---
title: "Carrefour, the Supermarket Giant, and the Truth Behind Its Management 'Fall'"
description: "Carrefour's first store in China, Beijing Chuangyijia, closed recently after its 28-year lease expired. The company is retreating from the Chinese market, having closed 54 stores in the first three quarters of 2022, roughly one every five days. Once a dominant player and a 'Whampoa Military Academy' for retail, Carrefour's decline is attributed to management reforms that centralized power, eroded local initiative, and led to a focus on short-term gains over long-term sustainability."
author: "商隐社"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2023-04-02"
language: "en"
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---

# Carrefour, the Supermarket Giant, and the Truth Behind Its Management 'Fall'

> Carrefour's first store in China, Beijing Chuangyijia, closed recently after its 28-year lease expired. The company is retreating from the Chinese market, having closed 54 stores in the first three quarters of 2022, roughly one every five days. Once a dominant player and a 'Whampoa Military Academy' for retail, Carrefour's decline is attributed to management reforms that centralized power, eroded local initiative, and led to a focus on short-term gains over long-term sustainability.

Recently, Carrefour's first store in China, Beijing Chuangyijia, ceased operations. Opened in 1995, it was the first true hypermarket on the mainland. But 28 years later, the lease expired and was not renewed, leading to its closure.
Carrefour is retreating from the Chinese market. In the first three quarters of 2022, Carrefour closed 54 stores, equivalent to one closure every five days.
Once a dominant player, a 'Whampoa Military Academy' for retail, and the pioneer of the 'hypermarket model' in China, Carrefour has become a memory for many. Amid numerous online and offline supermarket options, it can no longer represent a satisfying shopping experience.
What exactly happened to Carrefour?
In management circles, there is a 'plane crash theory' that a company should establish its own systems during operations to avoid 'falling' due to a leader's unexpected 'crash'.
Carrefour, once Europe's largest and the world's second-largest international retailer, slowly moved toward death following the plane crash death of its helmsman, Paul-Louis Halley.
**A Crisis Planted by Generational Transition**
On December 6, 2003, near Oxford, UK, an out-of-control private plane crashed into the ground, with a loud explosion and a flash of fire, killing Paul and all others on board.
As Carrefour's helmsman at the time, Paul's sudden death left Carrefour's top management leaderless. The Halley family, which had been centered on Paul and held the most shares in Carrefour, also fell into internal strife to decide the next successor.
Although this 'succession war' ended with the victory of Paul's brother, Robert Halley, the prolonged infighting further weakened an already battered family. Robert's mediocre business acumen and lack of personal prestige led Carrefour into even more dangerous territory.
**Compared to Paul, who had more vision for Carrefour, the Halley family under Robert was more interested in extracting wealth from Carrefour faster and more abundantly.** Besides attempting to develop real estate as Carrefour's second-largest business, the Carrefour management, backed by the Halley family, also turned their attention to the internal reforms that had begun in Paul's era.
And Carrefour's largest overseas market—China—became the best testing ground for this protracted reform.
**The Highly Anticipated Chinese Market**
In 2008, when Carrefour opened its store in Beijing's Shijingshan Wanda, crowds of customers even pushed over shelves, and the government even dispatched armed police to maintain order.
In an era when people primarily shopped at small shops, grocery stores, wholesale markets, and department stores, this store, with tens of thousands of products, neatly arranged displays, rows of checkout counters, and self-service shopping, brought an extraordinary shock to the Chinese people. Business was booming, and shelves being emptied was common.
Before 2009, it maintained its position as the top foreign retailer in mainland China by sales.
**The practice of 'freedom' was the fundamental reason for Carrefour's rapid development in China and globally in its early days.**
After entering mainland China in 1995, Carrefour China quickly received significant power delegated from Carrefour headquarters in Paris. Carrefour's globally renowned 'store manager responsibility system' played a crucial role in Carrefour China's early prosperity.
What is the store manager responsibility system?
Except for financial oversight by headquarters or regional directors, store managers were given broad powers over store operations, product procurement, and personnel appointments. For example, at the decision-making level, store managers had full authority to act based on actual market changes. This autonomy and flexibility became one of the secrets to Carrefour's early dominance over competitors.
**During this period, Carrefour store managers had supreme authority over their respective stores.** The future success of a store depended largely on the store manager's personal business acumen. Moreover, since store managers' personal income was directly linked to store performance, the system instilled a 'sense of ownership' while also awakening their 'wolf nature'.
At that time, rising incomes led to consumption upgrades, local governments offered various preferential policies to attract investment, and Carrefour's 'hypermarket model', which was a dimension-reducing strike, became a model for retail enterprises to learn from.
Specifically, Chinese retail was then concentrated in department stores, where suppliers sold goods directly in the mall, and the supplier set prices, such as for a bag of bread. Carrefour, however, bought goods outright and resold them to customers in its own space. With a one-stop shopping experience, thousands of SKUs, and the ability to pressure channel suppliers, it naturally sold cheaper. Plus, a significant share of imported goods made it attractive to consumers.
This model is also known as the 'back-end profit model', where profits mainly come from various fees charged to suppliers and sales rebates, such as entry fees, shelf fees, festival fees, rent, property management fees, and other charges, expanding profit margins.
With favorable people, location, and timing, Carrefour's early development in China was smooth, with 'basically no domestic competitors'.
However, once Carrefour established a foothold and got on track in China, problems hidden behind the store manager responsibility system gradually emerged, the most typical being corruption.
Some suppliers revealed, 'To get your goods into Carrefour stores, you had to pay many fees and also give red envelopes to store managers.' 'Some Carrefour buyers and store managers were very corrupt.'
Besides corruption, the divergent practices of various stores increased the difficulty of headquarters management. On one hand, procurement directions varied across stores, far from headquarters' desire to concentrate efforts. On the other hand, transaction conditions (such as purchase prices, rebates, and fees) negotiated by stores with suppliers also varied. 'The China headquarters became a supporting role, tasked with assisting stores and store managers to boost sales.'
This strong-branch-weak-trunk relationship naturally made Carrefour's top management, who had already crossed the river, think about dismantling the bridge.
**Moreover, 'when hunger is satisfied, lust arises.' When Carrefour China grew strong and entered a stable profit period, no one could guarantee that store managers would still fight as boldly as before, aiming to maximize company interests rather than personal interests.**
The 'rule by man' approach of the store manager responsibility system had played a positive role for a long time, but potential or exposed risks added more uncertainty to Carrefour's future.
In the eyes of Carrefour's top management, this uncertainty was intolerable.
Therefore, reforms at Carrefour had already begun while Paul was still alive.
**Surface Glory, but the Original Aspiration Had Long Been Betrayed**
**The core of the reform was to gradually take back store managers' powers, and the first power to be separated and stripped was product procurement.**
According to Carrefour's top management, after taking back the power, they could concentrate on negotiating with suppliers and secure more price advantages for their stores.
Carrefour first delegated the recovered power to the product departments of four major regions: North China, Central China, East China, and South China. By 2000, Carrefour advanced further by moving its headquarters from Beijing to Shanghai, which had a stronger commercial atmosphere, and transferring half of the staff from each regional product department to a higher-level national product department in Shanghai, achieving more thorough centralization in product procurement.
Although store managers lost product procurement power, they retained resources and rights related to promotional negotiations. Since the reform was still moderate, store managers still held considerable power and could counterbalance the powerful product departments. 'The product department could challenge stores if they didn't order new products, and stores could challenge the product department if popular products weren't in the operating system.'
The 'product department + store manager' combination also achieved a '1+1>2' effect, with Carrefour suppressing suppliers at both national and local levels.
It was the suppliers who suffered, as they had to swallow their pride to stay close to this big tree. This also laid the groundwork for many former Carrefour suppliers to switch sides when competitors like Walmart China rose strongly, but that's a later story.
Carrefour's reforms were far from over. Since taking back store managers' procurement power somewhat affected their work enthusiasm, Carrefour's top management decided to bypass store managers and use more institutionalized methods to stimulate local vitality.
In this context, in 2002, Carrefour established four new regional product departments. By stationing higher-level, more professional procurement personnel in these departments, and with a newly established pricing department providing accurate purchase price data, Carrefour successfully stimulated local vitality and achieved good revenue results.
So, what was the cost?
The cost was that suppliers, who had already been squeezed for 'gray profits', became the perennial losers.
However, the suppliers weren't the only ones suffering. With Paul's accidental death in 2003, the reforms, which had maintained a moderate pace and delicate balance, became radical and 'destructive'.
**The 'Three Fires' of a New Official**
The changes first occurred in 2005.
That year, Carrefour's number of stores in China exceeded 100. Considering the previous hierarchy was 'CEO-regional manager-store manager', and the regional managers, who served as a bridge, were overwhelmed by the increasing number of stores, Carrefour's top management decided to create a new level between CEO and regional manager: the senior regional manager.
This meant a weakening of regional managers' power. A former Carrefour employee, who did not reveal their name, admitted, 'In 2005-2006, I think almost all regional managers were in pain. They were basically reduced to secretaries of senior regional managers, going from having real power to being messengers.'
However, Carrefour's regional managers didn't suffer for long, because the pain of losing power would soon be passed on to store managers.
In 2006, with Eric Rousset, backed by the Halley family, becoming CEO of Carrefour China, a disruptive reform became inevitable.
Why?
The new CEO had almost no retail experience. Coming from a consulting background and having long worked as a professional manager, Rousset was best at being financial-result-oriented, improving efficiency for employers in the short term.
This perfectly matched the Halley family's desire to make quick money from Carrefour.
As the saying goes, 'A new official lights three fires.' Rousset quickly lit the first fire—**establishing regional CCUs.**
CCU stands for City Commission Unit, a new organization Carrefour established to take back promotional resources from store managers. Combined with the four product departments, which already held the remaining procurement power, Carrefour had effectively taken back all product procurement power from store managers.
With procurement power already taken back, splitting it into two parts was no longer appropriate. Moreover, the four product departments were stretched thin managing more stores, so Rousset decided to gradually dissolve them and concentrate all procurement power in more numerous CCUs, which were directly guided by headquarters and led by regional managers. 'The CCU gradually took on the role of coordinating between stores and the national product department.'
Who benefited most from this first fire? It was the regional managers, who had previously been sidelined. Since CCUs were under their leadership, regional managers with complete procurement power were at the peak of their influence. In stark contrast, store managers, completely stripped of procurement power, saw their morale further decline.
However, for regional managers, more power also meant more responsibility. They needed to expand their teams significantly, but the ensuing problem was: **how to solve the surge in personnel costs after middle management expansion?**
After all, Carrefour hired Rousset to make more money, not to increase expenses.
Understanding this, Rousset lit the second fire—**operating expense optimization.**
**Since top management's interests couldn't be touched, and middle management's appetite was growing, the only answer was: make the grassroots suffer again.**
To facilitate the middle management's rapid 'plundering' of the grassroots, Carrefour headquarters recommended the Guangzhou regional manager as a benchmark for operating expense optimization.
Indeed, whether it was saving on utilities, cutting non-essential positions, or recycling waste cardboard from stores for extra income, the Guangzhou regional manager put considerable thought into optimizing operating expenses and provided useful references for colleagues.
The problem was that the optimization measures implemented by the Guangzhou regional manager were tailored to the specific conditions of stores in his region, with strong specificity. But Carrefour headquarters and other regional managers, who 'only saw the thief eating meat, not the thief being beaten', forced store managers to vigorously learn from Guangzhou's experience, regardless of methods, and compress store operating expenses to Guangzhou's level.
With limited time and heavy tasks, many store managers had to resort to unconventional means to deliver satisfactory results to their leaders. For example, advertising, which headquarters valued and invested heavily in, became a sacrifice for many store managers to 'kill the good and claim merit'. Similarly, the free shuttle bus benefit for frontline employees became a target for cost-cutting.
In short, through this second fire, Carrefour temporarily solved the surge in personnel costs after middle management expansion. But anyone with insight could see that this draining-the-pond approach was not sustainable. To truly reduce costs at the grassroots level, Carrefour needed other methods.
In this context, Rousset lit the third fire—**Team Management Project (TOP).**
The Team Management Project was initially implemented at Carrefour's store in Urumqi (2003). Because this store's daily turnover was relatively low, to reduce personnel costs and improve employee efficiency, the store manager, while conducting large-scale layoffs, also split the original business department into two: **one part responsible for the front-end sales floor; the other for back-end warehouse management. The two were independent, and any coordination had to go through a newly established department—BOM.**
Unfortunately, the originally smooth communication between front and back ends was artificially interrupted, and the BOM members, mostly from finance backgrounds and unfamiliar with specific retail operations, greatly slowed down communication efficiency, ultimately affecting store operational efficiency.
However, since this store's daily turnover was already low and had little room to decline, and with the large staff cuts, performance actually rose instead of falling, which caught Carrefour's top management's attention and provided a solution to the 'redundant staff' problem in middle management. The approach was the same as with the second fire: **fleece the grassroots.**
Although Carrefour's top management publicly claimed to improve grassroots efficiency, as the Team Management Project was rolled out nationwide, more and more old Carrefour employees realized that headquarters was essentially aiming for layoffs. 'When I opened a store early on, a department had 12 employees, 1 department head, and 1 assistant. But by 2006, five months after opening, it was cut to 4 employees and 1 department head.'
Kicking out a large number of grassroots employees, 'unscrupulously' optimizing operating expenses, and completely stripping store managers of procurement power brought Carrefour substantial extra income. Besides filling the middle management 'money pit' and providing necessary returns to the 'hardworking' top management, to maximize the value of remaining income, Rousset used these funds for Carrefour's low-price/promotional strategy.
For consumers at the time, the events behind Carrefour didn't matter. What mattered was that Carrefour's aggressive promotions offered cheaper products than similar supermarkets. Winning consumer favor, Carrefour's development advanced to a new level in the following two years.
As the saying goes, 'Good and evil will be recompensed; the recompense comes sooner or later.' Carrefour's top management soon couldn't laugh anymore.
**Management Accelerates Its Fall**
The first to suffer was the Halley family.
In 2007, the year after Rousset lit the three fires, an emerging investment firm called 'Blue Capital' called Robert to convey: 'We have acquired 9.1% of Carrefour's shares. We are now the second-largest shareholder.'
According to people close to Robert, the old man was so shocked after the call that he fell from his chair.
How to understand Robert's shock?
Insiders familiar with the Halley family vividly described it: 'Imagine you're having dinner with your family when an uninvited guest arrives. He sits down, pours himself a drink, eats and drinks. As he leaves, he says, "You need a new cook!" That's how the Halleys felt about this raid.'
Especially since behind this uninvited guest stood Bernard Arnault, known as the 'Napoleon of luxury goods', who had previously 'usurped' LV. He is now the chairman of LVMH and has been the world's richest person.
Facing such an epic rival, the Halley family, 'experts at internal strife but novices at external battles', knew they were no match. In 2008, they relinquished their position as the largest shareholder by dissolving their family's overall shareholding, handing it to Arnault and his Blue Capital (with involvement from US-based Colony Capital).
For Arnault, what attracted him to Carrefour wasn't retail—he didn't understand retail. It was Carrefour's vast real estate resources. From this perspective, Arnault's 'vision' for Carrefour was no different from the Halley family under Robert, except that he was more blatant and unhesitating in using Carrefour as his 'ATM'.
Unexpectedly for Arnault, the 2008 financial crisis interrupted Carrefour's 'real estate-ization' process. And Carrefour China, once a 'blue-chip stock', was heading toward the abyss due to the aftermath of reforms.
**Carrefour Becomes a Short-Term 'ATM'**
**Just as Arnault, after becoming the largest shareholder, treated Carrefour as his 'ATM', with Rousset's three fires, the headquarters, senior regional managers, and regional managers, whose power was further concentrated, also tasted the sweetness and generally regarded CCUs as their 'ATMs'. When formulating specific development strategies, they preferred short-term actions that yielded quick results, even at the expense of Carrefour's long-term development.**
However, if the leaders themselves didn't care, what could the foot soldiers do, even if they loved Carrefour?
A former Carrefour employee lamented, 'As an old Carrefour person who experienced full empowerment, regional managers naturally liked to meddle in details and enjoyed making foolish decisions in areas they weren't professional in, breaking the scientific management that increasingly emphasized specialization... Even senior regional managers often made the same mistakes.'
In the eyes of old Carrefour employees, the foolish mistakes made by top/middle management were largely due to their growing detachment from grassroots work.
One detail: before the reforms, regional managers inspecting stores would carefully check the condition of various infrastructure inside and outside the store. As reforms progressed, more and more regional and senior regional managers' inspections became superficial. Even though the funds originally used for infrastructure maintenance had been 'optimized' away, leaving serious safety hazards, they didn't care.
**What truly mattered to them was only the store's specific performance.**
But the most fatal issue was that, with great power in hand, they were eager to show it to the outside world/grassroots, leading to frequent interference in grassroots affairs. Combined with Carrefour's remaining 'freedom' culture, the only result was 'capriciousness'.
For example, during a store inspection, Rousset suggested moving the non-food seasonal section to the bottom of the escalator. The accompanying senior regional manager and regional manager agreed. But after the store manager immediately complied, just a week later, when the senior regional manager inspected again, the store manager was told to move it back.
There's no better example of 'orders changed in the morning and countermanded in the evening'.
The increasingly bloated and greasy middle management, coupled with the continuous loss of grassroots employees, ultimately created a bizarre spectacle in Carrefour's operations: **'A kayak with 10 people: before 2006, 9 paddled and 1 steered; after 2006, 1 paddled, 8 steered, and 1 supervised.'**
In this context, Carrefour gradually developed a culture of 'satisfying the boss, not the customer'. This disheartened many old Carrefour employees who had witnessed its golden age.
Especially at the store manager level, these industry elites who played key roles in Carrefour's rise were 'killed after their work was done'. After having their powers taken away, they became tools merely following orders. 'Now it's the national and CCU that draw the map, and the stores execute.'
Despite this, headquarters didn't ease the assessment pressure on these store managers; instead, they added punitive salary measures, causing more dissatisfaction among old Carrefour employees, especially store managers. 'Once we have a better place to go, we'll definitely leave Carrefour.'
A Carrefour store manager revealed in a 2010 interview, 'Now inside Carrefour, store manager departures are no longer news. Since the centralization reform a few years ago, personnel turmoil, including store managers, hasn't stopped due to difficulty adapting to the new management model.'
However, for Carrefour's top management, the departure of these 'old-timers' was not something to regret. In fact, they somewhat looked forward to them leaving voluntarily.
In their view, the company had entered a standardized track, and anyone could fill the store manager position. Moreover, an 'old' store manager's annual salary was about 500,000-650,000 yuan, while a 'new' one was about 250,000-300,000 yuan. The former was less obedient, and their departure saved costs. Why not?
These executives were right about one thing: Carrefour after Rousset's reforms no longer needed store managers with independent thoughts.
But they overlooked one point: **standardization is fine, but the grassroots are always the ones most aware of market changes, especially their own store managers, who are the most precious human resources anywhere. Suppressing local individuality not only loses authentic frontline voices but also frequently puts the company at a disadvantage when facing real market changes.**
If, at this point, top management happens to be self-righteous and inflexible, Carrefour's future is bound to be bleak. For example, when competitors successively focused on supply chain construction and rushed to catch up with e-commerce and the later new retail wave, Carrefour lagged behind every time.
Did Carrefour's top management not notice these trends?
Obviously not.
**In the end, it was the glory of the past, path dependence, and the arrogance of monopolizing power that blinded these decision-makers.**
For instance, a Carrefour executive once said about why they didn't build a supply chain in China: 'China's EBIT margin is 4%, while France's is only 1%. Why is France's profit poor? Because France has 40 distribution centers, and China has none. Simply put, we save more money in China.'
In hindsight, this executive's remarks were self-defeating. And when Carrefour finally realized the importance of building a supply chain and put it on the agenda, it had already been left behind by competitors. As for the subsequent e-commerce and new retail waves, Carrefour's 'third strike' left outsiders speechless again.
**Unfortunately, with the loss of local vitality, Carrefour had lost its final correction mechanism. The ultimate result was that Carrefour, unable to keep up with the times, fell further and further behind until it was swept into the dustbin of history for people to mourn.**
That may be a bit harsh, but whether it was dragging down Suning's overall performance after Suning took a stake in 2019, the closure of the symbolic Beijing Zhongguancun store in 2022, the frequent scandals over shopping card redemption, or the 'last gasp' of introducing state capital, Carrefour is like a behemoth that has lost its vitality but still desperately tries to survive by sucking the lifeblood from its surroundings.
Looking back, it's lamentable that the once-spirited Carrefour has fallen to such a state.


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