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Carrefour China given govt relief

By WANG ZHUOQIONG China Daily Updated: 2023-02-21
A consumer steps out of a Carrefour store in Shanghai in January. [Photo provided to China Daily]

Carrefour China, part of retail corp Suning.com, has introduced strategic investment from a government-backed capital platform to further collaborate on supply chains, capital and operations, as part of the retailer's efforts to ease its tensions with suppliers and prepaid card members.

Carrefour China reached a deal with the Yingjiang district government in Anqing, East China's Anhui province, on Monday. According to the supermarket operator, the local government has invested through the acquisition of shares to further drive the upgrade of the retailer through development in internet integration, digital innovation and flagship brick-and-mortar stores.

Earlier, the Ministry of Commerce said it is vital to rapidly promote the recovery of the retail industry and stimulate innovations, spurring the transformation of digital retail and facilitating integration between retail and other sectors, online and offline, improving the efficiency of supply chains, so as to achieve high-quality development of the retail industry.

Jason Yu, general manager of Kantar Worldpanel China, a research unit in Shanghai, said the injection of State-owned funds has boosted confidence among suppliers and employees as well as consumers of Carrefour China, offering more support to the retailer's liquidity. However, the move will not directly address the difficulties in its business operations, Yu added.

The retailer has suffered from shrinking market share and a loss of profits, resulting in the closing of many underperforming stores in some cities over the past two years.

In the first three quarters of 2022, the company closed 54 stores, leaving only 151 stores in operation, according to Kantar Worldpanel China. The number was 210 in 2019 when Suning acquired an 80 percent stake in Carrefour China from the French retailer group.

Carrefour China has seen a net loss of 795 million yuan ($115.7 million) in 2020 and the figure was 3.33 billion yuan in 2021. In the first half of 2022, the retailer reached a net loss of 471 million yuan.

The COVID-19 pandemic has quickened the decline of the hypermarket format, which has been troubled by the rise of digital shopping, delivery services and multiple consumption scenarios, said Yu.

To this end, multiple formats are key to helping retailers to gain an edge in fierce competition, he said.

Earlier this month, rumors that Carrefour would close more stores fueled concerns among suppliers and resulted in panic buying from prepaid card members.

In a statement, Carrefour China said they have adopted temporary limits on the use of prepaid cards due to the impact of the pandemic, strategic shifts and rumors of the retailer's exit. They have improved supply chains in an effort to meet surging purchases using prepaid cards.

The retailer said it is exploring a new model to optimize supply chains and open more community-based shopping centers to combat current troubles.

In March, Carrefour China is expected to show a batch of new stores in major cities including Beijing and Shanghai, transforming their hypermarkets into brick-and-mortar service centers for communities. The stores will offer more services and experiences to attract more visits from consumers, such as children's play facilities and catering services.