Carrefour’s

Partly taken from Malaysian case book by Dr. Syed Sidek in collaboration with Research Associate Wang Leong Seng

Carrefour S.A. (French pronunciation: [kaʁfuʁ]) is a French multinational retailer

headquartered in Boulogne Billancourt, France, in the Hauts-de-Seine Department
near Paris. [2] It is one of the largest hypermarket chains in the world (with 1,462
hypermarkets at the end of 2016). Carrefour operates in more than 30 countries, in
Europe, the Americas, Asia and Africa. Carrefour means "crossroads" and "public
square" in French. The company is a component of the Euro 50 stock market index. [3]

Since its establishment in 1959 by its founding fathers, Marcel Founier and Louis
Defforey, the Carrefour group has expanded to more than 26 countries across three
continents. The group has more than 9,000 stores across the globe. Its concepts a nd
philosophies are geared towards customer satisfaction. Through its retailing activities,
it seeks to meet changing customer demands, in term of product selection and quality
at the most competitive prices.

Carrefour practices culture of innovation, adaptation and focus on customer.

Innovation can be found in their products, the layout of the stores and in the service
offered to customers worldwide. In global retailing, everything is quickly duplicated
and nothing is long lasting, they have to always sta y ahead of constantly renew their
operations and strategies. Operating in a global environment with a wide range of
cultural differences across different locations, Carrefour has incorporated “adaptation

1
culture” into its model of organization, by managing itself as a “glo-cal” company. Its
CEO defines “glo-cal” as global group with a local approach to its local market.

Carrefour has chosen to build its strength on hypermarket concept, a flexible concept
of handling large volume of goods with selection tha t evolves according to local
consumption requirements. By optimizing the hypermarket-retailing format, Carrefour
has been able to manage its market share while establishing a stronger network in
those markets where its presence is quite strong. Moreover , by consolidating purchase
volume, Carrefour is able to use efficient distribution tools and techniques leading to
an increase in value to its customers.

Carrefour in Malaysia

In 1994, Carrefour opened its first store in Subang Jaya, Malaysia. Since then it has
expanded into many stores in Malaysia such as in Mid Valley, Wangsa Maju, Sri
Petaling, Johor Bahru and Seberang Jaya and many more outlets in the early 2000s.
This has made Carrefour one of the pioneer developer of hypermarket concept across
Malaysia. It has aggressive promotion as compared wit h other hypermarkets. At the
end of 1999, Carrefour launch a month-long nationwide promotion campaign ‘Big Deals
of the Century’ which had successfully attracted over 1.3 million people to frequent
its then few stores nationwide. This campaign has helped increased a 20 percent sales
growth. Beside achieving higher sales, the promotion also provided an opportunity to
carry out real-life test of its newly created supply chain organizational structure.

Consumer Survey

A mini survey was conducted on Klang Valley consumers. The objectives of the survey
were to evaluate the consumer perceptions on Carrefour’s marketing strategies across
Malaysia. This in turn can be useful to decision makers in formulating strategies on
how Carrefour Malaysia could expand its market share.

2
The result shows that 95% of the respondents have visited hypermarket at least once.
It also shows that majority of these customers are from the middle -income group
ranging from monthly income of RM 1,000 to RM 4,000. The frequen cy of shopping
indicated that they visit hypermarket one to three times a month. For those earning a
monthly income between RM 1,000 – RM 2,999 visit more than 4 times a month. 37 %
of the respondents spend between RM 10 – RM 49 per shopping trip. This is followed
by 33% of respondents who spend in the range of RM 50 – RM 99 on each shopping
visit. An analysis on the amount spent by different income groups indicates that t he
highest and lowest income groups spend less (below RM 50 per shopping trip) whereas
the medium income groups (RM 1,000 – RM 2,999 per month) spend the most at
Carrefour.

It is also found that food and sundry department is the most frequently visited
department, followed by stationary department, clothing department, electrical
products department and lastly furniture department. On the motivations, which
attracted them to hypermarket was the low price of the items followed by innovative
promotional activities, free parking, store location, assortment of products, store
layout and lastly quality of service. As for the promotional medium, newspaper was
rated as the highest, followed by fliers, radio and lastly television. Easy payment
scheme for purchasing above RM 500 of furnit ure was not well accepted by the
respondents. Majority of the respondents rated quality of services as less important.
Hence as a manager of hypermarket, what can you learn from the failure of Carrefour
in Malaysia? In addition, how can you utilize informa tion from the survey to enhance
your retail marketing strategies?

From 2008 - 2015

3
By 2008 Giant hypermarket realizing the important of promotion in drawing crowds to
the retail stores, also followed similar concept. Price comparison of selected items
between both the retailers was highlighted in the newspapers by Giant hypermarket
showing the advantages of shopping at Giant hypermarket as compared with
Carrefour. Hence there was intense competition between Makro, Carrefour and Giant
hypermarkets. Mydin and Tesco also join in the rank and make the competition more
intense. Makro could not compete and left the Malaysian retail market. Similarly ,
Carrefour also lose the competition with many of its customers shifting to other
hypermarkets that offered better values. It was taken over and converted to Aeon Big
hypermarket.

Carrefour entered Malaysia in 1994 sold its 26 hypermarkets to AEON Group in

November 2012. The hypermarket was rebranded as AEON BIG, and operates with an
orange logo, compared to the magenta logo used by its parent company and existing
JUSCO stores in the country. The outlets in Kota Damansara and Jalan Ipoh was first to
be changed from Carrefour to AEON BIG.

Thus, the changing landscape of retail market competition and consumer behavior
posed a great challenge to the retailers as they move forward with the introduction of
GST and weakening of the Malaysian ringgit in 2015.

The fate of Carrefour in other countrie s

Hong Kong

On 18 September 2000, Carrefour closed its stores in Hong Kong after complaints from
manufacturers about selling products (especially electronics) at prices far below those
of its competitors. A company spokesman said at that time that the closures were d ue
to "difficulties in finding sites suitable for developing its hypermarket concept and
quickly acquiring a significant market share". Carrefour had entered the Hong Kong
market in December 1996 with a store in Heng Fa Chuen and had later added stores in
Tsuen Wan (Skyline Plaza), Tuen Mun, Yuen Long and Tsim Sha Tsui. Plans to open
additional stores in Ma On Shan, Tseung Kwan O and Yau Tsim Mong had been
cancelled.

4
Thailand

Carrefour's business in Thailand was sold to Big C Supercenter Public Company Limited,
the owner of Big C hypermarket stores in Thailand due to complaints. The transaction
is completed in March 2011, with the Suwintawong b ranch being the first changed
brand store from Carrefour to Big C Carrefour entered the Thai market in 1996.

Colombia

In October 2012, Carrefour sold to Chilean retailer Cencosud all 72 stores in Colombia
for $2.6 billion, with Cencosud converting all existing Carrefour hypermarkets to its
Jumbo brand. Carrefour pulled out of Colomb ia to focus on its core markets.

South Korea

In 2006, Carrefour sold its 32 hypermarkets to E-Land. The stores have been re-
branded as Homever but 2008 E-Land sold its 30 hypermarkets to Homeplusstores The
stores have been re-branded as Homepl.

The challenges of retailing in Malaysia

Malaysian consumers were confused by the different public messages on the prices of
retail goods and services after March 2015. Malaysians were hesitant to spend more
despite lower petrol prices and electricity charges.

5
The introduction of GST affected all retail sub-sectors (from retailers selling grocery,
fashion and fashion accessories, electrical & electronics, foods and beverages and
overseas travel) since 1 April 2015.

Consumers had been holding back on their purchases to observe the price movements
of the retail goods and services. They were also waiting for more promotions by the
retailers.

Due to GST and weak Ringgit, costs of living rose since 1 April 2015. Thus, reduced the
spending power of Malaysian consumers further.

The increased operation costs of shopping malls in Malaysia had hurt its bottom line.
Higher costs were contributed from increased electricity tariff, GST as well as higher
charges by service providers (security, cleaning, car parking, maintenance, etc.) of t he
shopping centres.

The successful ones are mostly likely to remain popular with queue of retailers wanting
to join. Shoppers will continue to visit these popular shopping centres due to their
wide ranges of offerings.

The already poorly occupied shopping centers will remain so with great challenges
ahead to lift the occupancy rates.

The old shopping centers will face pressure from the new ones. They need to refurbish
in order to meet today's shoppers' needs. If they do not do so, they will lose tenants
moving to new shopping centers.

The new shopping centers will face financial challenge to attract new tenants. To
attract tenants, they need to lower their rental rates to lure them.

Malaysians are active in online shopping. But the t ransaction amount is still low as
compared to the entire retail industry. Online retail sales only accounts for less than
2.0% of total retail sales in Malaysia. Services (telco services, banking services, movie
tickets, government services, etc.) account for the largest portion of online shopping.

6
More and more brick-and-mortar retailers in Malaysia now offer online shopping
facility. This trend covers almost all retail sectors - international luxury brands, fashion
clothes, fashion accessories, gifts, toys, books, electrical & electronics, furniture,
hardware, build ware, grocery, foods and beverages, etc.

At the same time, more online retailers in Malaysia are setting up physical stores.
Zalora.com.my has a permanent premise at Mitsui Outlet Park. The wel l-known Christy
Ng Shoes has set up her showroom in Damansara Utama. Popular Facebook Fat baby
ice cream has set up an ice cream parlor in Subang Jaya.

_______________________________________________________________________

QUESTIONS

Question 1
What factors contributed to the initial success for Carrefour?

Question 2
What can we learn from the survey analysis?

Question 3
Discuss the failure of Carrefour. What le sson can we learn from the case?