---
title: "Carrefour China's Darkest Hour"
description: "As 3·15 approaches, Carrefour has repeatedly stumbled on food safety issues. Recently, a Beijing branch was fined 50,000 yuan for selling mooncakes containing foreign objects. In fact, Beijing Carrefour Commercial Co., Ltd. has multiple administrative penalty records for food safety issues, with total fines exceeding one million yuan. Looking at Carrefour China's performance over the past three years, its offline business can be described as 'bleak.' Even though Carrefour attempted to change its continuous losses through a membership store model in October 2021, the overall situation has not improved significantly."
author: "乾行"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-03-08"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/carrefour-china-s-darkest-hour-5463520b/"
markdown: "https://xinjignxiao.com/en/articles/carrefour-china-s-darkest-hour-5463520b.md"
original_source: "https://mp.weixin.qq.com/s/-3eu2pMsDaZUtZUlIYYyfg"
translation: "https://xinjignxiao.com/zh/articles/%E5%AE%B6%E4%B9%90%E7%A6%8F%E4%B8%AD%E5%9B%BD%E7%9A%84%E8%87%B3%E6%9A%97%E6%97%B6%E5%88%BB-5463520b.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/carrefour-china-s-darkest-hour-5463520b/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Carrefour China's Darkest Hour

> As 3·15 approaches, Carrefour has repeatedly stumbled on food safety issues. Recently, a Beijing branch was fined 50,000 yuan for selling mooncakes containing foreign objects. In fact, Beijing Carrefour Commercial Co., Ltd. has multiple administrative penalty records for food safety issues, with total fines exceeding one million yuan. Looking at Carrefour China's performance over the past three years, its offline business can be described as 'bleak.' Even though Carrefour attempted to change its continuous losses through a membership store model in October 2021, the overall situation has not improved significantly.

As 3·15 approaches, Carrefour has repeatedly stumbled on food safety issues. Recently, a Beijing Carrefour branch was fined 50,000 yuan for selling mooncakes containing foreign objects. In fact, Beijing Carrefour Commercial Co., Ltd. has multiple administrative penalty records for food safety issues, with total fines exceeding one million yuan.
Looking at Carrefour China's performance over the past three years, its offline business can be described as 'bleak.' Even though Carrefour attempted to change its continuous losses through a membership store model in October 2021, the overall situation has not improved significantly. In terms of annual performance, Carrefour China's revenue in 2021 was 20.878 billion yuan, while 2022 revenue is expected to be less than 20 billion yuan, likely halving compared to the 31.2 billion yuan in 2019. Just last month (February 20), Carrefour China signed a strategic cooperation agreement with the Yingjiang District Government of Anqing City, Anhui Province, officially introducing state-owned capital strategic investment from Yingjiang District. This cooperation may have been driven by Suning.com, Carrefour China's current major shareholder. Even though the specific scale of the strategic investment has not been disclosed, the deep cooperation in supply chain, capital, and commercial operations is undoubtedly a lifeline for Carrefour China. Furthermore, Carrefour China may again leverage policy support to fill its shortcomings in supply chain and digitalization, leverage its years of retail experience, and achieve revenue growth, cost reduction, and efficiency improvement, reversing the overall revenue decline. State-owned capital support can alleviate Carrefour China's current pressure to some extent, but it does not mean it can achieve a comeback, as it still hasn't figured out what value it wants to bring to consumers.
**A 'Lose-Lose' That Failed to Save Each Other**
Founded in 1959, the French Carrefour Group is the founder of the 'hypermarket' concept, currently operating nearly 10,000 retail stores in over 30 countries, with various formats: hypermarkets, supermarkets, discount stores, convenience stores, and membership warehouse clubs. Carrefour entered the Chinese mainland market in 1995, opening its first store in Beijing. By the end of 2018, unable to withstand the impact of e-commerce retail, Carrefour China had seen declining revenue and negative profits for years, so it sold 80% of its 239 domestic supermarkets to Suning.com, a leading 3C retail company, for a low price of 4.8 billion yuan. Suning.com's acquisition of Carrefour China aimed to perfect its omnichannel layout, quickly acquire quality offline scene resources and prime properties in first- and second-tier cities, and change its relatively single home appliance business. The idea was good, but things didn't go as planned. After Suning.com 'bottom-fished' Carrefour, it not only fell into a spiral of difficulties itself but also struggled to help Carrefour out of trouble. Ultimately, the mutual approach of the former 'supermarket giant' and 'home appliance giant' became a 'lose-lose' that failed to save each other.
From 2019 to 2021, Carrefour China's overall revenue hit new lows each year, dropping to around 20 billion yuan in 2021; it also continued to lose money, with net profits of -795 million yuan, -3.337 billion yuan, and -471 million yuan in 2020, 2021, and the first half of 2022, respectively. In 2022, the expected losses were mainly due to large-scale store closures; as of September 30, 2022, Carrefour China had 151 stores, a reduction of 54 from the end of 2021. Amid continuous losses, negative news kept coming: first, a supply chain crisis where suppliers stopped supplying due to unpaid debts; then, a shopping card redemption crisis with many stores having empty shelves; and reports of COO Zhang Qizhe leaving in early February 2023. Until recently, besides traditional stores, Carrefour has been promoting business transformation and upgrading, including formats like Carrefour Retail Cloud, Yicai Cloud, and membership stores. The latest news shows that its new format, 'Community Quality Life Center 2.0,' will debut in March in Beijing, Shanghai, Kunming, Xuzhou, Wuxi, Shenyang, and other places. Meanwhile, Carrefour China's Executive President Zhang Kui provided a clearer explanation of 'Community Quality Life Center 2.0,' positioning it as a 'near-field retail service provider,' aiming to provide consumers with 'home scenario solutions,' not only offering the best and most economical products for family consumers but also providing near-field community home scenario services. Specifically, Carrefour China's positioning is no longer just a supermarket but a community quality life center focusing on the core family customer base within a 3-kilometer radius, centered on community commerce, services, and parent-child activities, bringing new consumption experiences to community residents. In general, this is a good choice for Carrefour China, but can this step truly help Carrefour China successfully transform? In my opinion, just as Suning.com clearly underestimated the difficulty of Carrefour's transformation in 2018 and overestimated its own execution capability, if Carrefour China's existing business model does not change, transformation cannot succeed.
**Outdated Business Model**
**Success and Failure Both Stem from the Same Source**
The traditional supermarket business model is essentially a property leasing model. Carrefour China's traditional business model profits from the spread between the two ends. This means that rent 'arbitrage' is key to profitability but also becomes its shackle. In the early days of entering China, Carrefour leveraged its foreign background and brand influence, using the strong offline traffic of its supermarkets to support the popularity of surrounding properties, allowing it to sign long-term low-rent leases with local governments or real estate companies. Then, as a dominant distribution channel, it 'rented out' fixed shelves in its stores to brand manufacturers in the form of entry fees or listing fees to make profits. These fees include listing fees, monthly rebates, advertising fees, promotion fees, festival fees, gross margin compensation, etc. For example, Chinese retailer Renrenle derives about 10% of its profits from such income. But success and failure both stem from the same source. As lease contracts expire and surrounding commercial areas mature, Carrefour's advantage of low-cost land acquisition disappears, directly leading to a sharp increase in operating costs. This cost is also difficult to pass on to brand manufacturers because, with the rise of mobile internet, brand manufacturers have more diversified online channels for product exposure and reach beyond offline channels. This leads to a sharp decline in net profit for supermarkets, resulting in significant losses, and ultimately, they can only quickly sell out and exit while their brand still has some premium. If it had invested in self-owned assets during the profitable period, it might have been able to cope with the fatal blow of rising rents. However, as a foreign enterprise, self-owned properties account for less than 5% of total properties. On the other hand, lacking professional property service capabilities is also one of Carrefour China's shortcomings. With the advent of the supermarket era in the late 1990s, most brand manufacturers, due to single categories and insufficient scale, found it difficult to build their own channels for distribution and consumer reach. Carrefour, holding store channel resources, could 'make money while lying down' during this period, even 'selling out' shelves before opening stores. As the seller (channel) dominated, its operational focus was more on how to charge more entry fees, display fees, and other levies from brand manufacturers. Therefore, creating various fee items was the most common tactic for operators, with common 'derived' fees including barcode fees, end-cap fees, and fees for banners, flower baskets, floating balloons, floor stickers, wall stickers, light boxes, DM special ads, and personnel management during promotions. As for providing quality material services to brand manufacturers, such as logistics services, customized marketing plans, and inventory management, these were rarely considered in its operational strategy. However, as a property service provider, its core competitiveness lies in possessing competitive retail scenarios. When market conditions are poor or competition becomes fierce, especially after the arrival of the 'new retail' era, online retailers, relying on instant logistics systems, can effectively handle the entire consumer journey and truly achieve 'more, faster, better, and cheaper' in retail. Offline supermarkets, due to operational inertia, still cannot provide brand manufacturers with full-chain local services or differentiated consumer experiences for brand manufacturers' customers—consumers—so they can only struggle and wait for death.
#### **Channel Power Over Product Power**
#### **Lacking a Competitive Trump Card**
For traditional supermarkets and hypermarkets, the core profit driver is channel capability, but this profit relies more on economies of scale. For example, Walmart globally had a net profit margin of less than 2% in 2022, but its profit reached $13.7 billion. The most effective way for retailers to gain more profit is to leverage their channel brand advantage to launch private label products, thereby monetizing the channel brand and indirectly earning the premium of product brands, with gross margins often exceeding 40%. Building private labels requires deep consumer insight to launch suitable products based on consumer needs and desires. However, Carrefour China's insight into products sold in stores is far from comprehensive and effective, mostly based on POS transaction data, unable to perceive consumers' entire offline shopping process, especially capturing and finely managing consumer nodes such as passing, stopping, picking up, and putting into the shopping cart from entry to purchase. Furthermore, Carrefour China's product perception is more based on tradition and historical experience, not knowing why a certain flavor of a certain brand in a certain category sells well while another doesn't, failing to provide brand manufacturers with actionable insights. This also led to the failure of its attempts to gain more profit by launching high-margin private labels. Without consumer insight and R&D capabilities, it cannot launch best-selling products, and without best-selling products, it won't invest more resources in new product development. Clearly, this is not a virtuous cycle. On the other hand, as mentioned earlier, due to the traditional supermarket business model, since shelf spaces are leased out, retailers do not have control over displayed products, making effective category management difficult. For example, even if the potential for cross-selling 'beer' and 'diapers' is discovered, it cannot quickly optimize product placement, ultimately missing sales improvement opportunities. In contrast, Carrefour Global, which divested Carrefour China, had already achieved 25% private label sales share in 2018 and expects to reach 40% by 2026. Clearly, Carrefour Global regards 'private labels' as a very important strategic segment, similar to building FMCG brands. For each of its private labels, it conducts in-depth consumer insight, then assigns clear brand positioning and specific target markets, such as organic, vegetarian, imported, family packaging, etc., and ensures the delivery of the best quality and price through a strong supply chain system. The disconnect between Carrefour Global and Carrefour China seems to determine the latter's decline from prosperity to difficulty. As Carrefour China struggles forward, Bloomberg cited sources saying that Suning.com had considered selling its controlling stake in Carrefour China, contacting potential buyers to assess their interest in acquiring the 80% stake. This means that Carrefour was almost abandoned within Suning. Whether Carrefour and Suning can redeem each other now remains a question.
**Conclusion:** Based on the constraints of Carrefour China's existing business model, weak property service capabilities, 'lagging' private label development, and obstacles in leveraging global supply chain advantages, successful transformation is undeniably difficult. Near-field retail may be the only choice for traditional retailers like Carrefour China to avoid being eliminated by the times. In my opinion, Carrefour China's current transformation direction is correct, but the prerequisite for success is bold organizational reform to support the change in business model. If it still follows old management thinking, subsequent strategy execution will be difficult to implement, and transformation will become water without a source and a tree without roots. With its controlling shareholder Suning.com already in deep trouble, Carrefour China's organizational change is likely to be a long and arduous journey.


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671