Comparison Of Retail Strategy of Carrefour and Walmart

TABLE OF CONTENTS Introduction The companies Wal-Mart stores Carrefour group Product sector Marketing and Service Strategies Pricing strategy Every-day-low prices Discount-everyday-prices Human resource management Technology Store designs Expansion strategies Comparison of strategies Conclusion Bibliography Introduction The discount retail industry emerged in the United States in the mid-1950s. Americans, accustomed to the supermarket concept and better informed, took the concept of self-service to heart. The basic discount concept relied on charging gross margins that were 10 to 15 percent lower than those found in department stores for general merchandise were.

The Discount store consisted of servicing small and middle-sized towns at prices equal to or lower than prices in nearby cities. the industry continued to grow. the growth into the 1970s cranked ahead. The companies in question are Wal-Mart and Carrefour. Such opportunity attracted many players at the local. As the competitive landscape filled up. both retailers. They first started with a single discount store in Rogers. Sam Walton adopted a circumventing strategy by maintaining lowest prices everyday and promising customer satisfaction together with high quality supplier cooperation and prompt delivery to grow continuously at existing market rates. Since then Wal-Mart extended its international presence to many countries. It was an initial test of the one-stop shop formula where consumers could get almost all of their shopping . the industry players were under intensifying pressure to push costs down. This was followed quite quickly by the first Carrefour hypermarket.0 The Companies 2. The company internationally came off the ground by opening its first store abroad in Mexico City in 1991. In the United States. The first department store in Annecy. Store design and how it supports buying and merchandising strategies of the retailers will also be looked at. To begin with. France. The objective of this paper is to compare and contrast sales channels in the same product sector considering various strategies used in the buying assortment of these retailers.1 Wal-Mart Wal-Mart was founded in 1962 by Sam Walton and his brother James Bud Walton. 2.(Wal-Mart Annual reports) 2. was opened by Marcel Fournier and Louis Defforey in 1960. The company has registered a unique success story in the history of retail industry credited to the leadership of Sam Walton. Arkansas. regional and national level. let us take a closer look at these companies profiles. Throughout the 1970s.2 Carrefour Carrefour had a humble beginning. The store was a first of its kind and provided parking space for 450 cars.The growth of the industry was nothing short of spectacular. increase store-selling areas and widen their market coverage.

2. For Wal-Mart. 3. 4. serve customer and search for perfection.921 convenience stores and other formats selling under its banner.259 supermarkets.needs satisfied at one location. Wal-Mart could reduce expenses on advertisements and promotions and also increase turnovers of products as it offered high quality products hence winning the reputation of a high-valued company and loyalty of customers.124 hard discount stores. the company was operating 16 wholly owned stores. low delivery cost and discount everyday to achieve high rotation. Carrefour began its internationalization and by1999. Wal-Mart s success is built on the practice of a lowest price everyday strategy that significantly reduces searching cost. that is. 3. respect everyone. With a move into Belgium in 1969. By the end of 1971. the major merchandise lines include house wares.0 Marketing and Service Strategies Wal-Mart differentiated business departments to thereby serving different market segments. and had franchise agreements with seven additional stores. and Latin America.0 Product Sector The Carrefour Group mostly deals with consumer goods and services. and shopping goods and services (household appliances. The idea of the hypermarket stressed mass sales. Carrefour internationalized much faster than WalMart. consumer electronics and groceries or food products. All employees therefore follow three management philosophies. The belief by Wal-Mart that customers always come first also comes in handy. The two therefore deal with consumer goods and services hence are competitors as the products are similar. which are sold by all formats of retail stores. and 1. The stores were located mostly in France but also throughout Europe. had an equity interest in five stores operated as joint ventures. It provided self-service grocery shopping at discount prices. Asia. electronic devices) which are sold by hypermarkets only. These include convenience goods such as food products. They fully carry out the practices of . it had 681 hypermarkets.

it could coordinate orderings. 5. All these practices have become the benchmark of the retailing industry (Wright 96). Carrefour keeps reminding customers to refund if they buy more expensive in order to comfort their purchases. as profit centers. To maintain lowest price reputation. extremely low prices. For example. it delegates each stores. To meet the nature of impulse purchase of customers Carrefour chooses massselling. On the other hand. By adopting this strategy. Carrefour s key success factors are: one-stop shopping. product innovation and emphasizes personnel cultivation. stock management and data processing for better control and decision-making. At the second stage. At the same time. store space and neighboring purchasing power. personnel training and market channels. It gradually enhances service quality. Carrefour on the other hand adopted a two-stage philosophy to achieve stable growth. ten-foot rule. In a summary. price does not equal to competitive advantage but an essential means to survival. Carrefour decides to set up a new store after the investigations of location. Carrefour also follows flexible pricing to reflect the differences of local markets. To Carrefour. The first stage enables branch stores to operate smoothly as fast as possible and to maintain high turnover.0 Pricing Strategy . Provision of wider shopping space and parking lot makes customers buying more convenient. It further adopted a strategic alliance to develop private label products to meet the needs of one-stop shopping. low delivery cost and promotion to attract and retain their buying. self-service. and sundown rule. free parking. it built a whole-selling or green store in industrial region and a general retailing or blue store in residential ones in Taiwan. In addition. full range of choices. Carrefour could capture both big and small accounts in one shot and then grow much faster than its rivals. utilizing the system of commerce automation to centralize the purchasing matters of all stores. pricing and promotion strategies and constantly stresses discount everyday that is very different from that of Wal-Mart.8 teeth smile. to decide what to purchase. it focuses on customers.

1 percent of discount store sales on advertising Wal-Mart produced only spent 1. its private label offering a fixed price all year round. The everyday-low-price strategy implied that there were few promotions. 5. Sam Walton s obsession with keeping prices below competitors led him to check his and the competition s stores thoroughly. the everyday-low-price guarantee required that each store manager set his/her own prices. including Carrefour. price is the amount of money charged for a product or service.2 Discount-Everyday-Prices Carrefour s overall pricing was heavily promotional. This attitude assured that Everyday-low-prices was a genuine strategy and not just a slogan. with frequent sales and special discounts supported by weekly circulars.1 Everyday-Low-Prices High-low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items. To offer everyday low prices. Wal-Mart offered brand name products at prices consistently lower than those found at department or specialty stores. They also were responsible for product offerings and shelf-space allocation decisions. The group implemented a discount everyday strategy unlike Wal-Mart. He looked out for good ideas and was not afraid to copy them. all of which were based on market specific inventory and sales data supplied by advanced information systems. To maintain lowest price reputation. . 5. Because retail competition was mainly local. Carrefour kept reminding customers to refund if they buy more expensive in order to comfort their purchases. price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.5 percent of sales.In the narrowest sense. counting the number of cars in the car park and going so far as to taking a tape measure and evaluating shelf space. typically ran advertised circulars per year spending 2. Wal-Mart practically defined this concept. More broadly. Although other major competitors. a company must first have everyday low costs.

purchasing.The objective of the group was to reduce prices in all formats of stores. thus gaining market share. and educate employees are consistently practiced in Wal-Mart in all its branches. This is a competition-based pricing: their strategy is based on what other competitors are doing (including hard discounters and informal traders). even though they are already under their competitors price. To treat new comers in the company fairly. In 2005. . The objective can be explained as a virtuous circle: the more they sell. The objective of this price reduction strategy is to attract more people to the stores. new staff can accumulate experiences and skills. They can also take courses supplied in the Wal-Mart Institute and have job rotation opportunity to enrich their expertise. each employee will be awarded maximum 200 dollars. Through learning by superiors in the first 16 weeks. Each store has to announce its profit. reduce cost. make them perceive responsibility and participation and share information. and the group tries to set the price below the competitors . Finally motivation and challenge of his/or her partners for better ideas everyday. Fourthly is the stock ownership option that allow employees to buy Wal-Mart stock at 15% off the market price and also benefit-sharing from reduced depletion. there is regular announcement of performance. If depletion of stocks is controlled within the limit of target.000 hours are eligible to this profit-sharing scheme. Cultivate employees with ambitions to become a leader of stores within a store and assist employees to conquer operational difficulties in pursuing their goals. First measure is education and training. Secondly. sales and percentage of discount regularly to make all employees informed. the following enlightenment and inspiration measures are undertaken. the clearly stated objective of each hypermarket was to be the least expensive store within its market radius. 6. there is also a Profit sharing scheme whereby employees who has worked in Wal-Mart for more than one year and worked over than 1. Thirdly.0 Human resource Management To treat customers friendlily. the more they can lower prices thus attracting more customers. the more economies of scale they can do. However. they also seem to have a demand-based (or target) pricing as they constantly try to reduce prices to meet or exceed customers expectations.

. they requested suppliers to adopt electronic data interchange system. 1992). The manager in charge of a store also wanders around the store once it is open. But the most important point with the Internet was the creation of a B2B extranet. The Internet. and thus reduce significantly the costs. The development of computers has been very useful for logistics reasons too. Carrefour created a website for recruitment purposes.Carrefour stresses more on the hand-down of corporate heritage. Finally. The main technology that has been useful is the computer. In the early stage of foreign market entry. At present. Faster computers can generate more accurate delivery schedules. Wal-Mart can transfer information swiftly and has saved three fourth stock-holding costs. for example. Further. Frenchmen take the positions of top-level management constantly to infuse management philosophy of reserve customers and reaction orientation into each store overseas. Carrefour keeps information for each customer that has a loyalty card. so that people can easily access to work offers and have information about them. Meanwhile. headquarters can finish stock-taking of each item for more than 4. suppliers can manage their relations with Carrefour group more easily and more efficiently.000 stores in the globe within an hour. The use of servers has also allowed developing giant databases of customers. With this system in place. Thanks to this portal.0 Technology The development of technologies has been very important for the development of Carrefour. Walk into any stores of Carrefour and you will see many staff walk around to replenish stocks all the time. Wal-Mart spent more than half a billion dollars in information technology facilities to connect their worldwide stores with headquarters. and then the Internet. 7. each store sends information to his suppliers via internet and have products replenished in on-average two days versus five days of their rivals (Huey & Walton. for example. allowed Carrefour to develop new kinds of activities like the online supermarket. and whichever shop you go to you are known and can use the advantages of your loyalty card.

All Wal-Mart s suppliers received a planning packet with information about the specific department with which the vendor was dealing as well as Wal-Mart s expectations from the relationship. they need district shops. To even better manage the supply chain. Technology was used not only in setting price and product offerings. distribution and the control of supplier relations. For instance. helpful services. By the late 1980s key suppliers were already directly managing Wal-Mart s merchandise inventory. WalMart restricted its suppliers to companies who limited the workweek to sixty hours. Developing new store formats The group aims at attracting the greatest possible number of people to their retail stores. so they need a store near their house. No single supplier was expected to account for more than three percent of the company s purchases. . 8. there is need to have different formats of retail shops to fulfill these needs. As different market segments have different needs. Wal-Mart s relation with its suppliers was enhanced by an Electronic Data Interchange (EDI) system. Wal-Mart operated a satellite system that enabled communication and electronic scanning throughout the store.0 Store Designs The Carrefour Group designed their stores so that they meet customers need. and a reliable private-label brand. Vendor negotiations were centralized and done in undecorated standard interviewing rooms. the appropriate product mix. that is. just once a week. The satellite system allowed requests for merchandise at the point of sale to be transmitted to the headquarters or to a supplier s distribution centers instantly.Technological superiority was seen as a competitive advantage by Wal-Mart. provided safe working conditions and did not employ child labor. This includes having the right store format. However. elderly person often do not have a car and live alone. large families with children are looking for hypermarkets where they can buy goods at a cheap price. supplier and distributor networks. but also in areas such as communication.

in order to achieve a more rapid pace of expansion than the firm could achieve if it were limited to two new stores per year. The Carrefour Group has recently tried three new store formats. They have used the well known Carrefour trademark (the logo and the brand name). and bread sliced to order. As more firms entered the discount retail market. Carrefour offered to share its retailing know-how. just adding the word Express to show that it is not the same as the traditional Carrefour. the competition for permits became fiercer as many firms and individuals fought for authorization to build in attractive locations. Franchisees were required to use a control system similar to Carrefour s and to submit their forecasts and results to Carrefour s controller. Carrefour s ownership interests in joint ventures ranged from 10 to 80 percent. softening the look of its warehouse-size buildings by installing wood floors and non-fluorescent lights in some departments and putting service counters in the food department. cheese. and consumer goodwill with potential partners both in France and elsewhere in Europe. In the late 60s. either in exchange for an ownership interest in stores under construction or franchise fees. Carrefour had been an innovator in store design. They have renamed supermarkets into Carrefour Express and changed the offer of products.In 1963. 9. Carrefour s rapid growth was made possible by the fact that the firm had been able to get two new construction permits per year. a consumer can normally satisfy all of his or her routine weekly shopping needs in one trip to the hypermarket. The concept was to build a retail facility which carries under one roof both groceries and general merchandise. . Carrefour opened the first ever-built hypermarket in SainteGenevieve-des-Bois in France. Thus. This transformation was highly successful with an increase in sales since the change of trade name.0 Expansion Strategies Throughout the late 60s and early 70s. where shoppers can get meat. trademark. It enables customers to know they can find Carrefour brand products there at hypermarket prices.

Thirdly. localizing sourcing to reduce transportation expense and exploit economies of scale. Fourthly. supply products at lowest price but highest value-added every day to reduce the searching cost and build trust and loyalty of customers. .0 Comparison of Strategies From the comparisons of strategies of Wal-Mart and Carrefour. was to become Best Cost Provider selling at everyday low prices. He applied same strategy in the retail industry. this study summarizes the common and different part of their strategies. due to its unique geographic expansion strategy. Firstly. training and incentives. On the other hand. Wal-Mart has been expanding itself to adjoining territory (within 200 miles of the existing stores) and covering the small towns by opening up stores before penetrating the next big territory. however.Wal-Mart had a unique expansion strategy. Secondly. They all adopt the same strategies in the following practices. emphasize the creation of friendly atmosphere at every store where employees wander around to replenish goods and see if any assistance required. education. This could be realized by the continuous implementation of the latest available information technology and distribution control systems at a time. Instead of expanding to the main metropolitan cities to quickly gain national coverage. the company is able to operate its own distribution centers with a truck fleet to supply its stores. This concept kept marketing and advertising costs significantly low compared to its competitors . The hallmark of Walton s strategy. The Retail Link computer system is one of the secrets of Wal-Mart s success. both stress the culture of humane and provide employees with best career planning. differences in strategies are reflected in the following facets. Sam Walton had served in the army. Furthermore. 10. and had employed military strategy of winning post by post and strengthening it before moving to another post.

First of all. Wal-Mart has various stores that include American discount store. Wal-Mart emphasizes lowest price every day to win the best corporate image but Carrefour focus on a discount every day to attract customers to buy impulsively. can only rely on the flexibility from local procurement of individual stores to exploit the benefits of localization because they do not yet established global logistics system. Comparing with Carrefour. 11. and drugstore by the streets based on the characteristics of customers. As for Carrefour. 1998). it is a crucial point for the Carrefour group to have learnt about their customers and to do everything they can to satisfy . especially cross docking. Their transportation and logistics system. As a result.0 Conclusion Since Wal-Mart reached its objective of being the number one retailer in the U. the former established as many stores in big cities as possible but the latter adopted a circumvent cities from countries strategy to steadily cultivate talents and accumulate experiences. are well known. Secondly. it had been shifting its focus on becoming a global chain. Wal-Mart can reduce stock-carrying costs and transportation and therefore increase profitability by 2. in early 1991. starting to expand into the international market. Carrefour. This method enables Wal-Mart to replenish goods twice a week (once bi-weekly to their rivals) and reduce storage space and delivery time. basing on the concept of every day low costs (EDLC). Wal-Mart has a complete storage management system. Wal-Mart implement cross-docking technique simultaneously to increase operational efficiency and control cost in global logistics. Finally. on the other hand. As in many other businesses. Sam s Club membership warehouse.S. and therefore Wal-Mart in the long run can maintain this strategy and ensure the continuous growth of its businesses.5% compared with their competitors (Stern & Stalk. supermarket. Thirdly. most of their stores are discount ones but they also develop a mixed strategy nowadays. This expansion has proven to be overwhelmingly successful. Carrefour internationalized earlier than Wal-Mart.

. Englewood cliffs. Irwin. Perspectives on strategy from the Boston Consulting group. and Stalk G.them. Europe Stern C. G..dartmouth. Kroll M. Understanding Business. and Parnell J.tuck.com Wal-Mart stores.carrefour.. London Seth. (1999). J. and Randall. inc.walmartstores. (1998). (1996) Strategic Management: Concepts and cases. Prentice Hall. The Grocers: The Rise and Rise of the Supermarket chains.com Nickel W. Kogan Page Ltd. company profile http://mba. Thus Carrefour has defined what builds up a positive experience for the customer apart from the marketing mix. McHugh & McHugh (1993). you can see that many other factors contribute to the customer s decision-making as seen earlier in this paper.edu/pdf/2002-2-0013. A.pdf viewed at Wright P. London Wal-Mart Annual reports viewed on 8th April 2008 at www. Bibliography Carrefour Annual Reports viewed on 8th April 2008 at www. Wiley.