Shanghai Group Agenda Background of Carrefour Discussion 1 y Share opinions Discussion 2 y Share opinions Recommendations Carrefour Established in France since 1959 The inventor of Hypermarket Carrefour means "Crossroads" in French Carrefour Largest hypermarket chain in the world Second largest retail group in the world In the 70s, Carrefour went global Over 11,000 stores in 29 countries Carrefour 3 commercial format y Hypermarket y Hard discount store y Supermarket Carrefour’s strategy Localization y Adapt to the local culture, norms and consumer behaviors y Aim to achieve: ○ “你中有我，我中有你” ○ “I am a part of you, you are a part of me” Carrefour in China Entered in 1995 3 commercial format y Hypermarket ○ Carrefour y Hard discount store ○ Dia y Supermarket ○ Champion Distribution Channel of Carrefour in China Carrefour in China Chinese translation y JIA NE FU - Happiness and prosperity for the whole family Carrefour in China Owns 135 stores in China 99% of goods from local suppliers 99% employees are Chinese Carrefour in Hong Kong Entranced in 1996 Owned 5 stores y Sha Tin y Chai Wan y Tuen Mun y Yuen Long y Tsuen Wan Closed all stores in 2000 Discussion 1 1. Why do you think that Carrefour withdrew from the Hong Kong market yet have become very successful in the Chinese mainland? 2. How do you characterize the shopping behaviors of Chinese consumers and implications for channel management? Reasons for Carrefour withdrew from Hong Kong High rent and limited supply of shops over 100 thousand square fee In 1996, the rental price was the highest Reasons for Carrefour withdrew from Hong Kong The idea of ‘One stop shopping’ was quickly copied by other competitors Competitors modified the idea. y Combined the wet market and supermarket into a ‘Superstore’. y With Local characterizes. Reasons for Carrefour withdrew from Hong Kong Carrefour sold electronic appliances and cloth y Not consist with Hong Kong consumer shopping behavior y Not localization Reasons for Carrefour withdrew from Hong Kong Keen competition y Park ’N Shop and Wellcome have been well developed ○ Occupied around 80% market share ○ Use ‘Price cut’ try to fall out Carrefour Reasons for Carrefour withdrew from Hong Kong Relationship with Supplier y The Pricing strategy of Carrefour is ‘Every day low price’ ○ Supplier could not endure Carrefour force prices down ○ Bad relationship Park ‘N Shop and Wellcome put pressure on the supplier to not to supply products the Carrefour Reasons for why Carrefour achieve success in China Localization (chameleon strategy) Different regions have different culture y Taste y Subculture Example 1 In Guangzhou, people have higher demand for fresh food Carrefour first offer Fresh food in Guangzhou y 农贸市场销售方式 Example 2 The stores in Kashgar Grand Bazaar(喀 什大巴扎) y there are many Uygur (维吾尔族) Alive lamps are sold in this Carrefour shop Example 3 In Chinese New Year, Carrefour do special promotion Local sourcing 99% of products are sourced locally y More fit for local tastes 99% of employees are local y Know the local customers well As the first International brand of supermarket enter to China Bring new shopping model to people y One stop shopping Shopping Behavior of Chinese consumers Spend more on luxury products Trade up across all product categories Will quickly abandon products for newer alternatives Put more faith in brand names Will always be smart shoppers regardless of price. See shopping as fun rather than a task Case Study: Culture and its effect on shopping behavior Western shoppers vs. Chinese shoppers Chinese were fussier shoppers. Used multiple senses Chinese females and Western males were more careful shoppers Chinese view shopping as a fun activity/ Western views shopping as a task to be completed Implications for Channel Management Must establish strong brand relationships Focus on Innovation and Improvements Must always up the ante on product benefits For Suppliers Implications for Channel Management cont. Offer the product categories that Chinese trade up the most in Location, size, format, service Offer the latest models and maintain shorter SKU cycles For Retailers Discussion 2 1. As a manufacturer, why would some Chinese companies engage directly distribution of products in China? What are the problems of directly distribution? 2. Depending on the channel structure and system, what are the domestic distribution channel challenges for Carrefour in China? Example : GREE • No intermediaries • Use multiple channels • GREE roles - manufacturer - retailer 32 Costs are 10% - 15% cheaper than the other To eliminate about 15% - 20% profits taken from the middlemen Smooth ordering and better products’ competitiveness y less stratification of selling, the lower transmitting fee Customer loyalty y trademark and copyright assurance, avoid duplication 33 Avoid the opportunity of smuggling and corruption Controlling all transaction activities y e.g. Quality control, delivery, logistics, uniformity in services etc. A wide platform to collect information y low price or price repayment strategy can closer to the consumers and get the latest information 34 Problems More Risky y Do not have sophisticated understanding of local cultures or features y Complicated in the sales contact y A large involvement export process y Poor management practice y Flexible of the fully outsourced 35 Problems Lack of price superiority y raising the costs of manual labors y need money to build up logistics system y costs of management and transmission 36 Gome Vs Gree In 2004, Gree withdrew from Gome Conflict between the both channel leaders y Gree maintained multiple channels y but Gome wants more control In 2007, both of them have reached a compromise Both of them are the market leader 37 Carrefour y In 2008, agricultural cooperatives (農村合作社) established y Buy fruits and vegetables directly from farms y Lower down the cost of supply chain by 20% - 30% 38 Carrefour Dominate the food quality – fresh Costs of packaging and delivering are more detail Enhance the food safety and assurance Increase the income of farms by 30% to 40% More than 50 cooperative have joined y e.g. Shanghai, Wuhan, Beijing and Guangzhou 39 Distribution channel challenge y Regional focus ○ Distribution networks centralize in better developed area y Lack of professional managers & talented operators ○ Poor management practice Distribution channel challenge y Advance Information Systems are not common ○ Poor track and trace capabilities y Compared with foreign rivals, Chinese distribution channel operators loss their advantageous position ○ High costs but low efficiency Distribution channel challenge Still at the early stage of development y Most of the distribution channel operators are trucking companies which have not yet integrated professional management practices Carrefour Boycotted in China (2008) In April 2008, y Olympic torch relay was disrupted by Tibetan independence advocates ○ Especially in Paris y Afterward, the major shareholder of Carrefour is suspected that donated to Dalai Lama Carrefour Boycotted in China (2008) Chinese activists have promoted boycotting Carrefour y Since Carrefour is a French company Carrefour Boycotted in China (2008) Chinese search engines blocked access to Carrefour's website it was given an error page when searching “家乐福” Carrefour Boycotted in China (2008) Although Chinese government deleted the related topic of anti-Carrefour in internet The spokesperson of Carrefour indicated y The sales was declined y Less people came to Carrefour Recommendations of Carrefour Carrefour should enhance positive image Retrieve back a good relationship with consumer By public relations Recommendations of Carrefour Public relations y Green marketing ○ Reduce wasteful packaging ○ Reduce pollutions Recommendations of Carrefour Public relations y Social marketing ○ Donations y Money y Supplies .