Carrefour, Chinese Tech Giant Tencent Form Alliance

2018-01-28    Chinadaily    851  

On Tuesday (Jan 23), French retailer Carrefour SA has announced a potential investment by Chinese tech giant Tencent Holdings Ltd and hypermarket operator Yonghui Superstores Co Ltd in Carrefour China, aiming to boost its struggling Chinese

On Tuesday (Jan 23), French retailer Carrefour SA has announced a potential investment by Chinese tech giant Tencent Holdings Ltd and hypermarket operator Yonghui Superstores Co Ltd in Carrefour China, aiming to boost its struggling Chinese businesses. Carrefour did not reveal the exact amount involved.

According to the retailer, the investment would leverage Carrefour's global retail knowledge, Tencent's technological leadership and Yonghui's operational knowhow, in particular its deep knowledge of fresh products. Carrefour entered China in 1995. By the end of last year, it had 230 hypermarkets and 39 convenience stores across 58 cities in the country.

Thanks to the partnership, Carrefour will improve its online visibility, increase the traffic of both its online and offline retail activities, and benefit from Tencent's advanced digital and technological experience by developing new smart retail initiatives. The cooperation would also cover mobile payment, in-store experience and data analysis to boost Carrefour China's customer traffic.

Carrefour has been continuously making efforts to improve its Chinese venture's performance, including revamping stores, introducing its convenience store format Easy Carrefour, as well as its own e-commerce channel in the past few years. However, the company has still found it challenging to rival the combination of leading traditional retailers and online players in the market.

According to Kantar China by Dec 1 of 2017, of all the retailers in the market, hypermarket operator Yonghui grew the fastest at 12.4 percent year-on-year. Last December, Tencent announced plans to acquire a 5 percent stake in Yonghui. "The move is part of the extension of Tencent's efforts to move offline after the investment in Yonghui," said Jason Yu, general manager of Kantar China.

Previously, Carrefour denied reports that it would seek investment from Alibaba Group Holding Ltd. Alibaba took a major stake in top Chinese grocery chain Sun Art Retail Group Ltd last year. Sun Art grew by 6.5 percent year-on-year in 2017.

"Alibaba's involvement with Sun Art Retail would mean too much overlap with Carrefour. But Yonghui, which focuses on fresh products, will not be a major competitor with Carrefour," Yu said. "Carrefour has been eager to seek breakthroughs to rival the collaboration of Alibaba and Sun Art."

E-commerce is growing with explosive speed in China, putting traditional retailers on the defensive. Online sales accounted for about 20 percent of Chinese retail spending last year but grew 32.2 percent compared with 2016 while overall retail rose 10.2 percent. In 2016, Walmart formed an alliance with JD and has made rapid progress in its online sales since then. "Carrefour will be further isolated if they don't join Tencent," Yu said.