Carrefour Group, can be the new n° 1 retailer of the world?

By Laureen Barbier

For 40 years, the Carrefour Group has grown to become one of the world’s leading retailers. It’s actually the second largest retailer just after the giant Wal-Mart and the largest in Europe. In 2008, sales are estimated to € 97.6 billions. The group knows a solid increase in its sale during this year, especially in its growth markets such as China.
May Carrefour be able to surpass the giant Wal-Mart?

On the one hand, The Carrefour group is currently engaged to a new strategy: they focused on one objective, be among the three leading players in each market where the company is present. They drive their core competencies for growth. They have decided to withdraw the market: Poland, Spain South Korea, Slovakia, and the Czech Republic. Moreover, they have assured their position by way of tactical acquisitions in Brazil, Poland and Spain.²

This strategy leds to double the store openings in existing and emerging markets. The group, currently, operates four main grocery store formats: hypermarkets, supermarkets, hard discount and convenience stores. It has over 15,000 stores under company-operates or franchise.

Carrefour is undeniably better than Wal-Mart in certain aspects of retailing business. The former CEO Daniel Bernard (replaced in January 1^st 2009 by Lars Olofsson) says: “They learn (Wal-Mart) from us in fresh food and merchandising”.
The most significant success and competitive advantage that Carrefour has is their presence in markets where the US giant was late to come into like Asia. For example, the Group has 100 stores in China, twice more than Wal-Mart. "Carrefour is the world's most successful international retailer," says Jaime Vasquez, an industry analyst at Salomon Smith Barney in London, adding, "Wal-Mart has no track record outside North America." The French retailer has built its empire in over 29 countries. By contrast, Wal-Mart operates only in 10 countries.
In Addition, the Carrefour group puts its customers as the center of their objective. They simplified its organization, to give more independence and freedom to stores managers in order to adapt their business to the needs area. They have increased its service offering in order to expand the customer choice, to respond to different customer lifestyles.

On the other hand, Carrefour Group faced to challenges that may affect their current strategy of expansion.

Indeed, The Empire is shaking in its foundation, I mean, in the French Market
for few years, more and more French consumers have switched its favorite hypermarkets in favor to discount chains such as German’s Aldi and Lidl. With the current crisis, this challenge increase and the Group has reacted already with the development of hard discount stored Ed in France and Dia abroad. However is it enough to satisfied new consumer‘s habits? This new strategy hasn’t slowed the new competitors already set up on the outlet market. Some store sales had fallen at 4 %. . Carrefour sales slowed to 0.7% gain compared to 10% gain in 2008. And last month, the French retailer had issued a profit warning in response to falling demand from consumers and fierce promotions that it used to lure shoppers to its stores. °

Abroad, the situation changed and competitors appear. They have pulled out of some countries where it has struggled; and concentrated on key markets like Latin America and Asia. In fact, sales have slowed down in West European countries such as Spain which has boosted results last year .In China, the Group want to increase the number of store opening to boost sales because of the global recession.. The country knows ,for the first time, a slowing economic growth and the projections indicate that this situation will continue. When there is a crisis, people look to price. So the retailer has decided to drop prices and make more promotions in order to compensate. “Expansion in China is fine, but if you put it in a larger context the market still represents only a slow single digit percentage of sales,” said Christopher Hogbin analyst at Sanford C. Bernstein in London.³

Finally, even if the biggest French retailer has always failed to enter in last market where is not present: the US market, their final aim for the Group in a long term view, is to win the global commercial battle. And I think they are closed to reach this objective if the economic background doesn’t modify the rules of the retailing business.

²http://www.carrefour.com/cdc/group/current-news/2008-sales-en.html

³http://www.bloomberg.com/apps/news?pid=20601089&sid=a9cs2JLTJ8O8&refer=china

°http://www.businessweek.com/magazine/content/04_41/b3903075_mz054.htm