Chapter 6 Carrefour will make more "Chinese money" than Wal-Mart?

There is a consensus in the domestic retail industry: Wal-Mart and Carrefour represent two retail profit models. In short, Wal-Mart makes profits by reducing procurement and logistics costs, while Carrefour's "magic weapon" is to charge access fees (commonly known as entry fees).Because Carrefour's current expansion in China is more successful than Wal-Mart's. In addition, this model is easier to operate. Therefore, most domestic retail companies follow the "Carrefour" model, and entry fees become an indispensable part of their profits. But there is a view that, apart from China, the profitability of the multinational giant Carrefour in other overseas regions is not satisfactory.It can be seen that the profit model of charging access fees is only short-term, that is to say, it is impossible to guarantee long-term profits for retail enterprises.Therefore, if domestic retail enterprises want to achieve long-term profits, they should focus on reducing procurement and logistics costs.

As the head of Carrefour (China), Shi Rongle obviously disagrees with such a view. "The Chinese are the best businessmen in the world, and Carrefour is not teaching the Chinese how to do business." Shi Rongle said so.An industry insider said that according to China's current traffic conditions, it is difficult to complete efficient logistics and "magically" reduce costs.Therefore, Carrefour's model may be more suitable for the current situation of China's retail industry. "This profit model is 100% permanent." Luo Dingzhong, the former general manager of Carrefour Shanghai and now the development director of Carrefour China Executive Committee, said with certainty.The reasons he gave are two common business laws in the world: first, "pay for use." Second, "latecomers must pay a higher price than advanced ones."

In Shi Rongle's view, entry fees are generally collected in accordance with the model stipulated by the government.He said that in the scope of strict government supervision, more attention should be paid to whether retailers pay suppliers on time and whether they are in arrears with suppliers for a long time. "Retailers sell goods to consumers and generate profits in the process." Shi Rongle analyzed that whether it is charging channel fees or reducing procurement and logistics costs, it actually has to solve the problem of product purchase prices.He reminded that the key to the profitability of the two models does not lie in whether to charge entry fees. They essentially solve the same problem, that is, how retailers and suppliers can provide competitively priced commodities.

In order to achieve this goal, Carrefour is looking for different partners all over China.Carrefour is likely to be the foreign-funded retail enterprise with the most joint ventures in China.According to Shi Rongle's introduction, Carrefour currently has 32 partners in mainland China and jointly opened 31 joint ventures.Carrefour has opened 60 stores in the mainland, and on average, each joint venture currently manages less than two stores. Wal-Mart has only 3 joint venture partners in its 44 stores in China, namely Shenzhen International Investment Development Co., Ltd., Kunming Daguan Commercial City Co., Ltd. and CITIC Pacific.

The Carrefour joint venture maintains a high degree of flexibility.98% of the fresh products in Carrefour stores are purchased locally; 60% of groceries and daily necessities are also completed locally.At the beginning of this year, Carrefour China set up senior executive committees in four regions, with headquarters in Beijing, Shanghai, Guangzhou and Chengdu.The four regions hold 80% of the decision-making power. It will not be easy for anyone to manage such a large-scale joint venture.Shi Rongle is also very busy. According to his statistics, he took 126 flights last year. China's retail industry has been completely opened up. Will Carrefour change its joint venture model in China and start to "fly solo" freely?Faced with this problem, Shi Rongle asked: "Why do you want me to change a good system that has been successful for 10 years?"

"The secret of Carrefour's success in China is that it has good partners everywhere." Shi Rongle revealed that local joint venture partners can not only help Carrefour with administrative affairs, but also allow Carrefour to understand the local consumption situation and familiarize itself with the market. Jiangsu Yueda Group is such a partner.The main business is automobile, textile and other manufacturing industries. Jiangsu Yueda, which has invested in 6 expressways, entered the retail industry through cooperation with Carrefour. "Carrefour is very loyal to good partners." Shi Rongle commented.

The cooperation between Carrefour and Uni-President Group extends from Taiwan to the mainland, which seems to be another footnote to Shi Rongle's words.At the end of last year, China's retail industry was fully opened to foreign investment, and Carrefour gained more freedom.Shi Rongle also publicly admitted for the first time that Taiwan Uni-President Group also holds shares in Carrefour stores in the mainland of the motherland. According to him, when Carrefour was required to rectify, Jiangsu Yueda took over 35% of the 45% shares held by Uni-President Group in Chongqing Carrefour.Therefore, the current Chongqing Carrefour Commercial Co., Ltd. includes 3 shareholders.Carrefour holds 55% of the shares, Jiangsu Yueda holds 35% and Uni-President Enterprise holds 10%.The joint venture company established by the three parties jointly developed the business in Chongqing, and injected the two Carrefour stores in Chongqing into the joint venture company.At the same time, the fourth store in Chongqing will be signed on the same day, and the fifth store is already in the process of site selection and negotiation.

In addition to Chongqing, Uni-President Group also owns shares in Guangzhou and Tianjin Carrefour joint ventures.Carrefour currently has 3 stores in Chongqing, 3 in Guangzhou, and 5 in Tianjin.Calculated in this way, Uni-President Group has extended its tentacles into 11 Carrefour stores in the Mainland. "It was the boss of Taiwan Uni-President Group who taught me how to do retail in China." Shi Rongle introduced that before coming to mainland China, he had worked in Taiwan Carrefour for six years, and Uni-President Group was its only joint venture partner in Taiwan. So far, Carrefour has entered 27 cities in mainland China.In the central and western regions, it has opened 15 stores in 6 cities including Urumqi, Chengdu, Kunming, Chongqing, Wuhan, and Changsha.In the future, it plans to continue to expand in mainland China at a rate of 10 to 12 stores every year, and one-third of the newly opened stores will be distributed in the central and western regions.