Carrefour M Marketing

RETAIL INNOVATIONS CASE STUDY
Carrefour: Hypermarket Reinvention

Carrefour's approach to revitalizing its hypermarket format and key action points for retailers looking to improve their large format store sales
Reference Code: CM00028-002 Publication Date: December 2010
OVERVIEW Summary
Verdict's Retail Innovations case studies are new for 2010. Each profile provides an evaluation of a company that stands out due to a set of unique characteristics, or a particular strategic initiative. In this case study, Verdict examines Europe's largest retailer, Carrefour, and its effort to revive sales growth at its hypermarkets across its key European markets. In 1963, French company Carrefour invented the hypermarket format, an entirely new store concept where almost everything could be sold under a single roof, from groceries to clothing and electricals. Carrefour has since grown to become the second largest retailer in the world and by 2009, sales from hypermarkets accounted for 52.5% of turnover in its core domestic market. However, in recent years the format has started to struggle, resulting in Carrefour pursuing several different routes to achieve sales growth, including implementing new initiatives to reinvent the ailing hypermarket. This brief explores the reasons behind the fall of the hypermarket in Europe, the need for Carrefour to ensure the survival of the format, and the strategies Carrefour is adopting to reinvent the concept that helped it to rise to the top. Importantly, it also provides action points for grocers and other retailers looking to revive their own large format stores. In its examination of Carrefour's approach, this brief will focus on the following areas: demographic influences, hypermarket sales across Europe including like-for-like sales and sales densities, branding, instore layout, focus areas across food and non-food categories, private label, new instore services and its approach to convenience stores.
Carrefour: Hypermarket Reinvention Verdict. This report is a licensed product and is not to be photocopied
CM00028-002/Published 11/2010 Page 1
Strategic Action Points inspired by Carrefour
STRATEGIC ACTION POINTS INSPIRED BY CARREFOUR Carrefour's strategy demonstrates initiatives that large format retailers should consider
Offer additional services to improve the shopper experience and compete with the online channel
Add services that are complementary to your product offering, such as a make-up advisory service, hairdresser, or pharmacy. Add a food service area to encourage customers to prolong their stay in the store. Use some products that can be purchased in-store in your food service operations and advertise which ingredients have been used in each dish and where they can be found within the store. Add services that allow customers to complete other chores alongside their grocery shop, such as a postoffice, a banking facility, a launderette, or a dry cleaner. Offer a consignment area for shopping bags and complement this service with assistance to help shoppers carry their purchases to their car. This will encourage use of in-store services and browsing especially across non-food areas such as media and health and beauty.
Maintain a specialism in your core product area with own brand development and food-related services
Develop and extend private label goods to improve brand penetration and profit margins. Add interactive services involving ingredients and food products available in store, such as food tastings and live cooking demonstrations and cookery classes. Add specialist food areas, such as a butcher's counter, fishmonger counter, and a delicatessen to enhance reputation for fresh food. Develop market style displays and offer product assistance to personalize the experience and undermine the clinical feel often associated with large stores. Add sections dedicated to local food produce and specialties to give each store its own localized identity. Successful regional offerings can also be extended to other stores or markets if they have more universal appeal. Consider extending organic or sustainable food ranges to cater for growing demand. Add a convenience food area to cater for top-up shoppers and those looking to eat on-the-go.
Customize and rationalize non-food categories in accordance with local preferences

Be prepared to alter category areas and services according to the store location and local consumer preferences. Rationalize the non-food assortment to focus on the most profitable categories. This may also involve discontinuing certain ranges, but in the longer term it will help improve sales per store and sales densities.
Strategic Action Points inspired by Carrefour
Clearly departmentalize selected categories to help revitalize sales and facilitate cost-effective renovation
When creating new formats consider a modular approach akin to a department store. This creates clarity for the customer when searching for products. Furthermore it means that underperforming departments can be removed with ease and successful ones can be rolled out to other stores and markets to minimize redevelopment costs.
Ensure layout and signage is clear and accessible to customers

Widen aisles and add self-service checkouts to decrease congestion in store. Lower shelving to improve visibility and to improve access to all available products. Consider local demographics when designing a store layout. Older consumers and families in particular will benefit from wider aisles and lower shelving. Add large, clear signage and banners to promote pricing and make products visible throughout the store.
Expand more successful store formats as an alternative to the hypermarket

Take the pressure off the hypermarket format by expanding more successful chains and, in the longer term, reducing the proportion of sales derived from large store formats. Re-invest sales derived from profitable stores into improving the core hypermarket format.
Drivers Behind the Strategy
DRIVERS BEHIND THE STRATEGY Hypermarket sales have been impacted by changing consumer behavior and legislation
Social and demographic changes are impeding the performance of the hypermarket
Across Europe and other mature markets, the population is gradually growing older as birth rates are falling, while life expectancy is on the rise. Such a demographic shift is already starting to profoundly impact upon the retail sector. In the EU27 region, the share of the population aged 65 and over is expected to rise from 17.0% in 2009 to 20.1% in 2020, indicating one of the largest proportions of older people in the developed world. With the majority of Carrefour's sales derived from European markets in which the population is aging fastest, the retailer must indentify a suitable response. In the US the proportion of the population aged 65 or over is expected to increase from 12.9% in 2009 to 16.1% by 2020. In Australia the proportion of older consumers was 13.3% in 2009, compared to the emerging market of India, where an extremely young population means that those aged over 65 account for only 4.9% of the total population. Mature markets across the world are witnessing a rise in single person households. This trend is being propelled not just by the aging population, but also by the emergence of smaller families, as well as rising incomes providing individuals with the means to live alone. The result is a smaller shopping basket requirement, thus reducing reliance on hypermarkets. Footfall to hypermarkets is being further weakened by the rise of the urban population in the developed world. Denser and larger cities mean more opportunities for retailers, as well as heightened demand for smaller stores located in close proximity to shoppers' homes. This trend has facilitated the need for and consequently, the rise of the top-up shop.
Consumers are no longer favoring out of town shopping, driving spend in city center stores
The cumulative factors of an aging population, growing urban areas and rising incomes are resulting in a fall in out-of-town shopping. Cities are increasingly able to cater to all consumers' shopping needs, with many retailers opening up downsized formats in urban areas, including discount retailers. This means that many consumers no longer have to drive out of town for cheaper groceries. Moreover, as total incomes are rising for many shoppers, consumers are more willing to pay a premium for convenience, and thus conduct their grocery shop in higher priced neighborhood stores.
Legislative factors are affecting hypermarket growth

In multiple European countries, legislation governing retailers' store expansion impedes the growth of larger stores, and instead facilitates the spread of smaller outlets. Carrefour is particularly affected by such legislation as its core markets include France and Italy, where such laws have been put in place over the last two decades.
To this end, as the retailer relies on store network growth to drive sales, exploiting the laws will be of great importance to its future success. In France, the Loi Raffarin act of 1996 means that stores less than 1,000sq m may be built under a single building permit, while stores exceeding the threshold require more judicial processes and planning permissions. Consequently, this has spurred smaller retailers to increase the pace of their expansion. In order to compete against neighborhood stores, Carrefour has resorted to opening smaller outlets, to the detriment of its core hypermarket format.
A similar law was put in place in neighboring Italy in 1998, entitled the Bersani law. The purpose of the Bersani law was to encourage competition through the expansion of medium to large stores. However, the law placed the planning of entry and expansion of such stores in the hands of local and regional authorities, which often remained reluctant to allow new retail space that would threaten the livelihoods of retailers in town centers. For such reasons, a cap on new retail space and number of larger stores was put in place by many regions, effectively counteracting the original intentions of the law and encouraging the growth of smaller stores.
The traditional hypermarket format is in decline

Sales at Carrefour's European hypermarkets have been floundering since 2008
Sales at Carrefour's hypermarkets have been weakening as consumer behavior has shifted. This development has become especially evident in its European stores, which contribute the bulk of the retailer's total sales. Year-on-year sales at Carrefour's hypermarkets across the G4 countries (France, Spain, Italy, and Belgium) started to plummet in Q4 2008, although in Belgium, sales declines had been evident well before that, and sales across other markets had also been weak throughout 2008. Sales fell dramatically across all markets in 2009 when compared to 2008. However, in 2010 year-on-year sales began to recover in both Spain and France. Nonetheless, the improvement was based on very low comparatives, and hypermarkets in both markets have some way to go before they reach the sales values achieved in 2008. The steep and continuous decline in like-for-like sales at its hypermarkets demonstrates the poor performance across existing stores, with an exceptionally disappointing performance in both Spain and Belgium. In Spain, food sales were heavily impacted by strong deflation. However, the non-food segment remained a key contributor to falling sales. Consequently, hypermarket expansion slowed down in 2009, with Carrefour divesting sites in Belgium and Italy and not opening a single hypermarket in France during the whole year.
Figure 1:
Hypermarket sales change across Carrefour's core European markets, 200810

Carrefour hypermarket total sales change in core European countries, 2008-2010 France Spain Italy Belgium
4 2 Change in total sales year on year (%) 0

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010
-2 -4 -6 -8 -10 -12 -14
Carrefour hypermarket like-for-like sales change in core European countries, 2008-2010 France 2 Change in like-for-like sales year on year (%) 0
Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010
Spain
Italy
Belgium
-2 -4 -6 -8 -10 -12 -14
Source: Carrefour, Verdict Research
VERDICT
The convenience store format has been vastly outperforming the hypermarket network in France
Sales at Carrefour's convenience stores in France have been continuously resilient, outperforming turnover at its hypermarket network. Consequently, Carrefour has been encouraged to invest heavily in its smaller, more versatile outlets in terms of expansion and format innovation. The strong performance of Carrefour's convenience stores helped to buoy the retailer's total turnover in its domestic market, which accounted for 42.9% of consolidated sales in 2009.
Figure 2:
French hypermarket vs convenience store like-for-like sales change, 200810

Convenience stores Hypermarkets
Change in like-for-like sales year on year (%)
0
Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010
-2
-4
-6
-8
-10
VERDICT
The "everything under a single roof" format is no longer profitable for Carrefour
Carrefour invented the hypermarket with the aim of selling all items under a single roof, thus increasing basket sizes. The turn to non-food items helped Carrefour to boost its profits, as many of these carried higher margins than food categories. This was especially applicable to categories such as electricals and furniture. Customers benefitted as the retailer was able to sell big ticket items at competitive prices. However, this model is no longer proving effective for Carrefour. While margins in food have grown, many non-food items have been underperforming. In 2009, non-food sales at Carrefour's hypermarkets in France fell 5.6%, compared to a decrease of 1.7% for food sales for the year.
Its other core European markets reported similarly disappointing results. In 2009, non-food sales at hypermarkets in Spain and Italy slumped by 9.6% and 7.7% respectively. These extremely poor performances pulled down total sales for the hypermarket format.
Carrefour has been finding it difficult to remain price competitive in many categories, thus resulting in squeezed margins, which has ultimately impacted upon the profitability of the format.
Reviving the format is vital for Carrefour's sales performance

Hypermarkets account for the majority of Carrefour's total sales
Despite the poor performance of Carrefour's hypermarkets in Europe, the format remains vital to the retailer's growth, as it forms the core of its entire trading concept. It also forms the bulk of its total European turnover. Turnover at Carrefour's so-called G4 countries accounts for 69.6% of total group sales, indicating how crucial this region is to the group's overall performance.
Figure 3:
Proportion of total sales and hypermarket sales from Carrefour's G4 countries
Total Group Sales
Total Group Sales in G4 Countries
70%
Hypermarket Sales in G4 Countries
37%
VERDICT
In 2009 sales across all stores in France accounted for 42.9% of total group turnover, meaning that the sales performance in its domestic market has an acute impact on the group's bottom line.
However, in France, hypermarket sales made up 52.5% of Carrefour's national turnover in 2009. Therefore the hypermarket sales fall contributed to an overall sales decline of 2.8% in the country.
Similarly, sales in Spain, Italy, and Belgium make a large contribution to total turnover, accounting for 35.5% of total sales. In these countries, hypermarkets also play a large role, accounting for 54.8% of fullyear sales in 2009.
The heavy sales decline across all of Carrefour's European hypermarkets has dealt a blow to the group's finances. As such, it is vital for Carrefour to improve the sales performance of this format so that it can achieve its goal of market share gain across the G4 region, and to finance continued growth in its emerging markets.
Carrefour's Strategy in Focus
CARREFOUR'S STRATEGY IN FOCUS Carrefour has developed the Planet format as an alternative hypermarket
Carrefour Planet has been created to revive the retailer's failing hypermarket sales
To ensure growth, Carrefour has developed a three-year transformation plan entitled "En Avant" (or "Getting Ahead") consisting of seven core strategies. One of these strategies focuses on revitalizing the ailing hypermarket, further indicating the importance of the format when it comes to boosting the overall performance of Carrefour. Carrefour's hypermarket revitalization program involves the creation of a completely new format one that is built upon a new philosophy in the form of Carrefour Planet. Carrefour Planet is a large format multi-specialty grocery store. It is similar in size, store location, and product proposition to the traditional hypermarket stores with the main difference being its format. Carrefour Planet is more departmentalised and thus creates a clearer division between categories. The retailer is planning to replace nearly half of its hypermarket stores across France, Spain, Italy, Belgium, and Greece with Carrefour Planet.
Figure 4:
Carrefour's new Carrefour Planet store format
VERDICT
The branding for the Planet stores is consistent with Carrefour's other brands, such as Carrefour Market and Carrefour City, in order to adhere to the retailer's brand convergence strategy.
Figure 5:
Carrefour Planet branding, in line with the branding of its other formats
New large store format
Supermarket format
Inner city convenience store format
VERDICT
Carrefour opened five pilot Carrefour Planet stores across Europe over the summer months of 2010. The in-store proposition across all stores varies slightly, so as to match local market demands: o o o two stores were opened near Lyon, France, in Ecully and Vnissieux two stores were opened near Madrid, Spain, in El Pinar and Alcobendas one store was opened in Mont-Saint-Jean, Belgium.
Nearly half of the existing hypermarket stores in the G5 region will be converted to Planet
Carrefour is aiming for Europe-wide expansion for the new Planet format. It aims to open stores across Carrefour's G5 markets in Europe, where the majority of hypermarkets are based, and where hypermarket revitalization is badly needed. The G5 region consists of France, Spain, Italy, Greece, and Belgium. The format will be rolled out from the beginning of Q2 2011 and will be almost completely finished by early 2013. Carrefour aims to convert 245 of its 500 strong hypermarket network in the G5 region to Planet stores. The retailer hopes for 70.0% of hypermarket sales in the region to be taken by the converted stores. 1.5bn will
be invested in the new format over the next three years, with an expected 18.0% sales rise at Carrefour hypermarkets. Although revitalizing the hypermarket format is imperative to boosting flagging sales, converting almost half of its network in Europe will prove to be a very costly process indeed; therefore, rollout needs to be considered on a store by store basis. Carrefour's plan for the French market is more ambitious, with the aim of converting 120 stores, which account for 60.0% of the existing network, with the hope that they will generate 76.0% of total hypermarket sales in the country. For all remaining G5 countries outside of France, the aim is to convert 125 stores, accounting for 45.0% of the hypermarket estate, which the retailer hopes will generate 60.0% of total hypermarket sales. In addition, certain aspects of the Planet format will be implemented in underperforming hypermarkets internationally, especially in key growth markets such as Brazil.
Figure 6:
Carrefour's rollout strategy for its Planet format across the G5 region for end of 2012
500
245
120
Total G5 Planned Planned hypermarket Planet stores Planet stores network in G5 in France
VERDICT
Hypermarkets not converted to Planet will be revamped to boost performance

Carrefour has embarked on a two-pronged strategy to help revive its hypermarket sales in the G5 markets, meaning that all hypermarkets in the region will be revamped to some extent to negate the current trend of falling sales. Nearly half of all hypermarkets will become Carrefour Planet, while the remaining stores will retain the Carrefour brand, with some departments and features from the Carrefour Planet format integrated into the stores.
Store layout will be improved to include segmentation across departments

The large sales space of the hypermarket format will be reduced in underperforming stores
The retailer acknowledges that if the use of space cannot be fully maximized in some hypermarkets, then it will have to reduce selling space to improve sales densities and profits. Indeed, this is a strategy that has been adopted in the past. For example, its Toulouse store in France was downsized from 25,000sq m to 19,000sq m in 2010. Sales densities have suffered a steady decline since 2005, indicating an urgent need to divest stores of unprofitable space.
Figure 7:
Consolidated hypermarket sales data, 2005-2009

Sales per sq m () Sales per store (m) 55
6,400 6,200 6,000 5,800 5,600
45 5,400 5,200 5,000 2005 2006 2007 2008 2009 40
VERDICT
Sales per store (m)
Sales per sq m ()
50
The Carrefour Planet store layout is designed to be more accessible to shoppers

Carrefour aims to utilize the large amount of space in Planet outlets to reflect the feel of a real market and make each area much more visible and accessible to the customer, thus facilitating ease of movement around the store. The following layout strategies have been adopted at Carrefour Planet: o o o shelving and gondolas have been lowered by about 30cm aisles have been widened by about 20% signage indicating category location and pricing has become much clearer and more prolific.
Figure 8:
Store layout of the new Carrefour Planet format
VERDICT
Similar tactics have been adopted by other European retailers such as Edeka, with its Edeka 50+ stores in Germany, which are specifically tailored to appeal to consumers 50 years and older. The more open layout makes the store suitable for changing demographics, such as the aging population, but also for larger families.
Figure 9:
Large store signage indicating category locations in a Carrefour Planet in France
VERDICT
Carrefour Planet stores in France have been divided into nine category departments
Carrefour Planet is clearly segmented into different departments, each focusing on a distinct category and each with its own large signage hanging from the ceiling. Dividing the store into clearly distinct departments means that each store can be fitted out with the departments most suitable for its location and consumer demands in the vicinity. Underperforming category areas have either been cut down or removed completely from stores, a strategy the retailer will adopt for the remaining hypermarket network. The new format has also been clearly split into food and non-food with a separate entrance at each half of the store, demonstrating how Carrefour is differentiating its non-food and food offer. In France, Carrefour Planet has been divided into nine core areas, to emphasize specialism in a few of its strongest performing categories: o o organic food fresh food
o o o o o o o
health and beauty children's goods clothing home leisure goods. frozen food multimedia goods
Across its European networks in Spain, Italy, Belgium, and Greece, the category focus is the same with the exception of multimedia goods and frozen foods which aren't explicitly mentioned as key focus areas outside of France. Outside of France, seasonal products, such as Christmas decorations have also been cited as a core category.
Although the category focus is broadly similar across the store network, each one will include customized departments catering exclusively to the local shopper. For example, pilot Planet stores in Spain include a department for bicycles and an area selling Iberian ham, while the store in Belgium includes a wine cellar and a games department.
Figure 10:
Games and Iberian ham departments in Carrefour Planet stores in Belgium and Spain
VERDICT
This strategy of departmentalization not only better showcases a given store's product offering by highlighting its key areas of focus, but also means that selected departments can be easily slotted into other traditional hypermarket outlets. Moreover, it means these can be moved around in a Carrefour Planet without compromising operations in other departments.
Focusing on select categories will enable Carrefour to maximize the sales potential of each department. Cutting down or removing categories that have been hampering sales will greatly help to improve profits through the reduction in mark-downs, while also helping to improve flagging sales densities.
Carrefour has focused its product assortment on value and best performing categories
The stock-keeping unit count across food categories in Carrefour hypermarkets has been rationalized
According to Carrefour, the concept of selling everything under one roof, the philosophy which the hypermarket format was founded upon, is now out of date, with sales of many product categories underperforming and consequently pulling down total revenues. As Carrefour is not able to be competitive across all product categories, some of these are being withdrawn to give more prominence to the most competitive and successful categories. This applies to food and non-food areas. In some countries, the stock-keeping unit (SKU) count of food products may be decreased by 15.0% to leave Carrefour with product areas which have the highest sales potential. For example, frozen food and organics form a large part of shoppers' baskets in France, and so the amount of space dedicated to these departments has been extended in the French Carrefour Planet model by 5.0% and 200% respectively. Growing consumer demand for fresh food has prompted Carrefour to introduce a fresh food area resembling a traditional market, with fruit and vegetables sold from large wooden crates, and other fresh foods, such as fish and meat, sold from deli style counters. Indeed, the fresh food area has increased by 33.0%. However, the SKU count in the department was cut by 13.0%.
Figure 11:
Carrefour Planet's fresh food area, laid out to resemble a market
VERDICT
Carrefour aims to boost its profits by increasing the range of own brand food products
The proportion of Carrefour's own brand food products present in store will be boosted. Currently, around 4,500 Carrefour branded groceries are sold. This will help Carrefour improve margins and also boost brand penetration across the network. Carrefour hypermarkets have long held the reputation of carrying comparatively high prices. Extending the presence of own brand ranges in store will help the retailer to improve its reputation for value. It claims its own brand range tends to be 15.0-20.0% cheaper than manufacturer brands. The entry level Carrefour Discount brand, originally developed for the French market, has been extended across the G4 region since mid-2009, with stores in Italy being the latest to launch the range in October 2010. Further rollout plans are in progress for the end of 2010; in Spain and Italy, the range will be boosted to 300 SKUs by the end of 2010, while in Belgium, the SKU count will reach 390 by the end of the year. This compares to 423 Carrefour Discount lines available in France. The retailer has reported that it will invest in creating innovative products across its own brand range, rather than simply replicating existing products. This development will also take place across non-food categories. The retailer hopes that enhancing its private label range will boost margins by 40.0%.
Carrefour aims to become a specialist across a few select non-food areas
Figure 12:
Carrefour Planet non-food sales area rationalization strategy
CHANGE IN SALES AREA
Health & Beauty
+ 40%
Baby
+3%
-15%
Home
-12%
Fashion
-5%
Electricals
VERDICT
In the current economic climate, margins in non-food have declined, while those in food have actually risen, a statistic which runs contrary to the original basis behind adding non-food ranges to hypermarkets.
This is forcing Carrefour to rationalize its non-food offer, cutting down categories where margins have been falling and extending categories that are proving to be profitable.
Categories have been chosen according to the typical store demographic, and according to Carrefour's competitiveness in that particular category. As women tend to form the bulk of Carrefour shoppers, health and beauty and children's products have generally become more prominent in store.
Figure 13:
Extending health and beauty area in a Carrefour Planet store in France
VERDICT
Conversely, some items, such as electrical goods and furniture, in which online stores are making great gains, are proving less profitable, and are being cut down by Carrefour in some stores.
Removing bulky products such as electricals and furniture is a sensible move, as poor sales in these areas have a great impact on sales densities, with such products also taking up selling space that could be used to extend profitable categories.
Additional services and events have been introduced to Carrefour Planet

Services offering convenience and encouraging customers to stay in the store for longer have been added
Carrefour has added services to its Carrefour Planet stores in a bid to boost basket sizes and sales across multiple areas in the store. A consignment area has been added, where shoppers can leave their groceries while they browse the rest of the store. Providing adequate assistance is offered to help shoppers carry their purchases to their car, this strategy should help Carrefour to encourage customers to shop across departments.
Furthermore, Carrefour has added a babysitting area and a crche inside the store, which will help to speed up the grocery shop for customers with young families.
A snacking area with added seating has been incorporated into the Carrefour Planet layout. Carrefour is trying to enhance the customer experience through eating areas customized to the store's particular location and demographic. Stores in Spain include a bar, while others include diverse food-to-go options, such as sushi.
Figure 14:
Dedicated eating area in a Carrefour Planet store
VERDICT
Services promoting the multi-specialism of Carrefour Planet have been introduced to the format
Carrefour's non-food areas have become much more specialized. To further promote its expertise in certain non-food areas, it has added complementary services to those areas. For example, virtual makeover kiosks and hairdressing areas have been introduced, alongside the extended health and beauty department.
Figure 15:
Beauty Bubble hairdressing area in the health and beauty department
VERDICT
The hairdressing unit offers a 10 minute haircut for 10 in an area called the Beauty Bubble. Such a specialized service gives Carrefour Planet the air of a department store. However, the majority of shoppers will still visit the outlet for their grocery shopping, while potentially adding some extras to their basket.
It remains to be seen how successfully a hairdressing area in an open plan health and beauty department will fare. While the lack of privacy may be an issue for some customers, the speed and value of the service will appeal to certain demographics, such as men and parents with children that require a hair cut. Moreover, the presence of a consignment area will help to attract shoppers to make use of services
Carrefour is now partnering with well-known brands to open dedicated areas in Carrefour Planet stores. Partners include Apple, Sony, and Samsung. This feature serves to highlight Carrefour Planet's department store-type proposition.
The fresh food area has been revamped to appeal to food enthusiasts
Carrefour has introduced a number of services and events in its fresh food area, intended to promote a market style atmosphere and thus appeal to food enthusiasts, such as food tastings and the opportunity to meet producers of goods sold in store. Such events will help to meet rising consumer demand for organic, local, and ethical food, as well as encouraging consumers to cook from scratch, and therefore buy their ingredients from the store.
The pilot stores have already shown an improved sales performance over traditional hypermarkets
Carrefour has reported strong sales gains from some of its pilot Planet stores. However, it should be kept in mind that some of these gains may have originated from high footfall from first-time visitors keen to explore the new launch. Only time will tell how much longevity the concept has once the initial novelty has worn off. Like-for-like sales increased by 8.0% on a 10.7% rise in footfall at the El Pinar store since its opening, while the store in Belgium has benefitted from an increase of 8.9% in sales from a 13.1% rise in traffic, despite the fact that this store has not yet been fully reformatted. As a comparison, sales growth at the rest of the hypermarket stores remained in negative territory. The retailer reported that the revamped fresh food department at the new Planet stores has fared especially well with a rise of 25.0% in revenue at the pilot stores in France and Spain.
Growth of convenience stores has been kept at a high level across the network
Carrefour is growing its network of convenience stores while revamping existing hypermarkets
In light of falling hypermarket sales, Carrefour has been placing great focus on boosting its convenience store numbers across its core G4 markets, as well as its emerging markets in Brazil, China, Indonesia, and Turkey. This strategy has been pursued alongside its hypermarket revitalization plans. However, for retailers without a dependence on existing large format stores, concentrating on opening smaller stores may be the preferred strategy. The convenience store expansion strategy has been implemented partly due to the lower start-up costs for smaller stores, and partly due to the sales success that such stores have brought the retailer. In comparison, hypermarket growth has slowed down. As such, the future growth strategy for Carrefour in Europe involves boosting convenience store numbers, while maintaining hypermarket numbers and revamping such outlets. Over the course of 2010, Carrefour opened 89 hypermarkets across its growth markets, compared to 358 convenience stores. It should be noted that the vast majority of hypermarket openings have taken place in the emerging markets, with not a single store opening in France since 2008.
Figure 16:
Carrefour global hypermarket vs convenience store openings
Convenience stores 120
Hypermarkets
100 Number of store openings
80
60
40
20
0
Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010
Source: Verdict
VERDICT
Appendix
APPENDIX Retail Innovations case studies

Verdict's Retail Innovations case studies are new for 2010. Each profile provides an evaluation of a company that stands out due to a set of unique characteristics, or a particular strategic initiative. Verdict outlines the background of the company; discuss the company's strategy; provide details of operational implementation; and comment on the successes and challenges faced by the company in question. Forthcoming titles are subject to change as retailers reveal new initiatives.
Methodology
A variety of secondary sources were used in the creation of this case study, including Carrefour's strategic presentations on its hypermarket reinvention plan, sales press releases, and annual reports: www.carrefour.com.
Further reading
Datamonitor (2010) The Future of Convenience Retailing in Europe, April 2010, DMVT0573 Datamonitor (2009) Private Labels in Retailing 2009, July 2009, DMVT0535 Datamonitor (2009) European Grocery Retailing 2009, January 2009, DMVT0483 Datamonitor (2010) In-store Services and Events in Global Retailing, December 2010, CM00025-004
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We hope that the data and analysis in this brief will help you make informed and imaginative business decisions. If you have further requirements, Verdicts consulting team may be able to help you. For more information about our consulting capabilities, please contact us directly at consulting@datamonitor.com.
Disclaimer
All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Verdict. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Verdict delivers will be based on information gathered in good faith from
Appendix
both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Verdict can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.
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RETAIL INNOVATIONS CASE STUDY

Carrefour: Hypermarket Reinvention

CM00028-002/Published 11/2010 Page 1

Strategic Action Points inspired by Carrefour

Customize and rationalize non-food categories in accordance with local preferences

CM00028-002/Published 11/2010 Page 2

Strategic Action Points inspired by Carrefour

Ensure layout and signage is clear and accessible to customers

Expand more successful store formats as an alternative to the hypermarket

CM00028-002/Published 11/2010 Page 3

Drivers Behind the Strategy

Legislative factors are affecting hypermarket growth

CM00028-002/Published 11/2010 Page 4

Drivers Behind the Strategy

The traditional hypermarket format is in decline

CM00028-002/Published 11/2010 Page 5

Drivers Behind the Strategy

Hypermarket sales change across Carrefour's core European markets, 200810

4 2 Change in total sales year on year (%) 0

-2 -4 -6 -8 -10 -12 -14

-2 -4 -6 -8 -10 -12 -14

Source: Carrefour, Verdict Research

CM00028-002/Published 11/2010 Page 6

Drivers Behind the Strategy

French hypermarket vs convenience store like-for-like sales change, 200810

Change in like-for-like sales year on year (%)

CM00028-002/Published 11/2010 Page 7

Drivers Behind the Strategy

Reviving the format is vital for Carrefour's sales performance

Proportion of total sales and hypermarket sales from Carrefour's G4 countries

Total Group Sales

Total Group Sales in G4 Countries

CM00028-002/Published 11/2010 Page 8

Drivers Behind the Strategy

CM00028-002/Published 11/2010 Page 9

Carrefour's Strategy in Focus

Carrefour's new Carrefour Planet store format

Source: Carrefour, Verdict Research

CM00028-002/Published 11/2010 Page 10

Carrefour's Strategy in Focus

New large store format

Inner city convenience store format

Source: Carrefour, Verdict Research

CM00028-002/Published 11/2010 Page 11

Carrefour's Strategy in Focus

CM00028-002/Published 11/2010 Page 12

Carrefour's Strategy in Focus

Hypermarkets not converted to Planet will be revamped to boost performance

Store layout will be improved to include segmentation across departments

Consolidated hypermarket sales data, 2005-2009

6,400 6,200 6,000 5,800 5,600

45 5,400 5,200 5,000 2005 2006 2007 2008 2009 40

Source: Carrefour, Verdict Research

CM00028-002/Published 11/2010 Page 13

Sales per store (m)

Carrefour's Strategy in Focus

The Carrefour Planet store layout is designed to be more accessible to shoppers

Store layout of the new Carrefour Planet format

Source: Carrefour, Verdict Research

CM00028-002/Published 11/2010 Page 14

Carrefour's Strategy in Focus

Large store signage indicating category locations in a Carrefour Planet in France

Source: Carrefour, Verdict Research