THE UPS AND DOWNS OF CARREFOUR IN CHINA
Carrefour entered the Chinese market in 1995 through a partnership with Shanghai Hualian, a home appliance company. Carrefour quickly gained popularity in its early years of activity, as it faced less foreign competition.
In 2022, Carrefour was the eighth most popular supermarket chain in China, with revenue of 27.3 billion dollars. At the beginning of 2022, the French giant had more than 200 stores across China. However, in the first quarter of that year it permanently closed more than 24 stores. Carrefour’s crisis in China accelerated in 2019, after the Chinese company Suning acquired a stake in the business; Suning now owns 80% of Carrefour’s retail operations in China.
The company’s Chinese name, “家乐福”, means “family, happiness and fortune”. The company had concentrated its presence mainly in first-tier cities such as Beijing and Shanghai, where it could offer quality products at low, affordable prices. One of the main marketing strategies Carrefour adopted worldwide was “localisation”. The brand studied the consumption habits and psychology of its Chinese consumers; in 2021 more than 90% of all products in Carrefour stores came from local suppliers. This kept product prices low and let customers find what interested them.
Carrefour China’s economic expansion began to stall in 2018, when it lost more than half a billion euros in net sales, falling from 4.3 billion dollars in 2017 to 3.8 billion dollars in 2018. The company was rescued by Suning, one of China’s largest online and offline retailers, founded in Nanjing in 1996, which acquired 80% of Carrefour’s shares for more than 4.8 billion RMB in June 2019. However, even Suning’s aggressive expansion policy did not stop Carrefour from falling into a deep crisis. In 2021 the French retailer had 205 stores across the country, but during the first three quarters of 2022 Carrefour China closed 24 stores. Suning suffered a loss of more than 4.5 billion RMB in the same period, down more than 40% on the previous year.
One of Carrefour’s mistakes was failing to keep pace with the country’s digitalisation: the supermarket chain was unable to meet Chinese demand for fast, efficient deliveries and lost a large share of its customers. Besides not keeping up with the times, at the beginning of 2023 Carrefour faced a severe shortage of products in its Beijing hypermarkets, especially fresh vegetables, fruit and meat. To solve the problem, Suning made significant changes to the layout of some Beijing stores, such as the one in Shuangjing. It had to move all its products onto a single floor of the hypermarket, while Suning products occupied the other.
The problem of prepaid cards is also worsening Carrefour’s crisis in China. After the first product shortages in its stores, consumers started panic-buying groceries because they were afraid of losing the money on their prepaid cards if the store closed for good. Although the company was going through a deep crisis at the beginning of 2022, Carrefour showed unwavering support for its customers during the COVID-19 outbreak. In April 2022, during the Shanghai lockdown, Carrefour staff slept in the stores to make sure residents had access to essential supplies. Despite the difficult circumstances, Carrefour employees prepared more than 3,000 orders a day, supplying vegetables, meat and everyday products to help those in strict lockdown.
Rumours that Carrefour China was going bankrupt were denied at the beginning of 2023. In February 2023, the company signed a strategic agreement with the government of Yingjiang District in the city of Anqing (Anhui). The agreement provides for equity investments in the company’s supply chains and business operations. The state investment made available to Carrefour could speed up the brand’s transformation, leading to faster development of the retail sector. This partnership will also help Carrefour improve its digital economy, an area in which Suning is also actively involved.
The Chinese company is trying to improve Carrefour’s 3C business: computers, communications and consumer electronics. The COVID-19 pandemic pushed the French retailer to invest more in a new supply chain model that integrates offline and online retail. Along with improvements to its supply system, since February 2022 Carrefour has also been adopting a community shopping model. In addition to the improvements to its suppliers already announced, stores will offer more family services and experiences to attract more consumers, such as children’s play areas and food outlets.
