CHAPTER 1 Introduction export planning

Carrefour expands abroad

Hypermarkets are giant stores as big as four or more football fields. Part supermarket and part department
store, they feature a wide array of product categories – groceries, toys, furniture, fast food, and financial
services – all under one roof. Hypermarkets have flourished in Europe for more than three decades. France’s
Carrefour SA opened the first hypermarket in 1963; with help from the French government, zoning laws
ensured that competing stores would be kept from the vicinity. By 1973, the hypermarket concept had been
introduced in Spain; today, Carrefour is the world’s most global retailer with 10,000 stores in 30 countries.
Most of the European stores were well established before competing retailing concepts such as shopping
malls and discount stores made the Atlantic crossing from America. Now the hypermarket concept is being
transplanted around the globe. Carrefour has established a strong presence in Asia; in December 2000, it
became the first foreign retailer to open a hypermarket in Japan.

Photo: Craig Joiner Photography/Alamy Stock Photo

In the United States, retailing channels are quite diverse. In addition to long-entrenched shopping malls and
discount stores, wholesale clubs such as Pace and Sam’s offer rock-bottom prices, and Toys ‘R’ Us, Circuit
City, and other ‘category killers’ offer tremendous depth in particular product categories. In February 1998,
Carrefour (‘crossroads’ in French) opened its first U.S. hypermarket, a gigantic store in Philadelphia with
330,000 square feet of floor space. Carrefour soon built a second American unit, but then shut down both
stores in October 1993. The problem? Many shoppers simply found the stores too big and too overwhelming.
Also, although the product assortment was very broad, there was little depth in some product categories. For
many products, only one brand or one flavour was available.

“In the future, we will have local companies or global companies, but not much in between. Globalization will
lead those who are not in the first team, or who are national retailers, to make alliances.” Daniel Bernard,
former Chairman and Chief Executive, Carrefour

Despite problems in the United States, hypermarkets are thriving elsewhere. There are several reasons for
this. First, in countries where shoppers must visit many smaller stores or markets to complete their shopping,
the megastore concept is viewed as a welcome innovation, even though many customers feel loyalty to
traditional family-owned stores. Also, hypermarket operators offer free parking in spacious lots, a lure to
shoppers in countries where parking spaces are short in supply. A third reason is demographic: as more
women enter the workforce, they have less time to shop. While U.S. shoppers can choose from many
discount stores and supermarkets, consumers in other countries find that hypermarkets are the only
convenient alternative to shopping store-to-store.
Venezuela’s first hypermarket, Tiendas Exito, opened in May 2001. A French-Venezuelan-
Columbian partnership opened the store despite Venezuela’s relatively small population of 24
million people and an economy mired in recession. The partners reasoned that the soaring cost of
living would motivate consumers to go bargain hunting.

Carrefour is still fine-tuning its global strategy. In November 1999, it acquired French rival
Promodès; valued at $ 13.6 billion, the deal was the world’s largest retail acquisition. In their quest
to build a global brand, Carrefour executives changed the names of hundreds of Promodès’ Pryca
and Continent stores in Spain and France to Carrefour. Confused by the names, some shoppers
took their business elsewhere. Meanwhile a competitor, the Netherlands-based supermarket
operator Royal Ahold NV, is retaining local store names as it expands around the globe. As the
company’s chief executive said, “Everything the customer sees, we localize. Everything they don’t
see, we globalize.” Carrefour has pulled out of Japan, Mexico, and South Korea while establishing a
presence in markets with stronger potential such as China and Brazil. Expansion plans unveiled in
2006 called for opening 100 new stores each year through 2008. Approximately one-fourth of the
new stores will be in China.

“Carrefour has a proud history as the most international retailer, planting its flags in many countries.
But I am not proud of putting my banner anywhere, at any price.” José Luis Duran, Chief Executive,
Carrefour

Meanwhile, at home in France, Carrefour is facing intense competition from Aldi and other so-called
‘hard discounter’ chains that feature private-label brands at lower prices. The French market is
critical because it generates 60 percent of Carrefour’s profits. After José Luis Duran became chief
executive in 2005, one of the first priorities was ‘to get France right.’ Duran sent a message to his
French store managers: henceforth, a major part of bonuses would be based on price
competitiveness. Following Wal-Mart’s strategy, Duran put an end to one-time discounts and
implemented across-the-board low prices. Although Carrefour’s financial results for 2005 were hurt
by a profit decline in France, sales and market share increased.

Having addressed the price issue, Duran set about improving service in an effort to win customers
from specialty stores. Stores that were understaffed have added more personnel. Duran is also
taking a more flexible approach to store size and design; Carrefour is trying new formats such as
‘Mini-Hyper’ and ‘Carrefour Express’, a scaled-down supermarket.

Source: Warren J. Keegan, Mark C. Green, Global marketing, 5th edition, Pearson Education, International
edition, pp. 431-432

Case questions

1. What is the biggest competitive threat facing Carrefour as it expands in global markets?

The competition of ‘hard discounter’ chains that feature private-label brands at lower prices,
who are operating in the same countries.

2. Carrefour is currently the top global retailer in China. What must it do to maintain its
leadership position as Wal-Mart expands operations here?

Carrefour has to look at the key things that make them successful and focus on those. The
megastore concept is positively viewed by the shoppers in China, as well as the free parking
lots. Additionally, carrefour as a hypermarket are a convenient alternative to shopping store-
 to-store for the workforce in China. Try to get more established, get more branches,
assortment, better pricing and be earlier than Wal-Mart. They must maintain their brand
image, localise their stores and services.

3. Check the latest annual report of Carrefour and evaluate the success of Carrefour’s
internationalization strategy.

The health crisis has accelerated the ongoing transformations in our industry: the growth of
e-commerce, the fragmentation of consumption patterns, the rise of local convenience stores,
increased demand in terms of quality, authenticity and traceability

Carrefour implemented these transformations in their internationalization strategy by offering

Cash & Carry is getting more popular, so they offer a wide range of food and non-food
products at wholesale prices, the cash & carry business appeals to professionals and
individuals looking for a good deal. Especially in Latin Amerika is this chain expanding
rapidly. Lastly, to keep pace with new consumer trends, Carrefour is rolling out agile and
innovative store formats everywhere around the world.

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