Companies spending by the bucket-load to expand into emerging markets should take a sideways glance at Carrefour. The French retailer was a pioneer, opening its first store in Asia in 1989. It planted flags all over the globe and became the world’s second biggest supermarket chain by sales, after Walmart. But recently it has been changing tack. Last year it left Russia just months after arriving. It has now begun to auction off stores in south-east Asia.
It is hardly a wholesale retrenchment: the company remains in Brazil and China, among other markets, but the partial retreat is telling. Carrefour fumbled its first-mover advantage in emerging markets by spreading itself too thin. Tesco, in contrast, decided to pursue local scale in relatively few countries. The UK-based retailer has made annual operating margins of about 5 per cent in Asia, well above the 3.5 per cent or so at Carrefour. The French company has responded – under prodding from some activist investors – by leaving Singapore, Thailand and Malaysia, where local scale seems unachievable.
Fair enough. Top-line growth should not be bought at any price. And thanks to a strong list of bidders with regional and global pretensions, Carrefour should pocket a decent sum from the sale of its south-east Asian stores. Still, European retailers have a good reason to go in the same global directions as their suppliers: Europe is mature to the point of moribund. Carrefour, which relies on the continent for 80 per cent of revenue already, has struggled to reinvent the once-cool concept of a hypermarket, selling everything from washing machines to fresh fish under one roof. Investors had better hope the newest model, to be unveiled this month, works. Lars Olofsson, Carrefour’s chief executive, would surely find it easier to shift 60-odd stores in Asia than 240 in France.