Carrefour's dominance in China faces threats(70186)

Carrefour losing market share in overseas markets

As France-based retail giant Carrefour saw severe losses in its overseas markets last year, its dominant position in China is also being threatened, according to a Beijing Business News report last Thursday.

Although Carrefour China President Eric Legros said that Carrefour's China sales rose 16 percent year-on-year in 2009 and opened 22 new stores in China, the most in its overseas market, it lost its dominant position in both the number of new stores and sales revenue, the report said.

One of Carrefour's rivals Wal-Mart opened more than 50 stores in China last year, 40 percent more than that of the year before, and the former lost its status as having the most number of stores for the first time.

In addition, in 2008, the sales revenue for each store on average of RT Mart of Taiwan reached 332 million yuan ($48.63 million), 80 million yuan more than that of Carrefour in the same period. In the first quarter of 2009, RT Mart's sales revenue was 11.56 billion yuan, more than Carrefour's 10.86 billion yuan.

Analysts believe that one of the reasons for Carrefour's loss of market share in the Chinese market is due to a management problem that is "too flexible", since the manager of each store is responsible for purchasing, promotion and pricing. With managers wielding so much power this may lead to corrupt practices, according to analysts.

Also, they believe that Carrefour's profits rely too much on the suppliers. According to the report citing an unnamed analyst, the retail chain's 60 percent of the gross profits are from the suppliers.

Wang Tao, president of Valuepool Management Consulting (Shanghai), said that due to China's local retail chains growing, this in turn leads to greater conflicts with suppliers.

Some analysts also say that Carrefour's marketing strategy is too "single-minded". To occupy the Chinese market, other foreign capital retail giants, including Wal-Mart and TESCO adopted other business models like having a presence in shopping centers and being a community grocery store, while Carrefour has insisted on its business model of a hypermarket.

Meanwhile in Japan, all the six Carrefour stores were replaced by Aeon Wednesday, making the retail giant disappear from the Japanese market. This was not the only loss in the overseas market, as in 2006, the firm retreated from South Korea and last year left the Russian market.

In January 2010, Carrefour pulled out of Italy, and shut 21 stores in Belgium. In 2009, the retail giant's net profit dropped 70 percent compared with a year earlier.

Carrefour's dominance in China faces threats

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