Carrefour calls it quits in Southeast Asia

With a modest presence throughout Thailand and trailing behind Tesco and two other retailers in Malaysia, French hypermarket group Carrefour has announced it is closing up shop in most of the Southeast Asia region.

Its 44 Thai stores, 23 in Malaysia, and two in Singapore are for sale. Operating in more than 30 countries — twice as many as British supermarket chain, Tesco — Carrefour may simply have over-reached.

The company says its strategy now is to stay the course in China and Taiwan, find a local partner in Indonesia and wait to get a foothold in over-regulated India. But the chain’s retreat from Southeast Asia may be ill-timed. The region’s economies are impressively buoyant and despite political turmoil in some areas, Thailand and Malaysia’s modern retail sectors are growing.

Mark Ingrouille, Publicis

Carrefour is the French word for “crossroads”, and that’s a place it seems to have met in Southeast Asia. A distant fourth in Thailand and Malaysia, it’s well off its aim of being “number one or number two in each of its markets” and the hypermarket group seems intent on leaving the region having recently put its 60 plus stores up for sale.

But with up to 10 bidders for its outlets from Britain’s Tesco to Singapore’s Dairy Farm group, Carrefour can’t have been doing everything wrong. The problem may lie with its stores place in the supply chain: at the end.

Unlike Tesco, which partnered huge local groups like Charoen Pokphand in Thailand and Sime Darby in Malaysia, Carrefour went its own way. Importantly, Tesco used its bridgehead and partners in the Southeast Asia market to source for good local produce to sell onto its other international stores. In the UK, Tesco stores are full of ‘own brand’ products originating in Thailand and Malaysia. In effect, Tesco has used its presence as a buyer as much as its presence as a seller to strengthen its local balance sheet. Its stores are in the middle of their supply chain operation bringing a double dividend, critical in a business where margins are razor thin.

This is not a question of Carrefour over-reaching, but more to do with its in-market strategy and consumer offer. It appears to have had a one-size-fits-all approach and has not adapted to local needs as quickly as others. For example, Tesco Lotus Thailand opened smaller community located outlets to complement its ‘big box’ store. Carrefour struggles to be different from its regional competition and it’s hard to see its strategy in the market. French cheeses aside, there seems to be little to differentiate them with an ‘everything under one roof’ positioning.

Interestingly, Carrefour’s customer base, in Malaysia at least, tends to be young and tertiary-educated. Could this provide a clue in helping to build a more differentiated branded offer? Even in the hypermarket value-oriented world there is a big difference between going to a store because you have to and going there because you want to.

The economies in question, Thailand, Malaysia and Singapore remain robust regarding consumer spending. However, without a clear differentiator it will always be hard to gain the scale needed for a retailer such as Carrefour.

Being in third or fourth place is usually tough going in any market let alone value retail. China and India are where Carrefour will now look to refocus.