French retail giant Carrefour (crossroads in French) is the number one retailer in Europe and number two in the world. In 2018, Carrefour made approximately 74 per cent of its sales in Europe, but it had 12,300 stores spread throughout 33 countries on four continents, with revenues of $76 billion and a workforce of 380,000 employees. In 2018, Carrefour SAs

Chapter 16, Cases #2

French retail giant Carrefour (‘crossroads’ in French) is the number one retailer in Europe and number two in the world. In 2018, Carrefour made approximately 74 per cent of its sales in Europe, but it had 12,300 stores spread throughout 33 countries on four continents, with revenues of $76 billion and a workforce of 380,000 employees. In 2018, Carrefour SA’s total revenue decreased by 2.7 per cent in comparison to 2017. Saturated domestic markets, economic growth in Asia and eastern Europe, and improvements in transportation systems are all factors driving large retailers to expand abroad, with mixed success. Tesco has moved into China and the United States, Carrefour has pulled out of some eastern European countries in order to focus on expansion in China and WalMart is pushing for growth in a range of new markets.

Carrefour SA is a France-based company that is primarily engaged in retail distribution. It operates a network of hypermarkets, supermarkets, hard discount stores, convenience stores and cash-and-carry outlets, and offers e-commerce services. The company’s hypermarkets, Carrefour and Atacadão, offer a range of food and non-food products. Carrefour SA’s supermarket chains include, among others, Champion and Norte brands, which primarily offer food, clothing and household goods. The company’s hard discount stores include Dia, Ed and Minipreço, offering products at discount prices. Its convenience stores, such as Shopi and 8 à Huit, offer a range of convenience products and services. Carrefour SA’s cash-and-carry stores, Promocash, Gross and Docks Market, offer wholesale products for businesses. As of 31 December 2014, the company was 8.11 per cent owned by Blue Partners. Anyone observing Carrefour over the last three decades must concede that international expansion is a key part of its strategic plan. Despite this, in 2008, 47 per cent of its sales were in France alone and 81 per cent in Europe. The 19 per cent of sales outside the region were evenly divided across Asia and Latin America. By 2014, 35 per cent of its sales were in France and 55 per cent in Europe, 14 per cent in Latin America, and 6 per cent in Asia. By 2018, 47 per cent of its sales were in France. Carrefour is under pressure in its home market of France as rivals keep prices low to gain market share. In 1996, the French government introduced the ‘Raffarin law’ to restrict the expansion of hypermarkets, with the aim of keeping the French countryside from turning into large warehousestyle retail structures. This in turn would protect the French way of life, in which local food farmers supply small local shops. For Carrefour, this meant that growth of its hypermarket business could come only from acquisitions in its local market or from expanding into foreign markets. Its success at following this strategy has varied considerably because of different competitive environments and cultural differences across regions. In the United States, Carrefour opened three hypermarkets in Pennsylvania and closed them as a result of local competition. In its home region of Europe, however, Carrefour is the number one retailer in Spain, Portugal and Greece, and the second largest in Italy. Carrefour was the first Western hypermarket company to expand into the Asian market in the mid-1990s. By 2001 it was the third largest retailer in China and had operations in Thailand and Japan. The company gambled that Asian customers would be willing to move from their traditional outdoor markets to purchase at air-conditioned and ‘all under one roof’ hypermarkets. These hypermarkets rely on local suppliers that can offer products at the same price level as those supplied to the local competition and cater to the tastes of locals. For their part, local suppliers are all too ready to enter contracts with Carrefour, which promises to put their products on shelves across the Asian region. Moreover, where local contacts are not readily available or insufficient, Carrefour’s competitive advantage comes from its economies of scale, centralised purchasing and power over the supply chain, plus operations and logistics efficiencies. Because products are offered in a comfortable environment at competitive prices, the local competition is nothing to worry about. In fact, Carrefour is more concerned about competition from other Western retailers such as Walmart and Tesco. Tesco and Carrefour raced to open the first hypermarket in the Thai market and basically tied. Both their hypermarkets faced each other in a busy Bangkok street. If they want to survive in the long haul, however, Western companies should always be wary of potential local or regional competitors. In Hong Kong, where Jardine Matheson and Li Ka-shing dominate the market, Carrefour was forced to close operations. The group now sees strong potential for further international growth in the large national markets of China, Brazil, Indonesia, Poland and Turkey. But the benefits of international expansion are not completely clear. Carrefour and other large retailers have tended to enjoy higher operating margins in their domestic markets. They have also struggled to leverage scale economies on a global basis because, in order to cater to local tastes, hypermarkets must purchase from local producers. Indeed, in November 2010, Carrefour announced the signing of an agreement with Big C, a subsidiary of Groupe Casino (France), for the divestment of its operations in Thailand for an enterprise value of Ä868 million. Carrefour plans to sell 19 stores in Malaysia and two in Singapore; it shut down its Xi’an outlet in China’s Shaanxi Province in July 2010. On the other hand, Carrefour SA announced the opening of its first Cash & Carry Store in India in December 2010. With a sales area of 5,200 m2, this store, located east of New Delhi in the Shahdara neighbourhood, will offer more than 10,000 stock-keeping units in food and non-food to professional businesses, institutions, restaurants and local retailers. Carrefour had opened three supermarkets by the end of 2010 and two hypermarkets in 2011 in Romania. The supermarkets were opened in the capital, Bucharest, in the southern town of Târgovişte, and in the northwestern town of Cluj. The hypermarkets slated for a 2011 launch were located in Bucharest Source: and in the northern town of Botoşani.

Since 2011, shares in Carrefour have gradually been falling since Europe’s biggest retailer issued a warning that profits in its core French market were set to fall, as it is facing fierce competition from rivals in France.

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