Carrefour'S Profit Model Is In Danger.

Since 2009, the French retail giant Carrefour, which has dominated the Chinese retail industry for more than 10 years, has been surpassed by its main competitors, WAL-MART and Da Yun FA, in terms of store volume and turnover.

Since 2010, a series of events such as shop closures, supplier prosecution and manager turnover have shown that Carrefour is facing an unprecedented crisis in China.

The achievement of the glorious localization practice is the root of Carrefour's deep crisis today.

Carrefour China's market is in crisis

Since 2009, Carrefour has begun to lose face to face in terms of store size and turnover.

In 2009, Carrefour opened 22 stores, and its main competitor WAL-MART opened more than 50 stores. The number of stores was the first to surpass Carrefour.

From the perspective of business scale, Tai run fat, a Taiwanese competitor, has a total sales of 40 billion 400 million yuan over Carrefour, ranking first in foreign capital retail business. While in a single store profitability that can better reflect the competitiveness of the retail industry, the company has a lead of nearly 100 million yuan in Carrefour sales of 334 million yuan per store.

After entering the 2010, Carrefour's dilemma did not improve much, but there were many problems and accelerated downward trend.

Stores closed: in March, Dalian's Carrefour Xinhua oasis store officially closed. In July, Xi'an's small Zhai shop, which had only been operating for three years, was closed due to poor performance. Carrefour had to temporarily withdraw from the Xi'an market.

Supplier sued: in June, a supplier in Qingdao brought Carrefour to court on the grounds of "collecting fees and arrears".

Shopkeeper leaving the storm: in 6 and July, the resignation of a large number of executives and core talents constituted "Carrefour exit door".

First of all, Carrefour's decentralization management system helped to achieve a high level of localization in the early days of entering the Chinese market and set a firm foothold in China.

Unlike WAL-MART's centralized centralized management system, Carrefour entered the Chinese market in the early days, and put the power down to all stores. The store manager has many independent powers such as procurement, promotion, human resources and so on, so that he can quickly and flexibly cope with the changes in the local market.

This strategy is very necessary in 90s when China's retail industry is very immature and foreign capital has just entered, because opening the Chinese market as soon as possible depends on the sensitivity of the market and the flexibility of store operation.

Carrefour's single shop decentralization management enables the store manager to adjust to the situation in time, and vigorously promote single store sales at the first time. Flexible and pragmatic management mode helps Carrefour achieve a higher localization.

Although the decentralization mode is flexible and efficient, it also increases Carrefour's moral hazard, weakens its internal management and international brand image, and limits the scale economy under the condition of a large number of stores.

In the decentralization mode, the ability and loyalty of the grass-roots managers determine the risk intensity of the company in essence.

In 2006, more than a dozen executives were arrested for bribery, which highlighted the drawbacks of Carrefour's commercial bribery.

On the other hand, with the gradual increase of the number of stores in various chain enterprises, centralization is almost a reform that all the large chain supermarkets are promoting now.

As Carrefour's stores are increasing to more than 100, the centralized management of the headquarters should be appropriately increased, and centralized management of procurement, promotion and bargaining rights can achieve obvious advantages in product quality control, cost saving and unified marketing.

To this end, Carrefour is determined to "release wine and wine", set up the CCU City procurement center, and centrally purchase the purchase rights of former store managers to the CCU purchasing centers in various cities.

However, "shaving fan" encountered a strong boycott of local stores, which led to "collective manager running away".

And the shopkeeper who did not walk no longer had any previous momentum.

Carrefour's development has been seriously affected and its pace of development has slowed down.

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Secondly, learning from China's home appliances and other chain industries to rely on the growth of profit collection channel fee growth mode, Carrefour also "localization" to suppliers to receive a wide range of entry fees, pile up fees, promotional fees, holiday fees.

WAL-MART, big RFA and Carrefour represent three different profit models of retail formats in the Chinese market.

WAL-MART attaches great importance to the adoption of the latest IT technology and the establishment of a scientific and efficient supply chain management to reduce the cost of logistics and procurement, and gain profits through the difference in the price of goods sold.

In order to obtain the most stable supply and the lowest price, the big run hair directly adopts the grass-roots "support" strategy to pack the rice, pork, fruit and other categories from the suppliers.

Carrefour's magic weapon is to charge the upstream suppliers a high entry fee and squeeze the profits from suppliers.

It is reported that Carrefour's total profit sources come from at least 60% of its suppliers.

In fact, WAL-MART and Da Yun FA are improving supply efficiency and reducing supply cost by optimizing supply chain, and the most important function of both companies depends on the realization of scale economy.

However, in the market environment where retail industry is not mature and economies of scale are not significant, Carrefour's exploitation of suppliers is more conducive to the realization of low price strategy for consumers and the high profit of retail enterprises themselves.

Carrefour's way of obtaining profits through channel fees appears to be no longer suitable for China's retail industry.

After more than 20 years of development, the retail formats of China's chain stores and hypermarkets have undergone many changes. The most obvious thing is to change from simply pleasing consumers, always at low prices, and exploiting suppliers to start a harmonious symbiosis of supply chain.

Carrefour is still squeezing suppliers through the way of profit from channel fees, and its credit cycle is the longest among retail peers.

The average settlement time of WAL-MART is 28 days, while the RFA is controlled within 30 days. Carrefour is as high as 50~60 days.

When the market environment changes, the suppliers with long grievances will be intolerable.

Supplier litigation in Qingdao has only exposed the tip of the iceberg.

Finally, China launched the domestic demand market in the past two years through macro policy adjustment, showing Carrefour's lack of flexibility in expansion mode.

At present, the market layout of large and medium-sized retail industry in China's three tier cities is close to blank, which will largely determine the future competition situation of hypermarkets.

But Carrefour has fallen behind its competitors in the three line market layout.

Since 2007, WAL-MART has begun to tap the potential of the store in the two or three line cities. Finally, after the comprehensive expansion in 2009, the number of stores in China exceeded Carrefour.

Tesco, trust mart, Lianhua and other brands also aim at the domestic three or four tier market. By exploring a large number of real estate and other forms of flexible shop mode, greatly improving the speed and success rate.

Carrefour is immersed in the success of the past and is too confined to a second tier central city in its layout.

In addition, Carrefour has been prejudiced and fearful of mergers and acquisitions because of its integration bottleneck after its merger and acquisition, which rarely used the bulk mergers and acquisitions stores, and basically opened shops solely, which also limited the speed of expansion.

First, through the establishment of CCU City procurement center, the end of the store master system.

However, how to balance decentralization and centralization in the process of "cutting off the right" is still a problem that Carrefour needs to solve urgently by establishing a complete manager promotion system and training mechanism to effectively enhance the enthusiasm of the store manager.

Secondly, we should strive to establish a fair and mutually beneficial relationship with suppliers.

To this end, Carrefour introduced a "financing plan for small and medium enterprises" in September last year, and the domestic small and medium-sized suppliers who cooperate with them only need to provide Carrefour's invoice, so that they can apply for loans at Deutsche Bank.

However, many suppliers said "look at it first", because they are most concerned about whether Carrefour can directly reduce the entry fees greatly.

After all, Carrefour is still the most expensive store recognized by domestic suppliers.

Finally, in view of the inflexibility of the expansion mode, Carrefour began to change its strategy of not buying only in China.

In July 2010, Carrefour and Hebei's Dragon shop established a joint venture with a view to quickly integrating into the local retail format in Hebei.

However, how to solve the problem of integration of personnel and supplier resources is still unknown.

We need to wait and see whether Carrefour's reform can be successful, but its lessons are very inspiring.

The rise and fall of Carrefour once again shows that in business history, there are only stages of success without permanent success.