On January 23, Carrefour signed a preliminary agreement with Tencent for strategic business cooperation in China, with Tencent and Yonghui potentially investing in Carrefour China. The rumor of "selling Carrefour China," which has persisted for five years, is finally more than just a rumor. Relevant data shows that Carrefour had already initiated preliminary cooperation with Tencent in 2015, rolling out mobile payment technology across its stores in China. Now, with this deeper partnership, what impact will it have on the retail landscape? 1 The Fallen Giant As a former retail giant, Carrefour enjoyed a long period of prosperity since entering China in 1995, thanks to its unique management model. By the end of 2013, Carrefour had opened 236 hypermarkets in 73 Chinese cities, employing over 60,000 people, and held an absolute leading position among foreign retailers in China. However, with the downturn in the overall offline retail environment, Carrefour, positioned in first- and second-tier cities, has found it increasingly difficult to bear high rental costs. Data shows that Carrefour China has experienced negative sales growth for two consecutive years, with its market sales and store numbers being surpassed by RT-Mart and Walmart, leading to a continuous decline in market share. In stark contrast, online retail giants like Alibaba and JD.com have grown rapidly. The continuous growth of Tmall's Singles' Day sales in recent years is a microcosm of the online retail industry's development. Against this backdrop, companies like RT-Mart and Walmart have also ventured online, attempting to reverse declining offline sales through the internet. But offline companies venturing into online retail ultimately lack the e-commerce gene. Following the lukewarm performance of Wanda's Feifan.com and the shutdown of RT-Mart's Feiniu.com, Carrefour's e-commerce attempts also failed to escape this fate. In 2011, Carrefour's profit was €371 million, down 14.3% from €433 million in 2010; operating profit fell 19.2% year-on-year. 2 Tencent + Yonghui + Carrefour As online traffic costs rise, internet giants are turning their attention offline, and traditional retail enterprises face increasing pressure. Aligning with a tech giant has become a natural choice for many traditional supermarket chains. In 2016, Walmart began cooperating with JD.com, with Sam's Club exclusively入驻 JD.com and JD Daojia entering Walmart's offline hypermarkets, facilitating mutual traffic between online and offline. Alibaba's new retail moves have been relentless, with investments or acquisitions in Intime Retail, Suning Commerce, Sanjiang Shopping Club, Bailian Group, Lianhua Supermarket, and RT-Mart. In 2017, Tencent acquired a 5% stake in Yonghui Superstores, officially entering the new retail battle. Image source: China Merchants Retail Xu Rongcong team Now, Carrefour's cooperation with Tencent and Yonghui can, on one hand, leverage Tencent's massive online traffic system to drive traffic to its offline retail business, and use its advanced digital technology to develop new smart retail initiatives and improve consumer experience. On the other hand, it can further empower traditional offline retail through Yonghui's recent experiments in fresh food, improving store operational efficiency. For Tencent, partnering with Carrefour allows it to promote WeChat, WeChat Pay, cloud computing, and related services within its ecosystem, while gaining access to Carrefour's rich offline retail resources and developing supporting retail services on its social platform, further enhancing user stickiness. In recent years, Alibaba has sparked a fresh food war offline, expanding its offline retail territory through investments and acquisitions to promote its Hema Fresh model. Hema has stated it will open 2,000 directly-operated or joint-venture stores nationwide. Tencent is not to be outdone, supporting Yonghui's fresh food format Super Species through its stake, thereby countering Hema Fresh's "desperate sprint." After Tencent and Yonghui invest in Carrefour, they will inevitably transfer Super Species' fresh food operational experience to Carrefour, further strengthening its bargaining power in the fresh food sector against Alibaba. 3 Alliances and Counter-Alliances Will Continue After several rounds of "sell-off" rumors, Carrefour ultimately chose Tencent and Yonghui over the widely speculated Alibaba. For Alibaba, which already has RT-Mart, the "King of Land Warfare," the impact may be limited. But for Tencent, securing Carrefour strengthens the "anti-Alibaba alliance" and secures a key piece in the new retail competition. Currently, the retail industry in China is largely dominated by two internet giants, Alibaba and Tencent. Alibaba has invested in or acquired Sanjiang Shopping Club, New Hua Du, Lianhua Supermarket, and RT-Mart by exporting supply chains, products, and business models. Tencent, through continuous traffic output and offline empowerment, has directly or indirectly allied with Walmart, Carrefour, Yonghui, Zhongbai, and Hongqi Chain. Image source: China Merchants Retail Xu Rongcong team Among the top ten supermarket chains by market share, only China Resources Vanguard, Wumart, SPAR Group, and Better Life have not yet aligned with Tencent or Alibaba. However, after the recent trading suspension of Better Life, this competitive landscape may be disrupted. For offline enterprises, choosing between Alibaba and Tencent is, as Better Life founder Wang Tian put it, "Alibaba's new retail is like an Apple system; you play within its closed system. Tencent feels more like Android, where everyone plays their own game within the system. That's the biggest difference between the two systems." Whether to choose Tencent or Alibaba is a decision that traditional retailers must make based on their own circumstances. But one thing is certain: the "alliances and counter-alliances" between the two giants will continue in 2018. And once offline supermarkets and hypermarkets are divided up, will the convenience store industry become the new battlefield for the giants? -END-