Welcome to WASS 10/11/2010

Global- Indian Retail Scenario & Marketing Strategies by Carrefours By Dr. Chandan A Chavadi

Global Retail Summary

Over 50 of the Fortune 500 companies, and around 25 of the Asian top 500 companies, are retailers.
Market value The global retailing industry grew by 1.5% in 2009 to reach a value of $10,539.9 billion. Market value forecast In 2014, the global retailing industry is forecast to have a value of $14,175.6 billion, an increase of 34.5% since 2009.

Market segmentation I Food and Grocery is the largest segment of the global retailing industry, generating total revenues of $5,637.8 billion accounting for 53.5% of the industry's total value. Market segmentation II Europe accounts for 37.4% of the global retailing industry value. Market share Wal-Mart Stores, Inc. is the leading player in the global retailing industry, generating a 3.8% share of the industry's value while Carrefour has a market share of 1.1%

 The performance of the industry is forecasted to accelerate, with an anticipated CAGR of 6.1% for the fiveyear period 2009-2014, which is expected to drive the industry to a value of $14,175.6 billion by the end of 2014.

The global retailing industry group generated total revenues of $10,539.9 billion in 2009, representing a compound annual growth rate (CAGR) of 4.3% for the period spanning 20052009.
In comparison, the European and AsiaPacific industry groups grew with CAGRs of 3.8% and 4.2% respectively, over the same period, to reach respective values of $3,940.1 billion and $2,673.1 billion in 2009.

 The global retailing industry group is defined here as the sum of six segments, each comprising only business to consumer (B2C) sales for the following groups of products. 1) The apparel, accessories, and luxury goods segment includes menswear, womenswear, childrenswear, footwear, watches, jewelry and related products. 2) The food and grocery segment includes food, beverages, tobacco, household care, personal care, and related products.

3) The electricals and electronics segment includes audio-visual equipment, fixed and mobile telecommunications equipment, computers and peripherals, domestic appliances, photographic equipment, games consoles, and related products.

4) The house and garden segment includes carpets and floor coverings, domestic furniture, garden products, home improvement products, and related goods. 5) The media products segment includes books, newspapers, stationery, recorded music and video, and related products.

6) The sports and leisure segment includes sports and fitness equipment, traditional toys and games, and related products.

Share of Organized Retailing in Countries

Country/Region
USA
Western Europe Malaysia Thailand Brazil Argentina Phillippines Indonesia

Share of Organized Retailing

80%
70% 50% 50% 40% 40% 35% 25%

South Korea
China

15%
10%

Indian Scenario

According to a McKinsey & Company report titled 'The Great Indian Bazaar: Organized Retail Comes of Age in India', organized retail in India is expected to increase from 5 per cent of the total market in 2008 to 14 18 per cent of the total retail market and reach US$ 450 billion by 2015. Indias retail industry accounts for 10 percent of its GDP and 8 percent of the employment to reach $17 billion by 2010.

Indias retail growth was largely driven by increasing disposable incomes, favorable demographics, hanging lifestyles, growth of the middle class segment and a high potential for penetration into urban and rural markets.

Major Retail Chains in India

Shoppers Stop Big Bazaar and Future Bazaar RPG group Lifestyle Trent Retail

Major Players categorywise

Apparel retailing ( Westside, owned by Tatas Trent and Shoppers Stop owned by the Raheja Group). Food retailing ( Foodworld by RPG Group and Food Bazaar of PRIL) Music and Entertainment ( Music world of RPG Group and Planet M of Times of India Group) Book retailing ( Crosswords, Landmark and Oxford bookstores) Watches and jewelry retailing( Tata owned Tanishq and Titan) Home Furniture ( Durian and Gautier India) Luggage (VIP & Samsonite) Footwear retailing ( The Loft and Bata)

Organized Rural Retail Stores

Carrefour Background

Carrefour is the world's second largest and Europe's largest retailer of groceries and consumer goods. The group operates more than 15,000 stores (both company-operated or franchises) through four main grocery store formats: hypermarkets, supermarkets, hard discount, and convenience stores. Carrefour operates in Europe, Latin America and Asia. The group is headquartered in Levallois Perret Cedex, France, and employs around 495,000 people.

 The group operates about 1,302 hypermarket stores across the world: 228 hypermarkets in France, 494 in European countries outside France, 288 in Latin America, and 292 in Asia. The group operates approximately 2,919 supermarket stores in 11 countries under the banners Carrefour Express, Carrefour market, GB, GS and Champion.

Carrefour's hard discount segment, Dia, operates about 6,252 hard discount stores in Spain, France (under the Ed brand), Portugal (under the Minipreco brand), Greece, Turkey, Argentina, Brazil and China.

 The group's other activities comprise convenience stores, cash and carry foodservice stores, and e-commerce retail format. Carrefour operates about 4,813 convenience stores and 144 cash and carry stores. Convenience stores are mainly operated by franchisees under the banners Marche Plus, Shopi, 8 a Huit and Proxi in France; DiperDi in Italy; Carrefour Express in Belgium and Brazil; Carrefour 5 Minut stores in Poland; Carrefour City stores in Spain; and Carrefour Convenient Buy in Thailand. Carrefour operates cash and carry foodservice stores under the trade name Promocash. Most of the cash and carry stores are operated by franchisees.

 Carrefour also sells its products through various e- commerce websites. Carrefour operates an online grocery store, Ooshop, a leading French online supermarket in terms of sales. Carrefour France hypermarket's nonfood website, CarrefourOnline.com - offers products such as leisure products (DVDs, games, software, music, books and more), audio and video, household electrical goods, as well as music downloads and even flower and bicycle delivery.

Carrefours Strategies in China

As of July 2007, Carrefour operated in China through 100 hypermarket, and around 255 hard discount stores. It had 300 million customers per year and 22,300 local suppliers. It is the leading foreign employer and employed 40,000 employees during 2007. First foreign company to enter the Chinese retail industry (1995). Adopted decentralized management structure, where all store managers in China operated with complete freedom. Stores designed according to the convenience of Chinese customers.

When most foreign retailers viewed China as a large market, Carrefour saw it as many small markets.

 95% of the stock sold was procured locally. Ensured freshness, an attribute considered important by Chinese consumers. Formed joint ventures with Chinese management consulting firm Zhong Chuang.

In 2004, Carrefour introduced Champion Supermarket format.

A survey made available by Carrefour shows that the company's consumer group in China comprises mainly medium and low-income urban residents.

 This conclusion was based on survey results indicating that about 28 percent of its customers arrive on foot, 15 percent on bicycle and 20 percent by bus. Carrefour sold variety of foods under one roof. Convenience was another factor that Carrefour promoted. The basket size in the Chinese stores was much smaller than European stores. Chinese consumers bought in small quantities, several times a week. Daily shopping for fresh foods was widely prevalent in China. Established hypermarkets in major shopping malls.

 Store manger along with department head decided on the product mix. To keep flexibility in supply chain, Carrefour use bike if its the lowest cost and most efficient. To differentiate imported products from Chinese products, flag of the country from which the product has been obtained was displayed on its label. By 2006, 11 purchasing centers had been established across the country.

 Carrefour stores were located at the center of the city with easy access to public transport. It did not follow a particular store format and encouraged store managers to come out with the best format for the store and sales plan.

 Carrefour sold its own label of products which were priced 20-40% below the market price. Most of the Carrefours stores in China were spread across several floor and ramp escalators. The department selling fresh foods and groceries were designed to resemble local outdoor market. Ladies call out to customer saying Come here, this is fresh and good, just like in street markets.

 The fresh food section was located at the entrance in a clean environment. For selling fish, Carrefour adopted different methods stores located near coastline Carrefour sold live fish, away from coastline as consumer preferred sold frozen fish. In many of the Carrefour stores in China, consumers can buy live fish, turtles and meat that was not usually available in Europe.

 At Uighur, populated mostly by Muslims, Carrefour did not sell pork. All products sold there (Uighur) was certified halal products. For important festivals, Carrefour decorated its stores according to traditional practices and stacked with items like paper lanterns. Carrefour promoted values such as freedom, responsibility, sharing, respect, integrity, solidarity and progress among the employees. Carrefour spent around 2% of its payroll costs on training. Created the Carrefour China Institute in 2000 in order to train Chinese staff to take positions of responsibility.

Carrefour Broad based Strategies Worldwide

Price: A Heightened offensive

Commitment to low prices the core strategy in all retail banners and in every country in which the Carrefour group operates. The low price strategy has been leveraged by three key strategies: purchasing synergies, price positioning and improved product presentation.
To ensure the best prices, Carrefour has continued to expand purchasing synergies (pooled purchasing) with Dia. Carrefour strives to be the price leader throughout the world by deploying an ongoing and aggressive low-price policy and expanding its in-store promotions and communications.

The introduction of the Ligne Alerte Prix (Price Hotline) in hypermarkets in France in April 2006 reflects this commitment. The hotline gives customers a key role in competitive intelligence while providing them with an opportunity to influence prices. Carrefour is committed to lowering its prices within 24 hours if a customer identifies a lower price at a competitors store. In 2006, Carrefour Argentina made a strong impression on consumers with a wide-ranging advertising campaign. Launched on 23 February 2006, the campaign helped to cement the reputation of Carrefour hypermarkets as a business committed to keeping prices down. Throughout the country, Carrefour promised the lowest prices on 800 basic consumer goods and invited consumer organizations to verify its claim.

Improved product presentation By showcasing products in display units or in their original boxes rather than stocking shelves with products one by one, stores save significantly on time and labour, resulting in lower costs and lower prices for consumers.

Products: An Expanded Offering

One of the Groups strategies for energizing sales growth is to offer a broad, high-quality and innovative array of both grocery and nongrocery products. In France (2006), product ranges were revamped and assortments were expanded with 2,000 new product listings sold under the Carrefour name. In particular, two new product lines for children were added: Carrefour Kids (ages 4-10) and Carrefour Baby (infants up to age 2), developed in cooperation with a committee of pediatricians.

 In 2006, Champion supermarkets in France expanded their selection of store-brand products, with 850 new listings now available in stores: Innovative fresh foods: mini fruits and vegetables for children, microwavable vegetables, and the first line of cholesterol fighting yoghurt launched as a store brand.

Sophisticated gourmet products: 100 premium-quality product listings under the Collection Champion brand name are now competing with upscale products from the major brands.

Environmentally and socially conscious products, like the many eco-friendly household cleaning products bearing the Champion Eco Plante name. Carrefour and Tetra Pak have pioneered a consumer awareness campaign in over 600 hypermarkets across Europe. The scheme, which was launched in early February, uses Carrefour-branded milk and juice - in specially designed Tetra Pak cartons which provide eco-tips to consumers. The products are on sale in stores in Spain, France, Belgium and Italy during EU Sustainable Energy Week (9-13 February 2009).

 Carrefour is making good progress in reducing energy consumption in stores and in working towards its objective of a 20% reduction by 2020 compared to 2004. It is deploying innovative energy management systems, energy saving lighting and closed freezer cabinets to achieve greater energy efficiency, with regular reporting to ensure it keeps on track with targets. Carrefour is also developing solutions for consumers such as the sale of green electricity to households and the growing offer of energy efficient products. Carrefour will also continue to raise supplier awareness and facilitate efforts to improve their environmental performance.

Loyalty Programmes: More Benefits for Customers

In France(2006), Carrefour strengthened its appeal by introducing loyalty card, now carried by some 8.7 million customers. After the introduction, hypermarkets recorded an increase in both the average customer purchase and the number of customer visits.

Carrefour celebrated a highly symbolic anniversary which offered a 5% discount year-round on 8,000 Carrefour brand products.

 To express its appreciation to its best customers, the banner developed an exceptional promotional campaign: a mailing sent to all cardholders, a radio campaign, a special catalogue, anniversary terminals and in-store displays. The purpose of the campaign was to offer a 40% reduction on 300 products over a 10-day period. The campaign proved an enormous success in Carrefours 218 hypermarkets in France, which in two years have developed the largest customer database in the countrys retail sector.

 A consumer club to suit every taste! To keep customers coming back, GB in Belgium and Champion in France have introduced a new concept: consumer clubs, which offer even more advantages to loyalty cardholders. Beauty Club, Baby Club, Healthy Living Club, Gourmet Club: every customer can find a club to suit his or her lifestyle and needs. On the banners websites and in brochures, club members receive practical advice from experts and exclusive offers in the form of discounts on targeted products.

Loyalty Card Statistics

8.7 million Carrefour loyalty cardholders in France 6.3 million Carrefour El Club loyalty cardholders in Spain 5.6 million Champion Iris cardholders in France

Services: A Growth Engine

Carrefour becomes a mobile virtual network operator in France. On 8th November 2006, following the example of its sister unit in Belgium, Carrefour France unveiled its new mobile phone service an economical, user-friendly, no-obligation service that reflects Carrefours strong commitment to its strategy of innovation at every level for the ultimate benefit of its customers. Featuring prepaid services, a fixed pricing plan for both phone calls and text messages and a reliable network, Carrefour Mobile relies on a transparent marketing campaign and a partnership with the European operator Orange.

Home Computer Support

Fifty percent of French households own a personal computer, but many report problems with installing, using and repairing their equipment. The solution? Carrefour Micro-informatique Assistance (Computer Technical Support), available since 8 November 2006, in 86 hypermarkets in southwest France and the Paris metropolitan area. Experts provide technical assistance via telephone from 8 a.m. to 10 p.m. seven days a week or in customers homes from Monday through Friday. Home training sessions for up to five people can be arranged upon request.

Champion Service Packages

An array of synergies with Carrefour Introduced in May 2006, the Champion Service Packages are mainly comprised of Group services and draw on the expertise of Carrefour hypermarkets. They operate as follows: in-store flyers offer a range of different services to customers, available via a special telephone number. These packages include a portfolio of 11 services in four different categories:

Financial services including the PASS card, personal loans, life insurance and interest bearing savings accounts.

 Insurance coverage, including homeowners and automotive insurance, family protection and pet insurance. Travel services, including car rentals in partnership with Avis. Practical information, including a care hotline for disabled and elderly individuals. This new service will both attract and retain new customers.