Carrefour, annus horribilis

Jul 12, 2012   //   by Alexander Lyon   //   News  //  Comments Off on Carrefour, annus horribilis

A Carrefour hypermarket in Sibiu, Romania at nightfall, by 7castleCarrefour’s bad year is getting worse with each new piece of information that comes to light. The “Carrefour Planet” stores have been discontinued less than a year after they started to be rolled out. Sales are down. Profitability is down. Top management has been overhauled, but the new CEO’s military approach and dedication to cost management doesn’t seem like it’ll be enough to return to previous profit levels. Carrefour has been taking a beating in urban, small-store markets at the hands of Monoprix and Franprix, whilst Leclerc’s aggressive advertising is turning up the heat for suburban, larger-store markets. Yesterday’s news was in the same vein, but felt like another nail in the proverbial coffin of Carrefour’s decline : 6% lost in market share in barely 6 months. Ouch.

How can corporate alignment techniques and methods answer Carrefour’s challenge? This article is a basic, elementary look at the type of thought process and solution that is possible.

Corporate alignment considers that the cornerstone for defining a company’s strategy, its objectives and how it will approach markets (both in a product/service and an organisational manner) is a business’ purpose. Carrefour’s purpose has been ill-defined for at least the past decade. Carrefour has become “just another” supermarket/hypermarket chain. Unlike Lidl, Monoprix or Daily Monop’, there is no particular consideration that overrides all others in Carrefour (Lidl is price-focused, Monoprix is quality-focused, Daily Monop’ is convenience-focused). Unlike Leclerc, Wal-Mart or Tesco, Carrefour is no longer distinguished by an organisational or service-related specificity (Leclerc is a franchise, Wal-Mart has their supercentre structure and a very short management hierarchy, Tesco is pioneering with the depth and breadth of customer loyalty programs).

But this weakness didn’t exist when Carrefour hoisted itself to the top of the retail market in France. Georges Plassat reminded the stockholders at his first annual meeting with them of the brand’s history, from the first hypermarket in France (and one of the first in the world) to the aggressive international expansion policy, through pioneering the use of private labels. Carrefour needs to become innovative, challenge the status quo and to a certain extent be ready to go beyond what the industry is comfortable with in order to improve the customer experience.

This might look like the start of a case for the now-dead Planet concept, but it actually isn’t. Planet was boring. Re-organising the stores, slightly different presentation of goods, new lighting & visual cues. Nothing here is challenging how the store works, what the value is to the customer, nor points towards a unique value that will set Carrefour apart from competitors. Sure, they increased the range of products in some categories such as beauty and they set out to have “cafeteria/rest” areas surrounded by the “home”, “media” and “beauty” areas, but this wasn’t really challenging what a hypermarket or supermarket really is. It was just trying to turn one store into a fake shopping mall.

One thing stands out when looking at what hypermarkets, private labels, wide selection of reputable brands and low prices mean when put together : ease to the customer. Carrefour should aim to become once more the easiest place for people to shop. All kinds of categories of goods. Reputable and safe brands that don’t represent an emotional or sanitary risk. Excellent access either by proximity or by motorway and parking availability. Reasonable, low prices that mean customers don’t feel the need to price check the competition. Clear “shopping path” through the store so customers spend a minimal amount of time in the store, whilst still leaving excellent opportunities for impulse purchases.

Carrefour already has lots of those things. Sure, there are incremental changes to how stores work that will be necessary to get back on track with this business purpose, be it regarding pricing, product range, store location/renovation improvements, store layout and logistics. But these are not game-changing qualities. They’re pretty similar to the road-map laid out by Georges Plassat. Focusing on foodstuffs and fast-moving products is a good way to open the path for many of these incremental improvements, such as store layout, pricing and product range, as well as providing a certain amount of respite to the logistics challenges Carrefour faces. The “military” style management will also be helpful to improve reactivity with regards to customer behaviour and competitors. Exiting certain markets can also be an opportunity to regroup, collect their forces and improve their positions in key countries rather than spreading their forces too thin. Store names are not particularly important, so I don’t see it as a major point that the process of bringing all the stores under variations of the Carrefour brand has been stopped.

How can “ease to the customer” go beyond this plan then? How can Carrefour set itself apart from the competition as the easiest place to shop, by innovating and challenging the status quo? Drives* are becoming commonplace, and represent a better internet sales method than delivery, focusing on the synergies to the customer and to the store. Carrefour definitely needs to provide this type of service, since it is a genuine attempt to “ease” the customer’s shopping experience. No more picking up heavy packs of soda or washing-up products for people with aches and pains. No more need to worry about how the cart will be packed so that soft goods won’t get crushed. For customers with little time or unpredictable schedules, it’s outstandingly convenient to be able to buy from the office/home and then just make a small detour via the shop to pick their shopping up when they can. Carrefour can go further though. Shopping is still for most people a genuinely annoying experience. It’s crowded, there are queues everywhere, parking can be a real challenge (getting the groceries to the car can be even worse), there’s little to no help, things are often dis-organised or confusing in their presentation… Not all of these problems can be solved at once. Nor is there any need for them all to be solved at once. But some can.

Certain marketing gurus talk about the need to “re-enchant” shopping. I don’t think that’s the case. I’m more of the opinion that people want to shop less, but shop better. Time is money, and time is something most people don’t have enough of. People don’t want to spend an extra 20 minutes being “re-enchanted” by shopping. They choose the store that takes the least time to go to (including parking/access difficulties, chosing/finding the product they want, queueing at the exit, comparing prices, and so forth), and once they’re there, habit kicks in like a vicious beast. Nobody wants to be “enchanted” by buying sausages or dishwasher salt, people just do it because they want/need the product in question. Carrefour’s purpose is ease, so here’s an idea they should be focused on : “total customer time cost”. Of course, measuring it is difficult, if not impossible. But certain aspects can be measured pretty easily, like time in store**, time to park*** and time to home****, whilst other aspects will need to be estimated using panels or qualitative surveys, such as time to compare*****, time to recuperate****** or time to complement*******. This kind of KPI is an accurate high-level indicator of performance, since it directly reflects advantages to the customer, unlike abstract metrics like turnover per square foot. Of course, turnover, profitability and other financials need to be kept in check, but as the past few months (and years) have shown, focusing on the financials of the business rather than value to the customer produces a very fragile situation.

After the purpose and the objectives, corporate alignment looks at organisation and seeing how it can be adapted to enable employees to fulfil the objectives they are given. Since this is a very basic look at Carrefour’s situation, I shall not dwell on this point. Carrefour’s existing by-country, highly centralised organisation could do with some changes, but overall represents a decent organisational model to achieve the aforementioned objectives.

Products, services and offer will be the last topic I’ll address. Corporate alignment can delve much deeper into how a business works, be it “support functions” such as accounting and human resources, “marketing functions” such as advertising, public relations and store visuals, or even “core functions” such as logistics, supply chain management and store organisation in this case. However, this is just a simple look at the process inherent to corporate alignment, and a broad-brush look at the solutions it can offer to a difficult problem like Carrefour.

In terms of product, services and offer, Carrefour needs to set itself apart. Adopting a drive* solution is nothing more than a defensive move, and its success will at best keep Carrefour on par with Leclerc and Auchan. In terms of actual products sold, Carrefour has little leeway given the already broad range of categories and products that it offers to customers, and the fact that despite being the largest retailer in France, it does not have the ability to secure considerably better conditions than its main competitors. In terms of services, however, there is a huge possibility for improvement. Carrefour has started to use automated check-out systems, which are a moderate gain of time. Now is the chance for Carrefour to go a whole step forwards and provide dramatically better customer service than its competitors. Expanding self-checkout aisles is possible, but when combined with drive opens the door to a whole new realm of possibles. Rather than forcing customer to pick up large, cumbersome items when shopping, they should be able to just  scan a code (with a store-provided reader they can use if they are loyalty program members), and upon completing the checkout, they just proceed to the drive-in area, where large products are charged directly into their vehicle. Staff saved on the checkouts can be re-purposed in the drive service area and warehouse, as well as increasing the number of staff in the store for immediate assistance or counter-style service. This provides 3 clear advantages with regards to time. Faster and more numerous checkouts, so less waiting in queues at the store exit. Faster loading of goods into the person’s vehicle. Less energy spent pushing around a heavy cart and picking up heavy items, which makes for a faster shop and less time spent recuperating from the exertion. It can also improve impulse shopping, as people are less likely to realise the amount of goods they have purchased, and be more susceptible to goods on display. For the store, this improves stock management, as it means there is a direct flow of goods from the store warehouse to the customer, without the need to re-stack shelves. In the longer run, Carrefour should pioneer RFID technology, despite it having high initial costs. Not only will this set them apart from their competitors and provide an immediate, visually important difference (seeing someone just walk up to a check-out machine and pay without unloading their cart is striking), but it is also the kind of challenge to the status quo that Carrefour needs to re-spike innovation and risk-taking internally. It could open the path to completely novel products that have great value for the customer, such as a “Kitchen manager” : a small box that lives in the kitchen, is connected to the Internet, and through RFID can “see” what people have in their kitchen as long as it was bought at Carrefour. This type of product offers great value to the customer (they can see when and what they bought, see what recipes they can make, manage their shopping list, etc.) and provides a strong incentive for the customer to become an “exclusive” customer at Carrefour, since products bought at competitors’ stores aren’t recognised, meaning the customer has to invest time and effort to remember, prepare lists and risks making mistakes. This is just one axis of service development Carrefour can follow. The importance of my explaining it is less so a competitor can copy it, or to inspire people in the retail industry, but rather to show how a clear vision of purpose and objectives mean that product, service and offer ideas grow organically and “cross-pollinate” to provide clear advantages to the customer whilst strengthening the company relative to its competitors.

Naturally, a complete corporate alignment process is much heavier. It delves into the details, the specifics of how the business works, establishes much more concrete plans regarding how the business can roll out new products, services and offers, whilst working to provide a structure that helps better products, services and offers emerge, be recognised an then implemented. Corporate alignment also looks with greater accuracy at the financial situation of the business, how its organisation works and how administrative/bureaucratic processes within the company enable or hinder proposals. This is just a simple exercice, which I started yesterday after reading about the bad news that befell Carrefour. Despite living in Massy (where Carrefour France is headquartered) I had no access to employees, insider information or industry-specific concerns, and as such it was quite simply impossible to cover many aspects. However, even without this required level of intimacy and information, corporate alignment still enables a genuine business project to be created and built upon, with concrete suggestions on how the business can improve, grow and find the resources to support its own growth in the long term.


Thank you for reading this.

Alexander Lyon


* : “Drive” (Shop & Drive-in) is a click-&-mortar solution pioneered by Auchan and since used by Leclerc, System U and other retailers in France. The customer purchases unwieldy, heavy and cumbersome packaged products online (such as packs of soft drinks, water, household cleaning products, etc.) and picks them up at their convenience in the store nearest to their home. Thus the customer doesn’t need to “block” a time for delivery when they’ll be at home, doesn’t have to pay for delivery (which is often seen as a rip-off), isn’t “limited” by the online selection which is generally inferior to the in-store selection, and can take advantage of the fact that most customers prefer to purchase perishable goods in person (fruit & veg, meat, fish) and so need to come to the store anyway. For the store, the advantage is that the products can be set apart in the internal warehouse, rather than requiring a complex delivery procedure with route optimisation, time-blocked schedules and a delivery fleet.

** : Either by following shoppers, or by proceeding to “trial shoppers” who have to buy a semi-random list of goods.

*** : Either by following shoppers, or by asking employees (cashiers, for instance) where they parked, or by observing the fill rate of the parking area.

**** : By using customer loyalty programs to identify where people live, when they shop and combining this information with mapping solutions that include traffic density.

***** : Time spent by customers to compare prices between stores.

****** : Time spent by customers to recover from the exertion of shopping, particularly important for more fragile populations such as seniors.

******* : Time spent by customers in stores that are direct competitors (regardless of size and speciality) in order to purchase goods that are not available or not desirable to purchase at Carrefour.

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