SHANGHAI - The French retailer Carrefour SA resells products bought from its suppliers to intermediate distributors at a discount in China to inflate sales figures, according to a report on the news portal NetEase.com on Friday.
The retailer also increases the charges for promotional and management activities to its suppliers, to make up for losses incurred in the reselling process, the report said, citing former Carrefour store managers in Shanghai.
These activities account for between 5 and 15 percent of sales at Carrefour stores in Shanghai, the report said, citing a former store manager.
The people quoted in the report were not available for comment on Friday.
Carrefour earned 36.6 billion yuan ($5.6 billion) in sales in 2009, according to a report last year by the China Chain Store & Franchise Association.
That means, at the lowest rate of 5 percent, about 900 million yuan of the retailer's sales in China in 2009 came from the practice of reselling.
The products resold by Carrefour are cheaper than those on the market, resulting in a situation where distributors make a profit at the expense of Carrefour's suppliers, the report said, citing a Carrefour supplier.
Yu Guo, a public relations official with Carrefour in Shanghai, refused to comment on the NetEase report.
The practice, if verified, casts doubt over the supermarket's rapid sales growth in China, which is among the fastest in the retailer's worldwide operations.
Carrefour's sales grew 12.5 percent in China in the fourth quarter of last year, more than double the company's overall growth of 5.1 percent.
"Every year, a sales growth target is assigned to each Carrefour store in China. The target increases every year, and to meet it, stores resort to this practice. If the target is not met, store managers will not get a bonus," according to a store manager in Shanghai who was quoted in the report.
"The headquarters in Shanghai turns a blind eye to this kind of practice, which inflates the sales figures."
The practice of reselling exists among some domestic retailers anxious to meet sales targets, but reselling on such a large scale with the acquiescence of senior management is rare, the report said, citing a Carrefour supplier.
If the reports are substantiated, it will be more bad news for the supermarket giant. In January, fines of 500,000 yuan each were handed down to eight Carrefour stores, three of them in Shanghai, which were found guilty of overcharging. The fines were the highest ever imposed in China for such malpractice.
Chinese regulators had determined that consumers were paying higher prices for products than those marked on price tags, the regulators also said that the company had falsely portrayed the size of discounts.
