---
title: "The Great Defeat of Foreign Supermarkets (Carrefour)"
description: "Since Carrefour opened its first store in China in 1995, foreign supermarkets experienced rapid expansion but later faced decline due to rising costs, policy changes, e-commerce competition, and the growth of local rivals. By 2019, Carrefour China was sold to Suning, marking the end of an era for foreign supermarkets in China."
author: "有趣有料的"
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published: "2019-07-18"
language: "en"
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# The Great Defeat of Foreign Supermarkets (Carrefour)

> Since Carrefour opened its first store in China in 1995, foreign supermarkets experienced rapid expansion but later faced decline due to rising costs, policy changes, e-commerce competition, and the growth of local rivals. By 2019, Carrefour China was sold to Suning, marking the end of an era for foreign supermarkets in China.

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In 1995, the songs "Alian" and "Big China" that were popular all over the streets and alleys made people thoroughly remember 25-year-old Dai Jun and 27-year-old Gao Feng. **This was a turbulent era, where people were swept by trends and carried forward by commerce.**
On December 5 of that year, the Beijing International Exhibition Center welcomed Carrefour's first store in China.
"Young men on roller skates ran around the store serving customers. There were no guards staring like prison wardens, small carts could be pushed outside, and salesgirls didn't make aggressive sales pitches. Apart from calling the meat department 'pork class' which was neither Chinese nor Japanese, there was nothing wrong." This was how an article titled "How Did Foreign Stores Get Rich" described Carrefour.
The Chaoyang Department Store and Yanfeng Mall, adjacent to Carrefour, were strongly impacted. The Wandewan Supermarket, Baixing Shopping Center, and Xinyida Shopping Club, which had just opened, were almost all losing money. Yanfeng Mall made a prompt decision to lower prices on more than 1,000 products including beverages, instant food, and washing supplies.
**A new era had arrived.**
**Head-on Battle**
Carrefour's smooth entry into China was inseparable from a policy.
In 1992, the State Council issued an approval allowing foreign enterprises to enter the retail industry in specific regions through joint ventures. Initially limited to clothing and department stores, it was expanded to food and chain operations in 1995.
# Source of Foreign Supermarkets, Brand Names, and Time of Entry into Mainland China Market
After Carrefour established a foothold in Beijing, it quickly expanded to major first- and second-tier cities. Walmart from the United States and Makro from the Netherlands followed closely, choosing Shenzhen and Guangzhou as their landing spots respectively.
**Novel product displays, advanced promotional methods, and one-stop shopping—these management models and operating mechanisms, which are common today, were eye-opening for the domestic retail industry at the time.** The "vegetable baskets" stacked in the supermarket and the familiar scenes of making bread on-site in open, transparent areas attracted countless consumers at the time.
"This huge supermarket had only three or five French people. They rented Chinese space, hired Chinese employees, bought Chinese goods, sold to Chinese people, and made Chinese money. It was truly successful and worth pondering." In the article "How Did Foreign Stores Get Rich," the author expressed great surprise at Carrefour's business model.
**Besides the flashy and novel model, the most attractive thing about foreign supermarkets was low prices.**
According to reports, Makro from the Netherlands, when it opened in Guangzhou in 1996, directly used the planned 10 million yuan advertising budget for price subsidies. Compared with other malls, the prices of its main products were reduced by 20%-30% to grab market share.
A year later, Makro opened a store in Beijing, Carrefour's stronghold. This was followed by an even crazier low-price model. Reports showed that a 99-gram bag of American Act II microwave popcorn was priced at 5 yuan at Beijing Makro Yangqiao store, while the same product was priced at 6.2 yuan and 6.7 yuan at two other supermarkets in the same area.
Walmart, which also entered China in 1996, made low prices a long-term marketing strategy, proposing an "Everyday Low Price" policy, striving to be the lowest in the industry. If consumers found a lower price elsewhere, Walmart would refund the difference.
The reason for these low prices, **besides more efficient business and procurement models, was some tax preferential policies for foreign enterprises. This disguised subsidy gave foreign supermarkets more room to cut prices.**
In contrast, local supermarkets at the time seemed more like "babies in swaddling clothes." The government's relaxation of restrictions seemed to end the protection period for local supermarkets, allowing the two sides with vastly different strengths to engage in head-on battle.
Under this impact, some weaker local supermarkets became the first "casualties." For example, in 1997, in cities like Beijing, Shanghai, Guangzhou, and Shenzhen, more than 10 local supermarkets adjacent to foreign supermarkets closed down each. At that time, 119 of the 212 large shopping malls experienced profit declines for the first time.
Entering the 21st century, after joining the WTO, China fully liberalized foreign retail in 2004, and foreign supermarkets entered a period of rapid expansion.
**In 2010, Carrefour, Walmart, and RT-Mart each had around 200 stores in China. According to media reports at the time, the top three foreign supermarkets alone held 31% of the market share.**
Local supermarkets that were good at learning, imitating, or exploring differentiation slowly found their way out amid the crisis.
Wumart Supermarket, which opened its first store in 1994, took over the management of Shijingshan Gucheng Vegetable Market in 1997, expanding the less-than-2,000-square-meter market into a 4,500-square-meter modern supermarket, reversing losses. From then on, Wumart adopted a model of joint ventures and cooperation with state-owned stores, rapidly expanding by renovating old food stores and vegetable markets.
Hualian Supermarket promoted its "small but complete" feature, placing seasonings and local specialties on the most visible shelves at the entrance, allowing customers to buy daily necessities in the shortest time, unlike in Carrefour where buying a bottle of soy sauce required going upstairs, searching through large shelves, and queuing at the checkout.
Yonghui Supermarket, founded in 1998, avoided head-on competition with foreign supermarkets by focusing on fresh produce and non-staple foods. It allocated nearly half of each store's area to fresh products, creating a new model of "farmers' market supermarket."
**Countless small-scale battles stimulated the nerves of the original "lords." Foreign supermarkets were no longer just a lurking crisis but a real, open threat.**
**Farewell to High-Speed Growth**
Carrefour's turning point came in 2017.
Globally, Carrefour's revenue began to decline significantly in 2010 and only eased until 2016. In contrast, the decline in net profit did not stop, and in 2017 it even began to show losses. Carrefour China became the hardest-hit area.
In 2017 and 2018, Carrefour China accounted for 5.14% and 4.9% of Carrefour's total revenue, respectively, but its losses accounted for 26.53% and 13.13%. For the Carrefour Group, Carrefour China had become a "drag" that urgently needed to be cut off.
On June 24, 2019, an announcement by Suning.com revealed the fate of Carrefour China: Suning.com acquired 80% of Carrefour China for 4.8 billion yuan.
**Carrefour China was not the first to fall, nor will it be the last.**
In 2004, Tesco from the UK acquired Taiwan's Hymall, and its 25 hypermarkets became Tesco's springboard into the Chinese market. Ten years later, Tesco was acquired by China Resources Enterprise, and all 135 stores were renamed "CR Vanguard."
In 2008, South Korea's Lotte Group acquired Makro from the Netherlands for 1.28 billion yuan. In the original Makro Jiuxianqiao store, the prime spot next to the escalator was quickly filled with Lotte chocolate pies, and Makro stores were gradually renamed "Lotte Mart."
In 2017, Lotte Mart, which was deteriorating in China, announced the sale of its 93 stores to Liqun Group and Wumart Group amid the THAAD controversy.
**The drama of "big fish eating small fish, small fish eating shrimp" played out repeatedly.**
Among the surviving foreign supermarkets, Walmart's global performance is worrying. From a profitability perspective, its net profit and net margin have declined for four consecutive years, with net profit falling from 100.42 billion yuan four years ago to 44.71 billion yuan, and net margin dropping from 3.37% to 1.3%.
Walmart did not disclose its sales performance in China, but based on available data, it is not good. In 2018, Walmart had more than 400 stores, nearly double the 219 in 2010, but its market share fell by nearly half, from 11% in 2010 to 5%.
Taiwan's RT-Mart and France's Auchan, which had been entangled in profit distribution issues for years, finally joined hands in 2011 to list as Sun Art Retail, completing what was then praised as a "money marriage." Alibaba currently holds 36.17% of it.
Another surviving German brand, Metro, has repeatedly been reported to be selling its China business through bidding, with competitors including the usual suspects like Yonghui, Tencent, Alibaba, and Suning. It seems not far from changing hands.
As of 2018, **the combined market share of the top three foreign supermarkets had dropped from 31% in 2010 to 17%, with both Walmart and Carrefour experiencing significant declines.**
From their heyday to the current bleak situation, the defeat of foreign supermarkets in China makes one reflect: what exactly happened over these more than twenty years?
**Local Forces That Drove Away Foreign Supermarkets**
From March to October 2011, Tesco, Carrefour, Metro, and Walmart successively announced changes to their China regional heads, as if the foreign supermarkets had "smelled" a certain danger.
Sure enough, in 2012, Carrefour, after withdrawing from Russia, South Korea, Japan, Thailand, and the United States, began frequently closing stores in China. Tesco closed 4 stores in China that year. Walmart reduced the area of new stores it planned to open by about 30% and began closing stores in Zhengzhou, Hangzhou, and some second- and third-tier cities in 2013.
Foreign supermarkets indeed faced difficulties. **Besides rising costs, disappearing policy dividends, and growing e-commerce, there were also local supermarkets that had grown up under the "pull" of foreign supermarkets. These were no longer problems that could be solved by changing leadership.**
In 2012, Huang Wenjie, executive president of the Guangdong Circulation Industry Chamber of Commerce, said, "Foreign retail giants generally sign long-term leases of about 15 years at extremely low rents. By this calculation, most retailers are now facing the expiration of their first batch of store properties."
When they first entered the Chinese market, foreign supermarket giants, which had accumulated substantial capital abroad, secured extremely low rents by paying more than 10 years of rent upfront. This advantage, after the lease expired, became a huge stumbling block for foreign supermarkets.
In 2011, overall rents for commercial properties in Guangzhou alone rose by 5%-10%, and in popular areas even by 3-4 times. In 2012, the average rent for the top 100 chain enterprises nationwide increased by 21%, labor costs by 20%, and utility costs by 16%, becoming the main reasons for the slowdown in foreign supermarket expansion.
**After the reform and opening up, foreign enterprises enjoyed favorable treatment in China. Starting from 2007, this gradually became unified with domestic enterprises, beginning with the income tax system and extending to pre-tax deduction policies for wages and salaries, land occupation, property tax, urban construction tax, and education surcharges.**
In addition, in the early years, local governments, in order to attract "foreign brands" during investment promotion, gave foreign supermarkets more lenient conditions in site selection, land use, planning constraints, and approval processes. As local supermarkets grew in scale and public relations capabilities, foreign supermarkets gradually lost this hidden policy advantage.
Of course, the impact of e-commerce is also an important factor that cannot be ignored. With the expansion of e-commerce, its reach extended from purely books and electronics to packaged food, daily necessities, clothing, and other areas, diverting some supermarket customers with low-price advantages.
# China International Financial Exhibition E-commerce Promotional Materials
After more than ten years of learning, local supermarkets that gradually matured could fully imitate successful foreign supermarkets in store layout, product selection and display, management methods, and promotional techniques, creating an indistinguishable shopping experience for consumers. After all, these were not hidden high-tech but visible differences that could be seen by walking around a store.
**The叠加的难题 formed an unsolvable dilemma, and foreign supermarkets thus entered a "troubled path."**
**Those That Stayed Found Rich Partners**
Foreign supermarkets had been "pioneering" in China for more than ten years, but the wasteland was no longer the same, and the opponents were no longer the same.
Their advantages were eroding day by day. The Chinese market was a distant battlefield for them; if they couldn't continue, they could withdraw. But for local supermarkets, there was no retreat, forcing them to fight with all their might.
**Rather than saying foreign supermarkets exited one by one, it is better to say they integrated into and strengthened local forces in another form.**
As one of the first batch of hypermarkets, Carrefour held advantageous locations in 51 large and medium-sized cities, 30 million members, and the supply resources and supply chains, including fresh products, that Suning.com needed for developing full-category supermarkets and department stores.
Suning Group, with its own real estate division, could solve Suning.com's leasing issues and naturally help with Carrefour's headache of rent.
The combination of Suning.com and Carrefour is just one example.
Compared with Carrefour's "selling itself," Walmart chose to embrace JD.com based on a 9.91% stake. From Walmart's perspective, it was attaching itself to an e-commerce giant and expanding more traffic entrances. From JD.com's perspective, Walmart's entry greatly expanded its SKU and provided a more complete backup force for offline full-category development.
Alibaba invested in RT-Mart and Auchan's parent company, Sun Art Retail, becoming the second-largest shareholder of the largest offline retail listed company in China. It used RT-Mart's offline traffic to supplement its customer base and provide a grounded platform for new retail.
As one of the first batch of hypermarkets in the 1990s, foreign supermarkets not only grabbed advantageous locations in various cities but also built several deeply rooted supermarket brands over more than twenty years, accumulating a large number of members.
As of December 31, 2018, Carrefour's net book assets were -1.927 billion yuan, while Suning.com's acquisition price was 4.8 billion yuan. Regardless of whether there are hidden risks behind this large goodwill, Carrefour's brand value must be reflected.
From the landing of Carrefour, the first foreign supermarket in China, in Beijing in 1995 to the sale of Carrefour China to Suning, foreign supermarkets experienced their glory days over 24 years, but now they are all saying goodbye one by one.
**An era has thus ended.**
Over these 24 years, all their accumulation will be inherited as a legacy by the local emerging forces that defeated them, or shared with them.
Source: Market Insights (ID: ishijie2018)


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