BARCELONA, Spain — Over the past two years, France-based retailer Carrefour has been implementing a single-brand strategy to place it in a stronger position for the future and to help it get through what its leader describes as the most challenging period for a generation.
Speaking at the World Retail Congress here, Jose Luis Duran, chief executive officer at Carrefour, the world's second-largest food retailer, listed factors such as inflation; rising energy and raw material costs; the erosion in consumer purchasing power; and the fragmentation of the retail market, in which the traditional definitions of big box, hard discounter and convenience retailers are breaking down, as all having a negative impact on global merchants.
“Never before has the industry faced so many challenges at the same time, and the solution is to have urgent priorities,” he said. “The best retailers will grow and thrive, so we have to find our own action plan. Strategies require mobilizing all assets — stores, management and technology — to build the brand around the world.”
Duran highlighted five priorities for retailers: Create local brand leadership; accelerate innovation; use technology smarter; use scale to protect supply; and work with local communities to do business in a sustainable way.
A key priority for Carrefour is to reposition itself as a multiformat, multichannel retailer operating under a single banner. Unlike in the past, when the company was “forbidden” from using the Carrefour banner on stores of less than 8,000 square meters (about 85,000 square feet) because the brand was closely linked to hypermarkets, the policy has changed, and Duran revealed that trials are being undertaken on stores as small as 3,000 square feet under the Carrefour name.
The evolution of the company into a single-brand operator has resulted in a number of benefits, including double-digit sales growth, increased customer awareness of the Carrefour brand, and greater employee pride in the name.
And whereas there was unnecessary competition between different company brands, such as the Carrefour banner and the Champion-branded business, this has now largely been stopped, Duran said. There has also been an increase in the number of consumers who shop across multiple formats, which he cited as proof that the changes are reinforcing brand loyalty.
Further proof of the success of the strategy came with the announcement at the World Retail Congress that Carrefour had placed second in the first Interbrand rankings of the “Top Performing European Retail Brands,” behind only fashion retailer H&M. Carrefour was given a brand value of about $10.5 billion, which places it above all other food retailers, including rivals Tesco, Aldi, Auchan, Wal-Mart-owned Asda and Lidl.
As the use of a single name spread across the group, Duran realized that the brand was reinforced not through a worldwide presence, but through local leadership in each market. It was this finding that partly contributed to the decision by Carrefour to exit several countries over the past few years. It initiated a policy in February 2005 that insisted it be among the top three largest retailers within each country that it operates.
“If you are four, five or six, then you're either niche or your brand is diluted. Even when the same principles are applied to your brand, then its recognition is low compared with being one, two or three in a market,” said Duran.
Another strand of building the Carrefour brand, according to Duran, is the development of the group's private-label products. They have been built up over the past three years to now number 20,000 SKUs.
“The private-label process began 10-15 years ago with basic products, but now it is accelerating into the upper ranges,” he said.
In addition to moving into premium own-brand products, the company has also been broadening the offer to include labels for organic, baby, children's and home products. Duran said a key aspect in the development of these products has been the improved knowledge the company has gained about its customers from its loyalty program, for which about 10 million households in France have signed up.
“Pre-2004, we had no customer relationship management or loyalty program for our hypermarket operation, as we believed we did not need to know our customers,” he said. “This has changed, and we now have a one-to-one relationship with them. We need to improve our speed [to market of new products] and are using technology to talk directly to our customers.”
The findings from its loyalty program have also enabled Carrefour to be more active about rethinking its store concepts with better customer flows and the creation of more attractive interiors. The same changes are being implemented and strategic imperatives applied to the company's 15,000 stores around the world, including around 7,000 outlets that are franchised.
It appears likely that the franchise model will be employed in India, which Duran regards as a market of great potential for Carrefour, but until the company finds the right partner, then he said the business is more than willing to hold back before opening up shop in the country.
“When I'm asked about the delay, I say I'll not do it until we find the right partner,” he said. “There is a huge opportunity, but it is worth investing time before [going in] rather than afterwards. It is an interesting market, but it's very challenging in the short/medium term. The opportunity is in 10, 15, 20 years.”