When Carrefour entered the Chinese market in 1995, the French supermarket chain chose to do it quietly, kind of like testing the water rather than making a splash. There was no marching band or lion dance to announce the opening of its first outlet in Beijing.
It was perhaps premature to be celebrating because nobody was sure whether the Chinese consumers were ready to change their life-long habit of buying groceries from their neighborhood stores for an entirely new shopping experience that de-emphasized any form of human interaction. It was obviously not the Chinese style.
But embrace it they did. Since that rather tepid first foray, Carrefour has opened 116 more stores on the mainland with a total floor area of nearly one million sq. m and is employing almost 50,000 people. Its adopted Chinese name — Jia Le Fu (happy and lucky family in English) — has become practically synonymous with "supermarket" on the mainland. The company's sales in China amounted to 30 billion yuan in 2007, accounting for about five percent of total group revenue.
Because of its growth potential, the Chinese market is enjoying almost as much attention from Carrefour's management as the group's home market in France. Two questions are raised invariably at management meetings in the head office, according to Eric Legros, president and CEO of Carrefour China. One is "How are we doing in France?" and the other is "What have we been doing in China?" Legros says.
Abandoning the leisurely pace of expansion in the first 10 years of exploration in the Chinese market, Carrefour, in 2005, began to step on the throttle and switched into high gear while opening new outlets. In the three years since, the company has opened 60 new stores, the same number opened in the previous 10 years.
In that rush for expansion, the company has opened more new stores not only in the major cities, but also in the second-tier cities and townships in the central and western regions of the country. For instance, Carrefour has five stores in Chengdu and four stores in Chongqing.
Legros, who became Carrefour's CEO in China in 2006, says he believes the company owes its success in this market not to any fancy marketing strategy, but rather to its dedicated application to its core business model.
"We have four concepts to (operating) supermarket: one-stop shopping, low prices fresh goods, shelf service and free parking," he says. "The presence of Carrefour has accelerated competitiveness in the Chinese retailing industry, enabling customers to buy goods cheaper than before."
Although the company's business model has remained international, its staff in China has increasingly been localized, which, according to Legros, has greatly contributed to its success.
Although Legros doesn't speak Chinese, he feels quite proud of being treated as "one of them" by his local staff, who call him "lao zong", a common Chinese way of addressing one's boss.
"We are very proud of our local employees. We trained and developed 40 to 50 store managers each year, most of them are (from the mainland), who are really very highly qualified," he says, adding that the company owes much of its rapid growth at a rate of 20 to 25 stores by year to its local managers. Indeed, the key word to Carrefour's success is localization.
In the early days in China, most of Carrefour's mana-gers were French and Spanish. At that time, hardly any Chinese people in the retail industry knew how to run a supermarket. "But now, we don't need them (foreign managers) anymore. We have talented people like Dai Wei," Legros says, pointing to his national public affairs director sitting beside him. "I'm so sure that someday, the president of Carrefour China will be a Chinese," he adds.
Carrefour established a Carrefour China Institute (CCI) in Shanghai in 2000 to train Chinese managers. Since then, the school has trained about 15,000 managers who are playing an important role in the fast expansion of Carrefour on the mainland. In 2007, 40,000 employees attended various training programs on an average of 23 training hours for each person per year.
Each year, Carrefour China sends some local managers to Europe for further training to gain greater overseas market knowledge and experience, some of which can be applied in China. "In 2008, 100 percent of the 40 stores' managers we are promoting are Chinese," says Legros.
At the beginning, Carrefour opened in three very different cities in China, Beijing, Shanghai and Shenzhen. The three cities are very far away from each other and had different characteristics. Carrefour had to adapt its stores to the specific needs of the consumers in each city. That experience has given Carrefour the confidence to expand into other cities. "Now we have 60 percent of our supermarkets in the main cities like Beijing, Shanghai and Nanjing, while the rest are located in the western and northern provinces," Legros says. "We want to strike a balance in store distribution."
In the pursuit of expansion, Carrefour faces different competitors in different cities. "China is a large country, when we think about the Chinese market, we think of it like Europe. In Europe, you have competitors in Germany, you have good retailers in France, and so on. "The Chinese market is the same. In Beijing, WuMart is good here, and in Shanghai it's Bailian. In Chongqing it would be New-Century. In any city of China, there is always a very good professional local retailer, who generally has a much bigger market share than us. "This is why we should localize. We need to adapt in every city we enter in China, because every city has its own feature. Beijing is not the same for us as Shanghai, and other cities," Legros explains.
Carrefour has always believed that a successful supermarket should provide low prices for most items. "There is an international rule: people rich or poor like to buy good products at lower prices," says Jean-Luc Chereau, former CEO of Carrefour China. "For rich people, they will pay less, save money and can spend it for other things, such as traveling, entertainment, or real estate. For poor people, they have no choice but to buy their necessities at the best price." Legros says,"If you go to Chongqing Carrefour any time of the day, you can find both rich people and poor people shopping for what they need or want. If you go to Beijing's Zhongguancun Carrefour on the weekend, you can also find the same mix of people there. Two months ago we had one million customers in a single day in Carrefour China. The Chinese people have the confidence in us and such confidence is our real asset."