Carrefour shops around for new locations in China

A Carrefour supermarket in Mengcheng, Anhui province. [Photo / China Daily]

French Carrefour SA, the world's second-largest retailer by revenue, plans to open 20 new hypermarkets annually and enter 30 new cities in the next three years, a move to keep up a strong expansion pace in further developing markets in lower-tier cities in western and central China.

Thierry Garnier, president and chief executive officer of Carrefour China, announced on Thursday in Beijing the group is expected to open 60 new stores to expand its presence to a total of 100 cities within three years, with most new stores opened in third- and fourth-tier cities in the country. Carrefour now has 236 stores in 73 cities in the country.

Despite the strong competition and challenging retail market, Carrefour still sees many opportunities linked to new policies from the government, said the CEO. "We decided to create new territories in central and western China to open more stores and put in more resources," Garnier said after accompanying visiting French Prime Minister Jean-Marc Ayrault to a Carrefour store in the Shuangjing area of the Chinese capital on Thursday afternoon. "Our plan is to open new stores to maintain strong expansion speed in the future."

The French retailer has seen its third quarter sales rise by 4.7 percent in China, one of its two key international markets. Its global sales growth in the third quarter, which ended on September 30, increased 2.7 percent year-on-year.

Hermann Ng, chief executive officer of Retail Nation, a consultancy in Shanghai, said the company's growth is still slower than strong Chinese competitors, many of which achieved double-digit growth this year.

He said the move demonstrates Carrefour's dedication to staying in the Chinese market, boosts the morale of employees and enhances the company's internal capacity amid rumors that the retailer is exiting the country. The biggest retailer in France has cut jobs and exited overseas markets it doesn't dominate to generate cash and reduce debt as part of a three-year turnaround plan.

Jason Yu, general manager of Kantar Worldpanel China, said Carrefour demonstrated its commitment to further expand its footprint and revive its business performance in China. According to Kantar Worldpanel report, Carrefour still experienced a loss of shoppers at national levels across all regions. Compared with RT-Mart, it also showed a weakness in the number of visits its customers are paying, Yu said.

Opening more new stores in the right locations will definitely help it to recover its shrinking shopper base but, inevitably, puts it in more direct competition with aggressive local rivals that have already built strongholds in lower-tier cities in China, said Yu.

Foreign retailers have met many challenges after high-speed expansion in China in recent years. The world's largest retailer by sales, Wal-Mart Stores Inc, has closed 11 stores and will shut 15 to 30 other outlets in the next 18 months across the country. Walmart said the closures will represent about 9 percent of its total store portfolio and 2 to 3 percent of sales volume through next year. United Kingdom-based Tesco Plc announced it will form a joint venture with China Resources Enterprise Ltd, which operates the Vanguard stores.

Kantar Worldpanel reported a 7.1 percent value growth for the fast-moving consumer goods market for the latest quarter up to Sept 6, compared with the same period a year ago. Increases in average prices, as well as more shoppers, resulting from urbanization, is driving the value growth.

Lower-tier cities in China are contributing heavily to the growth, with 73 percent of the last quarter's growth coming from outside provincial capitals, according to the report.

The stronger growth has come from shoppers in the lower-tier cities putting more items in their baskets this quarter. Generally shoppers in higher-tier cities will purchase more fast-moving goods over the year and this trend is now closing the gap.

Mergers and acquisitions have now become commonplace. The joint venture between RT-Mart International Ltd and Groupe Auchan SA in 2011 formed the Sun Art Retail Group and became the largest retail enterprise in China.

On Oct 15, Wumart Stores Inc announced plans to acquire 36 stores from Lotus which would give Wumart a 3 percent share of the national market, moving its ranking from eighth to sixth, according to Kantar Worldpanel. The move would allow Wumart to grow its presence in Shanghai and further strengthen its leadership in North China.