More problems for Carrefour

French retailer Carrefour, recently embroiled in controversy over wrong or ambiguous price tags, is under the spotlight again as two stores are facing possible closure.
A staff member surnamed Zhang who works in the Chuncheng store in Changchun in Jilin Province Tuesday told the Global Times that the store had stopped replenishing stock. She said the store would soon close, but she did not know when.
Li Jing, who works at reception in the Jinghu store in Shaoxing, Zhejiang Province, Tuesday said she had heard a rumor that the store would close. China Business News Tuesday reported that the store may close before May 1.
If the two stores do close, it will mean that four regions in China, in the east, north, south and west, will all have witnessed closures, the first time the retailing giant has seen so many store closures in the 16 years it has been operating in China.
The Chuncheng store, with a business area of 8,000 square meters, is the second-largest Carrefour outlet in Changchun. The Jinghu store is the only Carrefour in Shaoxing. The two stores have been open for more than two years.
So far, Carrefour has not confirmed whether the two stores will be closed or not.
As with the previous store closures - in Dalian, Liaoning Province; Xi'an, in Shaanxi Province; Jiaozuo, in Henan Province; and Foshan, in Guangdong Province - market watchers have attributed the problem mainly to poor management.
Li Zhenyu, an industry analyst from Huarong Securities, Tuesday told the Global Times that the Carrefour stores have a higher profit on sales commissions and entrance fees than other retailers, which means that suppliers have a tense relationship with the retailer.
At the end of last year, Carrefour was involved in a series of disputes with its suppliers, including Master Kong, a Taiwan-based instant noodles supplier, owing to the fact that the retailer refused to lower the high entrance fees and sales commissions it charges.
According to an audit report from Hangzhou Carrefour Hypermarket Co Ltd, which is responsible for the Jinghu store, the company had made losses of 2.1 million yuan ($318,654.98) by the end of 2009, and the figure rose to 4.8 million yuan ($728,354.23) by September 30, 2010, mainly owing to losses at the Jinghu store, reported NBS Tuesday.
"The stores involved are mainly in second- and third-tier cities, and the giant normally prefers a big market area, which makes it hard for it to compete with local retailing rivals," Li added.
Compared with Carrefour's situation, other foreign retailers are on a different track. The UK-based TESCO has started to buy property instead of renting in different cities, and on Monday said that the company would open two stores in Beijing and Liaoning Province, pushing its total number of stores to 95.