Carrefour stepping up Asian growth
markets where the phenomenally successful retailer has struggled to
make money in recent years. But will the focus on different store
formats, better adapted to the needs of the market, help turn
things around?
Carrefour, the French retail group, is gambling on a significant improvement in exchange rates over the coming months as it expands its business in South Korea and Japan.
Like most of the major international supermarket owners, Carrefour's results have taken a hammering in recent quarters as the euro continued to strengthen against other currencies, notably those in Latin America and Asia. But the French group maintained - and indeed accelerated in some cases - its underlying growth rates at these operations: Asian sales for the first six months were down 5.9 per cent in actual terms, but were up 12.3 per cent at constant currency rates.
Carrefour is already present in eight markets in Asia (China, Taiwan, Indonesia, South Korea, Thailand, Japan, Malaysia and Singapore) and was in fact the first European retail group to open a store there back in 1989.
Over the next three years, Carrefour will invest around $800 million in developing its business in South Korea, with refits to seven of its existing stores and the launch of its Dia hard discount format there with three new outlets. In Japan, meanwhile, the company is to open three new outlets this month alone, its first since it entered the country in 2000.
In fact, both these markets have proved troublesome in recent years, even for a retailer as skilled as Carrefour. Sales from the 26 Carrefour stores in Korea, for example, have been in steady decline even at constant currency rates for several quarters - although this slide appears to have been halted with the10.8 per cent drop in sales there during the first half of the current year attributed entirely to exchange rates.
In Japan, where competition is fierce among a number of strong local players, Carrefour decided to go it alone rather than follow the partnership route adopted by other European retailers - notably Tesco which recently entered the market through the acquisition of C-Two Network - and has struggled as a result, with sophisticated Japanese consumers seemingly bemused and ultimately turned off by the Carrefour product selection and store layout.
The three year period since the last Carrefour store opened there has been put to good use, however, with the company improving its relationship with Japan's multi-layered wholesale trade and a complete overhaul of the existing stores, introducing more French products and adapting the layout to meet Japanese tastes.
For Carrefour not to be successful in its Asian business would be unthinkable - its formula works phenomenally well everywhere else - but the French group may have to approach the markets there in a different way - such as seeking a partner in Japan or rolling out the discount rather than hypermarket fascia in some markets. In any case, Japan and Korea are unlikely to be the only Asian markets targeted in the months to come.
