RETAIL: Carrefour Shops for Yuppies with Lifestyle Convenience Stores

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Bottom line: Carrefour’s new foray into upscale, lifestyle-oriented convenience stores could stand a reasonable chance of success and breathe some new life into its struggling China business.

Carrefour expands Easy convenience store concept

After tinkering with a new convenience store concept for the last year, global retailing giant Carrefour (Paris: CA) has finally come up with a smaller-store model it likes and is planning a big expansion for its new chain of Carrefour Easy convenience shops. The move is part of Carrefour’s broader overhaul of its poorly performing China operations, which the company even considered selling at one point.

I do find this particular move somewhat contrary to industry trends, since Chinese are clearly buying more and more of their products online over popular services like Alibaba’s (Nasdaq: BABA) Tmall and JD.com (Nasdaq: JD). But that said, there will always be a place for traditional shops in the bigger retailing landscape, especially convenience stores whose main audience is usually impulse buyers looking for a quick drink, a bite to eat or just a place to quickly surf the web.

Carrefour first began testing its convenience store concept in China last year, and has finally come up with a format it likes for the Easy brand stores. The trial has seen Carrefour experiment with 3 locations in Shanghai, China’s capital for convenience stores. That small figure is probably why I haven’t seen one of these stores yet, even though I live in Shanghai and regularly buy things at other chains. But now I may have to go and check one out.

Following the trial period, Carrefour now feels ready to begin a more aggressive expansion of the chain and aims to triple the current store count to around 10 by the upcoming Chinese New Year next February. (Chinese article) A media report on the expansion describes the new chain as a cross between traditional convenience stores and more upscale shops like Starbucks (Nasdaq: SBUX).

It characterizes the outlets as more of a lifestyle concept, including such features as a coffee bar, wi-fi and battery charging stations, alongside all the traditional ready-to-serve food products that are a staple of traditional convenience stores. This particular concept sounds intriguing and could attract an audience. But it’s also worth noting that big chains like Family Mart and 7 Eleven are also all experimenting with similar more upscale elements in their shops.

Downplaying Supermarkets

There’s no mention in the reports of any implications for Carrefour’s traditional large-scale supermarkets, following this expansion for the newer convenience stores. The company traditionally operated hypermarkets that competed with names like Walmart (NYSE: WMT) and Tesco (London: TSCO), though the latter withdrew from China in 2013 due to stiff competition both from traditional and e-commerce rivals. (previous post)

Carrefour was mulling a similar withdrawal around the same time, as it reportedly looked for a partner to buy some or all of its China operations. It ultimately decided to stay in China, and earlier this year launched its own local retrenchment that saw it consolidate its national procurement network from 24 centers to just 6. (previous post) It said at the time that it wanted to expand its presence to 100 Chinese cities from the current 70, and that the convenience stores would be an important part of the expansion.

As part of the overhaul, Carrefour was also setting up a logistics network to back a new drive into e-commerce — a move that was long overdue and might be too late. I was always a bit surprised at how long it took Carrefour to discover e-commerce, which has become a major focus for rival Walmart using its Yihaodian site. But that said, this new convenience store initiative also looks like an interesting new endeavor that could breath some new life into Carrefour’s struggling China business, if it can differentiate itself from the existing convenience store chains.

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