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Carrefour in China

The rise and fall (and rise again?) of Carrefour in China

In 2022, Carrefour was the 8th most popular supermarket chain in China, with a revenue of 27.3 billion USD. At the beginning of 2022, the French giant had more than 200 stores across China. However, in Q1 of the same year, it registered the definitive closure of more than 24 stores. Carrefour crisis in China accelerated in 2019, after the acquisition of the company’s stakes by the Chinese brand Suning, which now holds 80% of Carrefour’s retail operations in China. Fierce competition is also damaging the company’s sales in China, the superstore is progressively losing ground to other Chinese supermarket companies.

The history of Carrefour in China and how the company made its own name in the market

Carrefour entered the Chinese market in 1995 through an alliance with Shanghai Hualian, an electrical appliance company. At that time, the Chinese government had imposed restrictions on the retail industry that hindered the expansion of foreign companies in China. However, Carrefour managed to gain popularity in its early years of operation, as it faced less competition from other foreign retailers who were affected by the government regulations.

Carrefour in China
Source: Baike, Chinese name of Carrefour

The Chinese name of the company, “家乐福”, means “family, happiness and fortune”. The company  focused on 1st tier cities such as Beijing and Shanghai, where it offered quality products at low and convenient prices. One of the main marketing strategies that Carrefour adopted worldwide was “localization”. The company adapted its approach to the specific country it entered. In China, the brand studied the consumption habits and the psychology of its consumers. As a result, in 2021, more than 90% of all the products in Carrefour stores were sourced from local suppliers. In this way, their items were cheaper and, thus, more affordable.

Carrefour China’s struggle and decline under Suning’s ownership

Carrefour China’s foundations began to crumble in 2018, when it registered a loss of more than half a billion euros in net sales, dropping from 4.3 billion USD in 2017 to 3.8 billion USD in 2018. To save the company, Suning, one of the biggest online and offline retailers in China founded in Nanjing in 1996, acquired 80% of the total Carrefour’s stakes for more than 4.8 billion RMB in June 2019.  Suning hoped to boost its fast-moving consumer goods (FMCG) and expand its retail presence online and offline. However, even Suning’s aggressive expansion policy didn’t stop Carrefour from falling into a deep crisis. As of 2021, the French retailer had 205 stores spread across the country, but during the first three quarters of 2022, Carrefour China shut 54 stores. Suning faced a loss of more than 4.5 billion RMB in the same period, down by more than 40% compared to the previous year.

Carrefour in China
Source: Statista, designed by daxue consulting, 2011-2021 number of Carrefour stores in China

Mistakes and miscalculations led Carrefour into a deep crisis

Carrefour was not the only Western company that failed in the Chinese market. Other big Western players such as Home Depot and Tesco also had to exit China after facing fierce competition and changing consumer preferences. Starting from 2010, both brands were forced to close their stores and abandon exit China.

China’s rapid digitalization of its economy since 2010 posed a major challenge for Carrefour, which did not manage to keep up with the e-commerce trend and new delivery system. This was one of the most crucial mistakes made by Carrefour in China, as online shopping became increasingly important for local consumers.

The shortage of products is a persisting problem in all the Carrefour retail points in China

At the beginning of 2023, Carrefour China faced a severe shortage of products in its hyperstores in Beijing, especially fresh vegetables, fruit, and meat. To solve the problem, Suning made significant changes in the organization of some Beijing stores, such as the Shuangjing store. Carrefour had to move all its products to only one floor of its hypermarket, while Suning’s products occupied the other one. As of February 2023, two third of Carrefour stores suffered from this shortage problem. The issue was more serious in big cities such as Beijing and Shanghai, where 80% of the Carrefour stores show anomalies on their supply chains and shelves.

Carrefour in China
Source: The Beijinger, Empty shelves in a Carrefour hypermarket in Beijing

Consumers are getting more concerned about Carrefour’s prepaid cards

The problem of prepaid cards is also worsening the crisis of Carrefour in China. After the first shortages of products in its stores, consumers started panic-buying grocery products, because they were afraid to lose money in their prepaid cards in case the store would have permanently shut down. Moreover, only “selected items” could be purchased using the Carrefour card. This restriction boosted the emptiness of some shelves, while others were completely full. The cards rapidly became useless, because the only purchasable products were sold out. The prepaid cards problem wasn’t only concentrated in few areas but was widely spread across China, concerning cities such as Beijing, Shanghai, and Chengdu. As of February 2023, the crisis had been continuing for more than a month.

Amid deep crisis, Carrefour China showed strong commitment to customers

Even if the company was facing a deep crisis at the beginning of 2022, Carrefour demonstrated unwavering support to its consumers during the Covid-19 outbreak. In April 2022, during the Shanghai lockdown, Carrefour staff slept in the stores to ensure residents had access to essential supplies. Despite the challenging circumstances, Carrefour employees prepared more than 3,000 orders a day, providing vegetables, meat, and everyday products to help those in the strict lockdown.

Source: Reuters, Carrefour employees in Shanghai offer their help to consumers in lockdown

Carrefour shifts towards digital economy

Rumors that Carrefour in China was filing for bankruptcy were denied at the beginning of 2023. In February 2023, the company stipulated a strategic agreement with the Yingjiang district government in Anqing city (Anhui). The deal involves equity investments in the company’s supply chains and business operations. The state-owned investments injected into Carrefour can potentially boost the brand’s transformation process, leading to faster development of the retail industry. In addition, the collaboration will help Carrefour enhance its digital economy, an area in which Suning is also actively involved.

The Chinese company is looking to improve the 3C of Carrefour: computers, communication, and consumer electronics. The Covid-19 pandemic has prompted the French retailer to is invest more in a new supply chain model integrating offline and online retail. Along with the improvements in the supply system, starting from February 2022, Carrefour is also adopting a community shopping model. Apart from the already announced improvement of their suppliers, the stores will also offer more services for families and experiences to attract more consumers, such as children’s playgrounds and catering facilities.

Carrefour’s economic struggles in China don’t stop its operations

  • As of 2022, Carrefour was one of the biggest supermarket companies in China, with a revenue of 27.3 billion USD.
  • The brand first entered the Chinese market in 1995 aided by the Shanghai Hualian company, immediately gaining lots of popularity. Carrefour’s main mission was selling quality products at convenient prices.
  • Since 2018, Carrefour was hit by a deep crisis after the acquisition of 80% of its stakes by Suning. As of Q3 2022, the company lost a total of 54 stores and Suning group lost more than 40% of revenue compared to the previous year.
  • Carrefour has faced significant challenges in the Chinese market in recent years, including a struggle to keep up with the digitalization trend. As the market shifted towards online retail, the company was slow to adapt and faced supply chain issues, resulting in a decline in performance.
  • At the beginning of 2023, Carrefour hyperstores across China faced a severe shortage. The crisis was also boosted by the company’s restrictions on certain products, which could only be purchased through Carrefour card. As a result, some specific shelves of the supermarkets were completely empty.
  • Despite the crisis, Carrefour showed concern and support to their consumers to regain popularity. During the 2022 Shanghai Covid-19 lockdown, the brand helped those in lockdown by delivering grocery products.
  • At the beginning of 2023, Carrefour also signed a strategic agreement with Yingjiang authorities to empower its supply chain system. The company started creating a new supply chain integrating both online and offline retail, as well as a new form of community shopping model.

Author: Lorenzo Linguerri

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