Carrefour CEO Alexandre Bompard made things very clear when he presented his transformation plan: the group will experience a cultural revolution and nothing will be taboo. There were no real surprises however and there is no news about Belgium for now…
Too slow
“Do you know how many stages we have to go through to get a magazine approved? 27! That is simply not acceptable!” Alexandre Bompard explained everything very clearly during his extensive speech. The rigid and bureaucratic nature of Carrefour will be overturned by a brutal transformation of the competitive landscape, the arrival of global platforms, new alliances and innovative startups. Add in altered consumer expectations and adjusted eating patterns and it is clear to see that the retailer reacted much too slowly to this new world.
“We have failed Carrefour Drive and have not invested sufficient funds in this formula. The result is that we only have a 10 % market share. We are active in every store format, but we are not omnichannel. We do not take advantage of our size, our overhead costs are excruciatingly high, our price image is problematic.” The CEO says that a radical transformation will be necessary. “We are facing an unprecedented cultural revolution.” The analysis seems clear, but how radical is his plan in fact?
Smaller stores
Everyone expected a “blood bath”. The main offices will have to shed 2,400 jobs, but none of those will be forced job cuts. The company will also close or sell 273 former DIA stores and a more efficient organization should help save 2 billion euros annually. Bompard may say he is tackling four taboo subjects, but he will not touch the hypermarkets, even though some are structurally onerous.
Where it is possible, Carrefour will make its stores smaller: in total, it will cut 100,000 sqm in France, which is 5.5 % of its total store network. These can be rented to third parties or be turned into “dark stores”. Carrefour will also make clearer choices in non-food: it will collaborate with partners like Fnac Darty for particular categories, but it also wants to increase stores’ operational effectiveness. It will not shut down any store, but will transfer five stores to franchisees.
Centralized purchase
Gone are the major remodeling operations that only generate an additional 5 % in revenue. Carrefour will also no longer invest in additional store space for the sake of gaining market share. Bompard wants to centralize the company’s purchase division, allowing it to take better advantage of its international size. The store network’s product range should also become 10 % smaller. “It becomes harder to read things in certain aisles, despite the fact that it barely generates growth. We have to be rational about our space in order to bring in new product ranges, like organic or local produce… We will assess every category and every supplier.”
The retailer will invest in price cuts and in its private labels, as those have to grow their turnover share from 22 to 33 %. The CEO believes proximity will also be a growth area: he aims to open at least 2,000 convenience stores globally over the next five years, particularly in major cities. He also hopes to develop innovative formats, but the “Bonn’app format does not appeal to me, so e we are going to re-evaluate that one.”
Leader in food online
Bompard feels that the company needs a complete omnichannel strategy to become successful in the future. “This is our priority and we will invest a lot to achieve that: 2.8 billion euro by 2022, six times more than we do now. The goal is to give our customers an unmatched digital purchase experience.” There is still a lot of work to be done in that regard. “We currently have eight different e-commerce platforms that do not work together. We will turn that into a single web shop per country, with carrefour.fr for France for instance. We will also introduce home delivery appointments, expand our one-hour delivery service and open another 170 Drives. I want to become the e-commerce leader in food.
The company’s online food turnover should be worth 5 billion euro by 2022 and capture more than 20 % market share in France. Half of its marketing investments will go towards digital, up from 8 % now and every single one of its 12,000 stores has to support the omnichannel model. That means it will become a pick-up and / or a return location. Carrefour has also immediately announced a strategic partnership with Tencent: “We want to be a leader in China’s online food market.”
Fresh food will also be a pillar for Carrefour and that category has to achieve a growth three times higher than dry food. Investments in its quality chain Carrefour, in sustainable agriculture, the largest product range of sustainable fish and at least 50 % of local fruit and vegetables should help achieve Bompard’s goals. He puts his faith in organic food, which will have to achieve a five billion euro turnover at affordable prices. “We will be a pioneer for organic food industry, helping it to become mainstream. It cannot be that only the affluent urbanites can afford this product range.” In order to guarantee the quality and its origins, Carrefour will invest in block chain technology.
Wait and see …
Conclusion? We have not found any real surprises in this transformation plan. It was to be expected that the retailer would lower costs and increase its digital investments. It has lofty ambitions and does reach for the sky, but does not really tackle taboos and the CEO is still quite vague about how he will achieve his goals. Can you fix the ailing hypermarkets’ issues with relatively minor alterations? Can the chain actually achieve the targeted e-commerce growth and will that growth be sustainably profitable? Is organic food the future? We will have to wait and see.
Those hoping to hear something about Carrefour’s Belgian operations, did not get anything. However, if the chain announced to cut costs in its main offices, then the people in Evere will be shaking in their booths as well. When he announced he wanted to centralize the purchase division, Belgium will most likely suffer from that decision as well. On the other hand: there will only “voluntary” job cuts in France and the CEO does not seem intent on closing hypermarkets, despite their structural losses (even for certain French hypermarkets). That could possibly be good news for Belgium, but we will have to wait until Thursday afternoon…
