---
title: "Reviewing Carrefour China's Downfall"
description: "In 2008, on the opening day of Carrefour in Beijing Shijingshan Wanda, a tidal wave of customers knocked over shelves, and the government even dispatched armed police to maintain order. In 2022, near the Spring Festival, Carrefour shelves across the country were emptied again, with checkout lines lasting over an hour. The same frenzy and crowding, the same scene of emptying Carrefour, but customers had completely opposite feelings. In just over a decade, Carrefour's customers have fallen from worshipping the 'godfather of hypermarkets' to the doomsday frenzy of a dying brand. As the pioneer of China's hypermarkets, why did Carrefour falter in the face of the advances of younger rivals Sam's Club and Costco? Was it Suning's recent troubles that dragged Carrefour down, or was Carrefour itself doomed?"
author: "金梅"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2023-03-21"
language: "en"
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---

# Reviewing Carrefour China's Downfall

> In 2008, on the opening day of Carrefour in Beijing Shijingshan Wanda, a tidal wave of customers knocked over shelves, and the government even dispatched armed police to maintain order. In 2022, near the Spring Festival, Carrefour shelves across the country were emptied again, with checkout lines lasting over an hour. The same frenzy and crowding, the same scene of emptying Carrefour, but customers had completely opposite feelings. In just over a decade, Carrefour's customers have fallen from worshipping the 'godfather of hypermarkets' to the doomsday frenzy of a dying brand. As the pioneer of China's hypermarkets, why did Carrefour falter in the face of the advances of younger rivals Sam's Club and Costco? Was it Suning's recent troubles that dragged Carrefour down, or was Carrefour itself doomed?

In 2008, on the opening day of Carrefour in Beijing Shijingshan Wanda, a tidal wave of customers knocked over shelves, and the government even dispatched armed police to maintain order.
In 2022, near the Spring Festival, Carrefour shelves across the country were emptied again, with checkout lines lasting over an hour.
The same frenzy and crowding, the same scene of emptying Carrefour, but customers had completely opposite feelings. In just over a decade, Carrefour's customers have fallen from worshipping the 'godfather of hypermarkets' to the doomsday frenzy of a dying brand.
As the pioneer of China's hypermarkets, why did Carrefour falter in the face of the advances of younger rivals Sam's Club and Costco? Was it Suning's recent troubles that dragged Carrefour down, or was Carrefour itself doomed?
**The Pioneer's Advantage**
In 1963, the world's first Carrefour supermarket was born at a crossroads in France, with its name Carrefour meaning 'crossroads' in French.
Carrefour entered Taiwan, China, in 1989, preparing for the mainland market. After partnering with Uni-President Group and accumulating six years of understanding of the mainland market, it officially 'stormed' the mainland in 1995, after policies allowed foreign-funded chain enterprises to be established in Beijing and Shanghai. **Carrefour, very savvy about the rules, did not directly open supermarkets but instead formed a 'commercial management company' with Beijing Zhongchuang Commercial Company, managing the wholly-owned 'Chuangyijia Mall' under the Carrefour brand, entering China's retail industry indirectly. This move not only avoided complex approval processes but also allowed Carrefour to gradually take control as policies loosened, seizing the initiative in China's retail sector.** Carrefour is regarded as the pioneer of China's 'hypermarkets,' with its pleasant shopping environment, ultra-low prices, enticing promotions, and 'one-stop' shopping experience, which was a revelation for Chinese people who had limited goods and single purchasing channels. At that time, Carrefour's shelves were cleared daily, with daily turnover reaching millions of yuan in 1995. Seizing the advantage, Carrefour quickly expanded to Shanghai, Shenzhen, and other cities, succeeding everywhere. As policies gradually relaxed, Walmart entered China in 1996, Taiwan's Yin Yanliang opened the first RT-Mart store on the mainland in 1997, Auchan opened its first store in 1999, and Yonghui, Xin Yijia, and Jiajiayue were also founded in the mid-to-late 1990s. Facing a wave of competitors, Carrefour knew that commercial location was a scarce resource and that preferential policies for foreign enterprises would diminish over time, so it began opening stores at breakneck speed to maintain its first-mover advantage. To replicate quickly, Carrefour abandoned the centralized management system used in Europe and adopted a 'hands-off' decentralization approach. Except for major events, Carrefour used only a 'two-level decision-making system' between regional managers and store managers. Regional managers focused on store openings and relationship coordination, while store managers had full authority over ordering, pricing, promotions, procurement suggestions, and personnel. To improve management efficiency and flatten the hierarchy, Carrefour did not set up deputy positions in any management role. This management style made each Carrefour essentially a 'store manager autocracy,' with the store manager as the 'king of the store,' having autonomy over operations and the power to appoint or dismiss subordinates. Carrefour's failure to effectively check store manager power laid the groundwork for future corruption and other issues. In 1998, Walmart's management, which was provided with centralized procurement and distribution by headquarters, was unwilling to be mere 'executors' and collectively defected to Carrefour. To accelerate expansion, Carrefour kept its operations light, without establishing its own logistics and distribution centers, relying entirely on suppliers to deliver to store warehouses. Without capital constraints, Carrefour's store count remained the highest among foreign retail brands. Its business in China developed so rapidly, expanded so fiercely, and localized so thoroughly that it was unmatched in any other country. To maintain low prices to attract customers, Carrefour innovatively adopted a profit strategy of 'front-end profits as a supplement, back-end profits as the main,' meaning that earning sales margins from customers was secondary, with the main focus on leveraging its channel advantages to charge high 'slotting fees' from product suppliers. Brands wanting to be displayed at Carrefour had to pay various 'levies,' including barcode fees, new store opening fees, contract fees, holiday sponsorship fees, and promotion fees. In contrast, Walmart only charged brands a 1.5% annual commission and warehouse commission in exchange for lower purchase prices, passing savings to consumers. **The difference between the two models was that in an era when goods were in short supply, Walmart suffered losses in China for over a decade, while Carrefour was guaranteed profits, raking in money.** In 2003, Carrefour China's sales reached 13.4 billion yuan, up 25.7% year-on-year, making it the highest-selling foreign-invested retail enterprise in mainland China, and it began expanding rapidly at a rate of over a dozen stores per year. In 2003, Walmart, the three-time global Fortune 500 champion, had only 33 stores in China with sales of just 5.85 billion yuan. In 2004, in accordance with WTO commitments, China's retail market fully opened to foreign investment. Walmart and RT-Mart, which had been dormant, began large-scale expansion. Before 2005, Carrefour was still the only profitable foreign retail enterprise in China, but as the preferential period for foreign enterprises passed and domestic retail brands gradually rose, Carrefour began to face attacks from all sides. Worse, as the company's scale grew, the very factors that had driven its rapid expansion began to backfire on its stores.
**Seeking Change** In early 2000, Carrefour's French headquarters formulated a global strategy for after 2005, hoping to fully utilize information technology to catch up with Walmart within 10 years, transitioning from decentralization to centralization. In 2005, Carrefour had 60 stores and continued expanding with a target of 20 new stores per year. The rapid increase in store numbers amplified the drawbacks of the store manager responsibility system: a single store buying 100 cases of mineral water versus 100 stores buying 10,000 cases would certainly yield different negotiation prices. Carrefour's decentralization gradually eroded its price advantage and led to endless corruption and management issues. Walmart, after acquiring Taiwan's Trust-Mart in 2007, embarked on a path of scale expansion in China, and the advantages of its centralized management began to emerge. As a typical example of centralization, Walmart spent $400 million on a commercial satellite after 1980, allowing its US headquarters to control data from any Walmart store. As Walmart's scale grew, its procurement advantages became increasingly prominent, but Carrefour's centralization policy faced many difficulties. After 2005, Carrefour began a 'store power recovery movement,' establishing city-based CCUs (City Commodity Procurement Centers) under its four major regions (East China, Central China, South China, and North China), taking back procurement, promotion, and fee negotiation powers from stores to the CCUs, which were responsible for local supply chain management. Not to mention whether the suddenly 'dethroned' store managers would rebel, Carrefour stores, dragged directly from decentralization to centralization, began to show various signs of discomfort. There was also great variation among Carrefour stores in the same region: in Shanghai, Carrefour in the foreigner district sold bananas well, while in the Chinese community, apples sold well. If promotions were unified for bananas or apples, it would not suit all stores. Moreover, **different stores faced different competitive environments and had different needs for 'price wars,' so a one-size-fits-all approach would inevitably cause some stores to lose out in competition.** At this critical juncture, Carrefour lacked a strong leader to gradually resolve these issues. At that time, Carrefour's China executives were mostly managers parachuted in from small European countries who did not understand China's vastness or the enormity and complexity of its retail market, leading to decision-making errors and competitive failures. Store managers could no longer use flexible competitive tactics as before, so performance inevitably suffered, but the difficulty of their KPI assessments did not decrease. In addition to adding store management items, indicators such as sales, gross profit, and inventory remained unchanged, putting immense pressure on store managers. To cut costs, some employees had not received a raise in five years. This inevitably led to talent attrition and management chaos such as corruption. After the centralization reform, the increase in management layers led to slow decision-making and multiple management heads. The CCU department was originally established to curb Carrefour's imminent corruption problem, but it only increased the number of people suppliers needed to 'grease.' In August 2006, eight CCU personnel were arrested for bribery. Besides the internal discomfort from adjustments, Carrefour's external environment continued to deteriorate.
In 2008, due to France's performance in the Olympics, there was a nationwide boycott of Carrefour. At the end of 2009, Carrefour China was surpassed for the first time by foreign rival Walmart and RT-Mart in both store count and sales scale. Carrefour's store leases were typically 20 years, and as rents rose, new stores were naturally less profitable than old ones. In 2009, rumors of Carrefour China being 'sold' surfaced for the first time. In 2010, Carrefour had 249 stores, but the nearly half-century-old Carrefour stood at a crossroads, agonizing over the trade-offs between centralization and decentralization. In 2013, rumors of Carrefour China being 'sold' resurfaced, as it was also retreating internationally. In 2006, Carrefour suffered a Waterloo in South Korea due to a lack of localization; in 2009, it withdrew from the Russian market; in 2010, it exited the Japanese market after competing for 10 years, and also withdrew from southern Italy; in the first half of 2011, it sold its stores in Thailand; in June 2012, Carrefour announced its exit from the Greek market... Besides the strong rise of domestic and foreign retail brands, another fatal blow to offline stores—e-commerce—began to flourish. Carrefour executives had believed that e-commerce's disregard for profits to capture market share was a flash in the pan and would not amount to much. So, it was not until the end of 2015 that Carrefour China started working on e-commerce. **The increasingly brutal external competition and internal management flaws made Carrefour struggle even more helplessly in the tide. As store leases expired, Carrefour's first-mover and rent cost advantages gradually eroded, and with consumers shifting to online shopping, Carrefour's financials deteriorated.** Facing the new retail wave, Carrefour China's 2018 financial report showed revenue of 29.958 billion yuan, down 7.67% year-on-year; after a net loss attributable to parent of 1.099 billion yuan the previous year, it lost another 578 million yuan in 2018. Carrefour had truly become a hot potato.
**Hanging by a Thread** Carrefour's several sale rumors came to nothing until it met Suning, which was eager to transform. Suning, which was building 'online-offline integration,' needed 'hypermarkets' to fill its retail format layout. So, in September 2019, 'Suning's wholly-owned subsidiary Suning International planned to invest 4.8 billion yuan to acquire 80% of Carrefour China, with Carrefour Group's stake reduced to 20%.' At the Suning Carrefour Q4 2019 work deployment meeting, Suning's leader Zhang Jindong was ambitious: 'In the next five years, in first- to third-tier markets, we have set a development goal of opening 300 Carrefour stores, striving to surpass Walmart.' Carrefour's lag in e-commerce happened to be Suning.com's strength, and the story seemed about to be rewritten. After the acquisition, Carrefour made many attempts in membership supermarkets, digitalization, and more. **Suning.com broke Carrefour's overall store layout, not only overhauling the advantageous fresh food category but also replacing the second-floor grocery and textile areas entirely with Suning electronics to increase average transaction value and profitability.** Under the transformation, Carrefour seemed to be reborn. Suning.com, after releasing its 2020 semi-annual report, stated that Carrefour had achieved profits of over 100 million yuan. But the profitability did not last. Suning.com, which had hoped to turn the tide, instead slid downhill together with Carrefour amid the pandemic and its own cash flow crisis.
Suning excels in the 3C sales model of standard products, low frequency, and low repurchase rates, while Carrefour's fresh food category is characterized by high repurchase rates, high turnover, and large customer traffic—a huge difference. Users said that after Carrefour was 'Suning-ized,' the cheap vegetables, pancakes, fried rice, meat, eggs, milk, and frozen products that once attracted consumers almost disappeared, completely replaced by standard products, eliminating the need for offline shopping. Moreover, in terms of operations, Suning.com was not an absolute top student. Articles had long pointed out that since 2014, all of Suning.com's non-recurring net profits were negative. Before the liquidity crisis, Suning relied on investment income from selling Alibaba shares and other assets to avoid net profit losses. In November 2020, Suning's huge debt crisis erupted, and a series of events such as investing in Evergrande brought a massive liquidity crisis. Zhang Jindong's Suning 'retail aircraft carrier' had not yet formed when it was besieged by the new challenges of 'finding money' and 'repaying debt.' In 2020, Carrefour lost 795 million yuan, and in 2021, its total revenue continued to decline. In 2021, there were multiple reports that Suning was planning to sell its 80% stake in Carrefour. In March of the same year, it was revealed that Suning Carrefour was planning an independent IPO, meaning Carrefour needed a new story.
In October 2021, Carrefour tested a paid membership supermarket, with the first store opening in Shanghai Pudong on the 22nd. But unlike Walmart's Sam's Club and Costco, which had accumulated supply chain and customer service capabilities over many years, Carrefour's historical DNA did not include the ability to serve high-end customer needs. Trying to build from scratch to compete with domestic and foreign companies that had been deeply entrenched for years was almost impossible. At that time, the company planned to expand 100 membership stores nationwide within three years. But as of the end of 2022, Meituan information showed that Carrefour had only four membership stores nationwide, all in Shanghai. **Against the backdrop of declining operations, high rents, and Suning's lack of funds, Carrefour's consecutive store closures were inevitable, and even normally operating stores began to face crises.** Some netizens said Suning drained Carrefour's cash flow, but whether true or not, Carrefour's arrears to suppliers were a fact. Starting at the end of 2022, incidents of suppliers demanding payment from Carrefour were frequently exposed. A supplier from the southwest region revealed that in November 2022, multiple suppliers withdrew from Carrefour, jointly boycotting supply. Carrefour was forced to purchase goods with cash, which is why many products did not support payment with stored-value cards. Suning, hanging by a thread, met Carrefour, also hanging by a thread. Suning.com stated that its net profit loss was largely due to Carrefour's drag, as its declining performance could not cover high fixed rental costs. To alleviate losses, Suning was fully implementing business adjustments for Carrefour, closing stores in some regions. Carrefour's store count shrank from 235 when it joined hands with Suning to 228 at the end of 2020, then to 205 at the end of 2021. As of the third quarter of 2022, Carrefour had 151 stores nationwide and had withdrawn from major cities such as Hangzhou and Chengdu. On January 30, 2023, Hunan's last Carrefour—the Changsha Furong Plaza store—officially closed, marking Carrefour's exit from the Hunan market. The wave of Carrefour closures caused panic among holders of shopping cards across the country, leading to the run on stores described at the beginning, and even CCTV repeatedly voiced concerns about consumer rights. On February 10, Orion Food Co., Ltd. applied to freeze Carrefour (Shanghai) Supply Chain Management Co., Ltd.'s bank deposits of 22.7412 million yuan, with insufficient amounts to be covered by seizing and attaching property of corresponding value, which was approved by the court. Orion stated that since the second half of 2022, Carrefour had been owing Orion for goods, and the two sides had ended their cooperation of ten to twenty years. This makes one sweat for Carrefour.
**Conclusion** When winter comes, Walmart, relying on online e-commerce and its second curve, Sam's Club, maintains competitiveness even after store closures. RT-Mart is penetrating more retail scenarios by laying out small and medium-sized supermarkets to recover lost customer traffic. Pangdonglai, by selling vegetables without any profit during the pandemic, became a city's anti-epidemic hero and a model for domestic supermarket operations. Carrefour, however, has only shrinking stores, continuous losses, and supplier lawsuits. As the run on stores ends, some products on Carrefour's once-empty shelves are slowly being restocked, but its era clearly will not return anytime soon. In 2021, Walmart China spent 85 million yuan to upgrade its automatic sorting system, improving logistics service quality and warehousing. Walmart has the largest multi-temperature cold chain distribution center in the domestic retail industry, and in terms of logistics and distribution, it can basically achieve one-hour delivery within coverage. These core capabilities are what Carrefour wanted 20 years ago, but in the end, amid its own procrastination and competitors' desperate catch-up, it ended up in a mess. **As an international chain, Carrefour's brand equity still exists, but if it wants to go against the wind in the future, adapt to changing user needs, build offline core competitiveness amid the surge of online retail, and improve service awareness, supply chain capabilities, and management levels, it still has a long, long way to go.**


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