“Holding a strong position in your home market is a requirement for international success” is a universal retail truth, best embodied by Tesco. This is a big threat for Carrefour, as the French retailers are not nearly as successful on home soil as the British giants. For Carrefour, everything now depends on its new format Carrefour Planet.
The handicap of a head start
Carrefour suffers from the handicap of a head start: when it invented the hypermarket in the 1960s, to which it owes its status as leading international retailer, the format was revolutionary. Since then however, the format that has become Carrefour’s backbone has barely changed, while its competitors – in order to reduce their arrears – have searched for renovating ideas.
Tesco only sought international expansion in 1993, over twenty years after Carrefour’s rapid internationalisation and only after it had developed a solid home base. With at least one store in each British postcode district, a differentiation in smaller and bigger stores and the adoption of non-food and services, Tesco is vital in every Briton’s life.
Planet to save Carrefour?
Carrefour’s main problem is its focus on hypermarkets: while that format brings in 62% of Carrefour’s turnover, it is a stagnating market. To turn the tide, the French retailer has to differentiate its stores and rebrand its old hypermarkets into Carrefour Planets: hypermarkets with fewer non-food and more (profitable) food articles.
The new concept will be used mainly in France, but will be exported as well. The aim is to put Carrefour on the map again, but the management – highly pressurised by shareholders Bernard Arnault and private equity firm Colony Capital – knows that the rebranding will cost a lot of money.
Tesco earned its money for expansion through a sale and lease back operation, but Carrefour had another strategy: introducing 25% of its real estate branch on the stock markets. This strategy quickly became controversial and has been postponed – and its main proponent, leader of Carrefour France, James McCann has been axed.
Victory or death
McCann’s dismissal quickly follows another hastened discharge: that of director Vincente Trius. Trius formerly worked for Wal-Mart and McCann came from Tesco, proving that transferring successful managers to another company is no recipe for success.
In no time, Carrefour’s European operation is decapitated. Tomorrow, Carrefour will provide more information about the flotation of its discount branch Dia. In a strange twist of irony, discount could save hypermarket with this move. If the operation fails, chairman Olofsson too could face a famous French invention: the guillotine.
By Pascal Kuipers, Alsano Communicatie