Carrefour’s Chinese business is to open between 40 and 50 new convenience stores in Shanghai by the end of this year.

The new stores will launch alongside 14 Carrefour Easy branches, as the French giant aims to ramp up the expansion of its smaller formats. The retailer is also expanding online operations from Beijing and Shanghai to Chengdu in the Sichuan province.

Efforts to further expand into China’s smaller-format segment shows that a lot of growth potential still exists in the market.

The Chinese convenience sector remains relatively regional, with no one player having total national coverage – providing ample opportunities for multinationals to expand there.

Wider strategy

This also forms part of Carrefour’s global strategy to target proximity formats. To this end, the retailer is putting considerable funds into multichannel initiatives; primarily ecommerce and smaller-format development.

A major problem for Carrefour globally is that it remains heavily dependent upon the struggling hypermarket format – although performance is still better than the bad days of the Carrefour Planet roll-out.

China has seen a handful of big-box closures over recent years owning to underperformance. The problem for many foreign retailers entering the market is a lack of local knowledge, which has led to numerous errors, the biggest of which has been a poor selection of store sites.

“A major problem for Carrefour globally is that it remains heavily dependent upon the struggling hypermarket format”

David Gray, Planet Retail

Carrefour’s European rival Tesco had similar issues in China, seeing sales slump due to some poorly located hypermarkets – a contributing factor in the company’s decision to exit the market.

The launch of Tesco’s Express concept in the region also failed to live up to management expectations, with just 15 branches in operation when it retreated from the country.

Despite attempts to tailor the format to the local market, branding it Tesco Legou Express, the concept failed to resonant with shoppers.

Carrefour will need to be careful to avoid similar pitfalls with its convenience and smaller-format roll-out.

Digital focus

That said, it’s encouraging to hear about moves to branch away from the core hypermarket format to target proximity concepts in the region.

Online expansion will also be key, with consumers exhibiting far more enthusiasm to shop grocery online than their Western counterparts.

Carrefour will have to move fast to grab a slice of this action, as competitors such as Walmart and pure-players such as JD.com are rapidly redefining the digital grocery space.

Carrefour has been working hard to overhaul its logistics in the market in anticipation of this development, but it still has some way to go before it can be deemed a genuine challenger.

This focus on proximity suggests that Carrefour believes more localised services may be an area in which it can drive better returns on investment.