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  • McKinsey & Co.

Lessons From A Global Retailer: An interview with the President of Careefour China

Jean-Luc Chéreau discusses the French company's experiences as its hypermarkets spread out from China's biggest cities to the vast hinterland.

Carrefour’s hypermarkets in China are the Bosporus of retailing—commercial centers where East and West splash against each other. Tanks of live fish, eels, bullfrogs, and turtles dominate the fresh-food sections, while vacuum-packed strips of bacon and slices of pepperoni lie in refrigerated cases a short distance away. Modern formats mix with local tastes in the French retailer’s stores: shoppers stroll down wide, brightly lit aisles, past displays of dried pork snouts and whole ducks hanging limply by the neck, as “Hotel California” plays on the speakers overhead.

Carrefour, whose name means “crossroads,” wasn’t the first foreign retailer in mainland China to open a hypermarket—a giant outlet that offers “everything under one roof,” from consumer electronics to groceries. But since the company opened its first store, in 1995, it has become the largest. Today it operates 73 hypermarkets in 29 cities, (Chains whose stores are typically 5,000 square meters or more.) from Urumqi (in the western reaches of the Middle Kingdom) to Harbin (near the Russian border) to Kunming (in the south). Carrefour also operates the Champion supermarkets and Dia convenience stores. Its 2005 turnover was about $2 billion (including value-added tax), making China Carrefour’s fifth-largest market. The company expects its sales in China to go on growing by 25 to 30 percent annually over the next five years.

Jean-Luc Chéreau, who came to the mainland after running the company’s business in Taiwan for seven years, has led Carrefour China since 1999. He recently met with Peter Child, a director in McKinsey’s Paris office, in his 25th-floor office in the Shanghai Stock Exchange building and discussed Carrefour’s hits and misses as it expanded beyond China’s largest cities.

The Quarterly:
What were your first experiences in China when you took over Carrefour’s mainland operations?

Jean-Luc Chéreau:

When I arrived here, in 1999, the market was just beginning to open. We were in the main cities—Shanghai, Beijing, Guangzhou, and Shenzhen—but not much in the others. I had only 17 stores, in 6 cities. Step by step we increased the number of stores, and today we have 73 hypermarkets in 29 cities. We learned about the Chinese consumer by starting with the main cities on the coast and continuing into the rest of China.

In reality, though, we began our experience in China 18 years ago, in Taiwan. For the hypermarkets in the big mainland cities, we have exactly the same hypermarket style as in Taiwan. But as you enter middle and western China, there is a much less mature market. For example, 50 percent of the televisions offered in a store in Shanghai would be flat-screen TVs. When you go into the middle of China, it’s only 20 percent because today flat screens are too advanced and too expensive for those areas. For mp3 players, digital cameras, and so on, it’s the same. The people are not able to buy, at least not enough for us.

The Quarterly:
How did your experience in Taiwan influence your activities in mainland China?

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