V S CASE CARREFOUR VS WAL-MART IN CHINA TWO DIFFERENT MODELS DATE 30.11.2010 GROUP NAZIR MOULAN & MAXIME WASSELIN 1
Summary I. COMPANIES PRESENTATION II. COMPETITIVE PRESENTATION 1. CUSTOMERS 2. SUPPLIERS 3. COMPETITORS 4. KEY SUCCESS FACTORS 5. COMPETITIVE ADVANTAGE III. IMPLEMENTATION & EXPANSION IN CHINA 1. HOW DID THEY IMPLEMENT THE BRAND? 2. HOW DO THEY SPREAD OUT? 3. HOW WILL THEY GROW IN THE FUTURE? 2
Companies presentation FOUNDED 1959 1962 NATIONALITY FRENCH AMERICAN EMPLOYEES (2009) 500 000 2 100 000 TURNOVER 107 BN 300 BN IN CHINA SINCE 1995 1996 # OF HYPER. 163 189 MARKET SHARES 2,3% (#7 - $5,4BN) 3,2% (#5 - $7,5BN) EMPLOYEES 40 000 50 000 EXP. STRATEGY ORGANIC M&A 3
CUSTOMERS MIDDLE-CLASS & UPPER-CLASS LOOKING FOR AN «EXPERIENCE» URBAN AREAS AVERAGE BUYING BEHAVIOUR: 120RMB. ==> NEED TO FULFILL CONSUMERS NEEDS. ==> CARREFOUR ADAPTED ITSELF TO THE CHINESE MARKET FIRST 4
SUPPLIERS They purchase most of their goods within China charge suppliers relationship - no fees flexibility electronic data system to manage stocks 5
COMPETITORS TOP10 RETAIL COMPANIES < 30%. WAL-MART 3,2% ; CARREFOUR 2,3% TOP3 HYPERMARKET/SUPERMARKET IN RETAIL SALES (2009) 1. RT-MART (AUCHAN) 2. WAL-MART 3. CARREFOUR LOCALIZATION CARREFOUR : 5,2% SHARE IN LEVEL A CITIES, 1% IN LEVEL B AND 0,1% LEVEL C. WAL-MART : 2% SHARE IN LEVEL A CITIES, 4,4% IN LEVEL B AND 3% LEVEL C. SOURCE: EUROMONITOR INTERNATIONAL AND RETAIL ASIA 6
COMPETITORS TOP10 RETAIL COMPANIES < 30%. WAL-MART 3,2% ; CARREFOUR 2,3% China s retail market in 2010 4,32 % 3,82 % 3,65 % 3,43 % 3,21 % 71,93 % 3,15 % 2,30 % 1,66 % 1,32 % 1,21 % SOURCE: EUROMONITOR INTERNATIONAL AND RETAIL ASIA GMELY ($10,0bn, 4,32%) China RE ($8,93bn, 3,82%) Suning Appliance ($8,53bn, 3,65% Brilliance group ($8,0bn, 3,43%) Wal-Mart ($7,5bn, 3,21%) Auchan ($7,36bn, 3,15%) Carrefour ($5,38bn, 2,3%) Bright Food ($3,89bn, 1,66%) Dashang ($3,07bn, 1,32%) Belle ($2,83bn, 1,21%) Others ($168bn, 71,93%) 7
KEY SUCCESS FACTORS CHINESE PURCHASING BEHAVIOR LOCALISATION CHINESE GOVERNMENT ADAPTATION GOOD MANAGEMENT SYSTEM WITH SUPPLIERS 8
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HOW DID THEY IMPLEMENT THE BRAND: WHY CHINA? 1992: GOVERNMENT ALLOWED JV WITH FOREIGNERS HUGE POTENTIAL MARKET POPULATION ON COMING OF THE MIDDLE- CLASS RETAILING MARKET NOT YET ORGANIZED QUITE NO COMPETITORS 200 150 100 50 Urban middle class (million) Lower middle class Upper middle class 0 1995 1997 1999 2001 2003 2005 10
HOW DID IMPLEMENT THE BRAND? 1995: JOINT VENTURE WITH SHENZHEN INTERNATIONAL TRUST & INVESTMENT CO. 1996: FIRST SUPER CENTER IN SHENZHEN KEPT THEIR MODEL «EVERYDAY LOW PRICE» AND THE BRAND NAME WAL-MART...... BUT HAD TO ADAPT THE ENVIRONMENT 11
HOW DID IMPLEMENT THE BRAND? JV IN 1995 WITH ZHONGCHUANG COMING IN CHINA WITH A LOT OF EXPERIENCE IN ASIA (TAIWAN SINCE 1989) OBJECTIVE: BIG CITIES & LOW PRICES NEW BRAND NAME: «JIA LE FU» MEANS «HAPPY FAMILY» 12
HOW DO STORE FORMATS: WALMART S FUMBLING SPREAD OUT? STORE LOCATIONS: FROM SMALLER CITIES TO LARGER CITIES EXPANSION : UNTIL 2004: SLOW 2004-2007: OPENING OF 20 STORES 2007: BOUGHT 35% OF TRUST-MART ==> M&A GROWTH (AND ORGANIC) #5-189 STORES 13
HOW DO SPREAD OUT? STORE 2007: FORMATS: acquisition WALMART S of 35% shares FUMBLING of Trust-Mart STORE - LOCATIONS: US$1 billion FROM SMALLER CITIES TO LARGER CITIES - 31 stores - one of the leading retailers in China EXPANSION : Wal-Mart UNTIL 2004: would SLOW capture much more competitive 2004-2007: advantages OPENING OF in 20 China STORES 2007: BOUGHT 35% OF TRUST-MART ==> M&A... but GROWTH it was a (AND difficult ORGANIC) integration: - Trust-Mart had significant loss #5-189 STORES - stores were renovated but their performance decreased by nearly 30% 14
HOW DO SPREAD OUT? STORE FORMATS: HYPERMARKETS, SUPERMARKETS & DISCOUNT (DIA) STORE LOCATIONS: BIG CITIES AND MORE PROSPEROUS AREAS. GOOD SOURCING FROM SHANGHAI (HEADQUARTERS) EXPANSION : 1999-2001: WARNED BY GOVERNMENT - PAUSE 2001-2010: FAST EXPANSION ORGANIC GROWTH: OPENING NEW STORES BUT... 15
HOW DO SPREAD OUT? STORE FORMATS: STRATEGY: HYPERMARKETS, EXPANSION FROMSUPERMARKETS ORGANIC TO & DISCOUNT (DIA) EXTERNAL STORE LOCATIONS: BIG CITIES AND MORE PROSPEROUS AREAS. GOOD SOURCING FROM IN JULY 2010 CARREFOUR BOUGHT 51% OF SHANGHAI (HEADQUARTERS) BAOLONGCANG. EXPANSION : WARNED BY GOVERNMENT -1999-2001: AN «EXCELLENT LOCAL RETAILER» - PAUSE EXPANSION ($160M) -2001-2010: ADD 11-30FAST HYPERMARKETS -ORGANIC FIND NEW IDEAS OF DEVELOPMENT GROWTH: OPENING NEW STORES -BUT... RETAIN THE EXISTING TEAMS - 3 YRS OBJECTIVE: RMB10 billion sales 16
HOW WILL THEY GROW IN THE FUTURE? RECOMMANDATIONS PURSUE EXPANSIONS DEPENDING TO OPPORTUNITIES (ORGANIC OR EXTERNAL) - CHANGE RELATIONSHIPS WITH SUPPLIERS - DEVELOP ADVANCED IS SYSTEMS - BE CAREFUL ABOUT THE REGULATIONS - KEEP GOOD RELATIONSHIPS WITH PARTNERS - CHANGE ITS DISTRIBUTION SYSTEM => LOWER THE COST OF THE DISTRIBUTION 17
CONCLUSION RETAIL STORE 2 BIG COMPANIES WELL IMPLEMENTED IN CHINA DIFFERENT STRATEGIES EXPANSION EXTERNAL GROWTH ORGANIC GROWTH FAST GROWING MARKET HYPERMARKETS FULFILL CONSUMER NEEDS SUPERMARKETS RETAIL STORES ONE COMMON OBJECTIVE: BECOME LEADER ON THE CHINESE MARKET 18