Carrefour, the French retail giant, is tailoring its stores after Wal-Mart, with everything from groceries and fishing rods to eye-catching shirts on sale at rollback prices.
With over 15,000 outlets worldwide, Carrefour is the world’s second largest retailer (behind Wal-Mart). The brand, starting near Paris in 1968, pioneered the hyperstore format, a combination of supermarket and department store, targeting bargain-seekers.
Carrefour’s first private label, Produits libres (free products), was a line that included fifty low-cost food products, sold in plain white packages. When new French laws forbade retailers from competing solely on price, Carrefour switched to a best-in-class approach.
Though Carrefour still draws one million French customers visit Carrefour stores every day, and the company continued to expand wordwide, the past fifteen years sales have seen slippage. The Wall Street Journal recently reported that Carrefour's biggest shareholder – a partnership between LVMH chief Bernard Arnault and the private-equity firm Colony Capital LLC – have lost about €1 billion ($1.46 billion) on its investment.
Lars Olofsson, CEO of Carrefour, formerly at Nestle SA, cites one main contributor to Carrefour’s iffy financial performance:
Carrefour wasn't consistent in the execution of its strategy. There has been this ambiguity between going for the bottom line or for the top line, and that means the whole organization hasn't been aligned in one clear direction.
As Olofsson begins to employ strategies to restore the low-cost message to the Carrefour brand, the retailer will also need to address its other threat: specialty stores. Olofosson plans to pick his bttles:
I'm not sure we can really be competitive with teenage clothes, that we are best equipped to permanently fight against stores like Zara and H&M. But we're the clear leader in kids and baby clothing, and I don't see any reason why we shouldn't do better.
Carrefour will have to compete against Zara’s unique selling proposition, geared toward clothes that are not only affordable but also move off the racks within four weeks. Loyal Zara consumers are anxious to purchase clothes before they disappear. Carrefour will also have to contend with H&M’s affordability, fashion, and the hip force of Swedish designers who cultivate the H&M look from TV, music videos, the street, and the runway.
It's not impossible for Carrefour to develop its sense of fashion and style. Wal-Mart, for example, joined forces with established clothing brands such as Op and l.e.i., and of course in the US, partnerships between big-box retail wholesalers and fashion brands are common.
In French, Carrefour means “crossroads.” The brand is at one now.