This article is authorized to be republished from Finance World Weekly (ID: cjtxzk); author: Wang Can, editor: Hua Ji. As a veteran retail giant, Carrefour China, after enjoying the initial consumption growth dividend, failed to complete its business transformation in time and eventually sold its business, which is indeed regrettable.**** On September 27, Suning.com announced that its wholly-owned subsidiary Suning International had completed the acquisition of Carrefour China's equity. It is understood that Suning International acquired 80% of Carrefour China's shares for 4.8 billion yuan in cash equivalent to euros and paid all transfer consideration on September 26, completing the delivery procedures. It is reported that the transaction passed the anti-monopoly review of concentration of undertakings by the State Administration for Market Regulation in August. According to the share purchase agreement and shareholder agreement signed by both parties, during the 90-day period starting from the second anniversary of the closing date, the transferor Carrefour Group may exercise the put option to sell all its Carrefour China shares to Suning International. In other words, Suning International may hold 100% of Carrefour China after two years. On September 27, Zhang Jindong, chairman of Suning Holdings Group, said in a letter to Carrefour China employees that he looks forward to Carrefour China and Suning Group achieving resource complementarity in the future, accelerating industry chain integration, realizing digital transformation of retail across the entire chain, and empowering small and medium-sized retailers in the industry. In addition, according to Yicai, Carrefour China will open 300 new internet-based stores in first- to third-tier cities in the future to further promote digital transformation. As early as May 9, Bloomberg reported that Carrefour Group was considering selling its China business. Suning.com announced on June 23 that it was willing to take over. Suning emphasized that after the acquisition, Carrefour China will maintain relatively independent operations for a period of time, and its organizational structure and property leasing will not undergo major changes. However, the departure of several senior executives indicates that Carrefour China is undergoing turmoil. On June 27, according to an announcement by Kingfisher Group, a British retailer, Thierry Garnier, chairman and CEO of Carrefour China, would leave Carrefour and join Kingfisher Group. In addition, Wu Bo, general manager of Carrefour's Central China region, also left on June 26. As a veteran retail giant, Carrefour China, after enjoying the initial consumption growth dividend, failed to complete its business transformation in time and eventually sold its business, which is indeed regrettable. Carrefour China's former glory Carrefour was founded in France in 1959. As one of the global retail giants, Carrefour pioneered the "hypermarket" format and achieved remarkable results, once ranking as the second largest retail chain group globally and the largest retailer in Europe. Currently, Carrefour operates 210 large supermarkets and 24 convenience stores in China, covering 51 large and medium-sized cities. In 1995, Carrefour Group entered the Chinese market and opened its first store in Beijing. At the beginning of the century, it had a peak of opening an average of 16 stores per year. At that time, the "hypermarket" format, still an emerging retail format, with its sufficient store locations, gave Carrefour enough bargaining power as a retailer. The "entry fee" for new suppliers of Carrefour was about 10,000 to 15,000 yuan, the barcode fee for each SKU was about 1,000 yuan per store per barcode, and the annual deduction point ratio was about 3%. In addition, Carrefour would also charge suppliers certain festival fees and promotion fees to meet the low-price positioning of "hypermarkets." Since Carrefour often withheld supplier payments by delaying payment periods, sometimes for several months, suppliers were in a relatively weak position. Carrefour and other "hypermarkets" could use this time difference to obtain cash flow. The large cash flow gave Carrefour room to continue opening stores. Even to save costs, Carrefour often chose to lease properties long-term. But after leasing, Carrefour would sublet part of the store space to individual merchants, and the accumulation of rent also brought considerable cash flow. In addition, by comprehensively considering factors such as foot traffic, transportation, and property costs, Carrefour generally occupied advantageous locations in various cities when opening stores, making it easier to attract customers. Because of this, during its heyday, Carrefour firmly held the top market share in the large supermarket industry in China. The decline of hypermarkets According to statistics from the China Chain Store & Franchise Association, Carrefour China ranked seventh in the 2018 China FMCG Chain Top 100 list. The impact of e-commerce platforms on traditional retail models has already had a huge impact on Carrefour. The acquisition announcement disclosed that Carrefour China is facing operating losses. Financial data shows that Carrefour China's operating profit has been negative for the past two years; its net loss in 2017 was 1.099 billion yuan, and in 2018 it was 578 million yuan. In terms of store sales, Carrefour's per-store performance has been declining since 2009. The chain top 100 list shows that in 2016, Carrefour's 319 stores had total sales of 50.5 billion yuan, with per-store performance of 158 million yuan, a year-on-year decrease of about 7.6%. Although it accumulated cash flow, quality stores, and standardized product categories, as a representative of traditional retail, Carrefour lacked e-commerce genes and failed to establish a complete supply chain and logistics system. Currently, Carrefour has six warehousing and distribution centers in China, including Shenzhen, Jiaxing, Tianjin, etc. However, because it cannot yet reflect economies of scale and increases the company's logistics costs, Carrefour is clearly inferior in distribution and transportation. In addition, due to the high procurement costs of the "hypermarket" format, profit margins are thin. In response, Carrefour attempted the "farm-supermarket docking" project, purchasing at the source through contracted cooperatives across the country to reduce costs, but the results were not significant. At the same time, with the rise of various e-commerce platforms, suppliers have more channel choices and gradually no longer rely on large supermarkets like Carrefour. With the slow upgrade of the supermarket format, the original offline foot traffic dividend gradually disappeared. From the perspective of C-end consumers, the membership system popular abroad has never been able to guarantee user stickiness in China; as consumption habits become more refined, the low differentiation of the "hypermarket" model has also made it less competitive. Although Carrefour tried to launch the "Easy Carrefour" convenience store small retail model in 2014, data shows it has not yet made a splash in the market. As of now, "Easy Carrefour" has fewer than 40 stores in Shanghai and Wuxi. In addition to setbacks in the Chinese market, Carrefour's global business has also encountered difficulties. According to Bloomberg data, since 2007, Carrefour's revenue growth rate has been declining, with revenue growth rates of -11% and -10.3% in 2016 and 2018, respectively. In January 2018, Carrefour Group announced a 2022 transformation plan, intending to cut 2,400 jobs in France to save costs. Can Suning realize its dream by adding retail assets? While Carrefour was slow to make efforts in e-commerce and new retail, Suning.com, which started as an appliance retailer, bet on new retail. In 2017, Suning.com launched the "Smart Retail Development Strategy," proposing to open 20,000 stores within three years and complete the implementation of over 20 million square meters of commercial entities. As of now, Suning has opened about 8,880 stores nationwide, including not only original appliance stores but also newly opened FMCG retail stores such as Suning Xiaodian, Hongchild mother and baby stores, and supermarkets in cooperation with RT-Mart, showing a clear intention to develop a full retail format. According to Suning's first-quarter 2019 financial data, non-appliance stores accounted for 25.4% of revenue growth in the first quarter. But in the FMCG retail store sector, Suning Xiaodian, which has increased to 5,098 stores, is still in the money-burning stage; as of the first quarter of 2019, Suning's investment in Suning Xiaodian exceeded 5 billion yuan. From 2017 to 2018, Suning.com recorded net losses of 88 million yuan and 359 million yuan, respectively. In addition to self-operated retail stores, Suning.com chose to acquire retail assets. In addition to Carrefour China, Suning has acquired 37 stores under Wanda Department Store and retail group Dia China, among others. Regarding the acquisition of Carrefour, Suning.com has stated that this acquisition can accelerate the development of the large FMCG category and thereby build a national warehousing supply chain for the large FMCG category. In the future, Suning will also digitally transform Carrefour China's supermarket stores to integrate online and offline retail formats. In addition to enhancing Suning's new retail FMCG categories, Carrefour's quality property resources are also an advantage. But Suning's acquisition of Carrefour this time still has an uncertain future. First, Carrefour's insolvency adds more uncertainty for Suning International. Although the loss reduced Carrefour's valuation, making this acquisition cost-effective, how and when Carrefour will return to profitability is unpredictable. According to Everbright Securities analysis, if Suning completes the consolidation of Carrefour China next year, it will drag down Suning's profit performance. In addition, the increasingly segmented e-commerce retail track may not accommodate the "large and comprehensive" characteristics of the traditional "hypermarket" format. With Suning.com claiming not to participate in operations, Carrefour's future is still unknown.