small shops in their neighborhood.
Thanks to its high reputation among Chinese customers, Carrefour has experienced a great period of expansion in China and had become one of the best-known French brands in the country. However, with the arrival of other retail giants in China, such as Walmart and Auchan, Carrefour no longer follows its pace of expansion and was even forced to close six stores during the past two years.
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Posted by Daxue Consulting China on Thursday, December 17, 2015