Slow-to-adapt Carrefour struggles in a changing retail landscape

Ding Yining
Carrefour's fluctuating performance is a reflection of the changing retail landscape in China, with consumers seeking ease in shopping and value for money.
Ding Yining

The recent crisis of Carrefour China underlined the quandary that brick-and-mortar establishments face.

Once a pioneer and a powerhouse among multinational retailers, Carrefour is now in an embarrassed position in China, with strong competition from grocery chains and delivery services.

This week, reports of a stock shortage at local Carrefour stores have caught the attention of commentators and customers.

Some people complained that they have been unable to use their shopping cards for certain products, especially those labeled with Chinese New Year, in Shanghai, Guangzhou, Wuhan and other parts of the country since last month.

When going into some Carrefour outlets, people see near-empty shelves.

Slow-to-adapt Carrefour struggles in a changing retail landscape
Jiang Xiaowei / SHINE

A near-empty Carrefour store. The retailer has been slow to adapt to the digital trend as delivery becomes an essential option for shoppers.

A member of the customer support team at the Carrefour store in Shanghai's Hongkou Plaza claimed the merchant categories were being adjusted but had not yet provided any details.

Consumers are now worried about whether they can spend all their money in the pre-paid cards issued by the retailer that used to have a good reputation.

The ups and downs of Carrefour outlets in China reflect the changing perspectives that have shaped consumption habits in recent years.

Industry experts say that Carrefour has been slow to catch on to the digital trend, even though delivery is becoming one of the most important options for buyers.

Carrefour opened its first China store in Beijing in 1995 and quickly expanded to more than 100 outlets by 2006.

In 2019, Suning paid 4.8 billion yuan (US$695.7 million) in cash to buy 80 percent stake in Carrefour China. At that time, Carrefour had 210 hypermarkets and 24 convenience stores.

Later, in 2018, it experimented with smaller store formats called "Easy Carrefour" in select cities, but made little progress due to poor locations and a lack of distinguishing store features.

It also tried to add catering service but made little progress and recorded annual losses of 1.1 billion yuan and 578 million yuan in 2017 and 2018, respectively, due to a further decline in foot traffic.

It has cut store numbers since then, shutting down 54 outlets by the end of the third quarter last year and stopping operations in cities like Chengdu, Nanchang and Hangzhou.

Comments by shoppers point to the lack of intuitive store features and specialty products.

"It's no surprise that Carrefour stores would succumb to fierce competition among physical retailers," says a Shanghai shopper named Li, who used to frequent Carrefour stores roughly 10 years ago.

Slow-to-adapt Carrefour struggles in a changing retail landscape
Ti Gong

In its heydays, Carrefour had over 210 hypermarkets around the country, but it has been slow to adapt to changing market trends.

Discount retailers and membership-only supermarket chains have outperformed the general retail business, although Carrefour has lagged behind competitors due to a slower pace of expansion.

Supermarket chains have come under pressure with changing shopping behavior, and some have emerged stronger with their flexibility and agility in responding to new trends.

Initial signs of recovery have emerged, but Carrefour may not have much time to return to profitability.

According to the Ministry of Commerce, sales at major merchants and restaurants increased 6.8 percent year over year during the weeklong Chinese New Year holiday in late January.

In a preliminary earnings report issued last month, Yonghui announced that it expected a net loss of 2.4 billion yuan due to the devaluation of one of its investment assets.

It also stated that major business figures had improved in December as the company worked to focus on an omni-channel strategy with a focus on fresh food, which has a high purchase frequency.

Slow-to-adapt Carrefour struggles in a changing retail landscape

Retailers now offer discount models, delivery, and integrated sales and service channels.

Bain & Company and Kantar Worldpanel China claimed that China's fast-moving consumer goods sector demonstrated resilience in the first three quarters of 2022, with 3.6 percent year-on-year growth due to substantial amounts of bulk shopping for daily essentials and food.

Membership-only stores such as Sam's Club, Costco, and Metro have seen the most growth in recent years, as have innovative delivery models that meet changing consumer demands.

A survey conducted by the China Chain Store & Franchise Association found that the number of membership-only stores had reached 189 at the end of last year, up from 33 in 2020.

Retailers have also shifted their business models to include niche segments such as discount models, delivery, and integrated sales and service channels.

Freshippo, Alibaba's grocery chain, has opened nine membership stores around the country and plans to open more fresh food discount stores in the near future.

Doris Tao, who lives in Shanghai's Putou District, is thrilled to hear that a Freshippo discount store will be opened near her home soon. "It's always good to be able to save money on everyday grocery shopping," she said.

RT Mart, Yonghui, and Walmart have also formed solid partnerships with leading digital platforms such as Alibaba and JD Daojia to improve delivery service.

It is said smaller store formats can now outperform big-box retailers because customers prefer to shop in their localities.

According to Kantar Worldpanel figures, sales of convenience and grocery stores increased by 9 percent in the first three quarters of last year.

As buyers place greater emphasis on convenience and value for money, those with the agility and capability to offer an integrated service would eventually excel, analysts said.

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