Carrefour's Boom And Bust: The Sky Is The Limit

Can the European retail giant be reborn from the ashes?

On the last day of March, Carrefour in Zhongguancun, Beijing, officially closed its doors. The shop, which has been operating for 18 years and was once Carrefour's largest flagship shop in Asia, has now had to close its doors.

Since this year, Carrefour has closed a number of shops in a row, continuing to accelerate the pace of withdrawal from first and second-tier cities. In addition to the Carrefour flagship shop in Zhongguancun, Beijing, the shop also includes the Carrefour Nanchang Shanghai Road shop, which was closed on March 15, as well as the Carrefour Guangzhou Wanguo shop, which closed on February 28, and the Carrefour Chongqing Shapingba shop, which was closed on January 15. Last November, Carrefour's last shop in Hangzhou was also closed.

Success and Failure

As Europe's largest and the third Carrefour entered the Chinese market on Christmas Day 1995, when it was so popular that it was full every day and the shelves were empty at night.

Carrefour took advantage of the policy of reform and opening up and accelerated the opening of shops, entering Shanghai and Shenzhen in 1996, with equally good results. Later, Carrefour also introduced the concept of "Happy Shopping Carrefour" and "One-stop Shopping".

By 2004, the number of Carrefour shops nationwide had reached 57, edging out Wal-Mart as the "number one superstore" in China. In 2010, Carrefour had its high point, with 249 shops, and Carrefour was present in almost every major city. However, since 2011, Carrefour has been on a downward spiral in China. In fact, before that, the Chinese public had already launched a massive boycott of Carrefour in 2008, a boycott that also set the stage for Carrefour's future embarrassment.

By 2019, Carrefour's share of the retail market was only around 5%, and Carrefour officially announced that year that it was selling 80% of its Chinese business to Suning Tesco for 4.8 billion yuan, essentially admitting that it had "lost China".

Carrefour also said in a statement that the agreement with Suning.com also gave Carrefour several "liquid windows" to sell the remaining 20% of its China business, implying a full exit from the Chinese market. It is worth mentioning that Suning Tesco itself is also in debt and was taken over by state capital in March last year, which has put an even bigger drag on Carrefour's hypermarket operations since its exit.

There are many reasons why Carrefour has retreated from the Chinese market, but the main reason is the rise of e-commerce. Since the rise of the e-commerce model 10 years ago, the market has quickly become saturated, people are not satisfied with the demand of 0 to 1, personalised or creative consumption dominates the main theme, hypermarkets are a little "plain and dull", not well enough to meet the needs of the younger generation, and market share has begun to be eaten up by e-commerce.

Compared to a trip to the supermarket, people prefer to pick up their mobile phones and shop whenever and wherever they can, which is convenient and quick, and it is easy to eliminate the loss of information asymmetry between buyers and sellers. In addition, the wide variety of online shopping, affordable prices and occasional sales, consumers naturally prefer online shopping.

The original big and comprehensive appeal of traditional supermarkets has been lost in today's booming e-commerce economy, and with factors such as labour costs, housing rents and the impact of the epidemic in recent years, the cost of traditional supermarkets is also rising, even in any segment of goods, hypermarkets have encountered the challenge of a wider selection of online and offline shops with a more accurate consumer profile.

Many people in the retail industry have said that the traditional department store supermarkets, including hypermarkets, generally crude way of operation does not work anymore, occupy a favorable position and then hire a good shop manager can make money the bonus period has long passed. External pressure from integrated e-commerce, fresh food e-commerce and community group buying has crushed the advantages that traditional supermarkets once had, and the backwardness of the profit model and selection management inherent in these offline businesses has been exposed one by one.

When the market set has changed, there are only two ways in front of Carrefour: exit or reform.