Big Changes In China Challenge French Retail Giant Carrefour

The world's second largest retailer, Carrefour, insists it is not pulling out of the massive Chinese market. Still, a closer look at the French company's struggles offers a window into how quickly things can change when doing big busines

Wang Fang

BEIJING – "Big" is the operative word for both French-owned retail giant Carrefour, and the People's Republic of China. So when rumors began circulating last month that Carrefour was planning to pull out of China and hand over its operations to the local China Resources Group conglomerate, it made some big waves.

Carrefour immediately denied the rumors, and the public relations spokesman of Carrefour China told the Economic Observer that the company will maintain its rhythm of opening 20 to 25 new branches per year.

Yet behind the rumor lies the truth that Carrefour China has seen much better days. Since July 2010, it has shut down six of its stores. One source close to Carrefour pointed out that the retailer has been suffering from severe staff turnover and increasing pressure on its cost control.

The shining image of this retail giant's entry to China is in the process of being tarnished. Over the past two years, the foreign-financed RT-Mart, as well as Vanguard and Dashang Group, have all overtaken Carrefour in growth in the retailing business.

In recent years, Carrefour has lost all the privileges that it enjoyed as a foreign enterprise when it first entered China, both in terms of obtaining land and opening stores. The cost of stores and logistics have greatly increased. "It's very difficult to follow the previous mode of operation for achieving the desired targets," a source close to Carrefour said.

Carrefour is now adjusting its strategy, choosing to open new stores in second and third-tier cities, and the suburbs and surrounding satellites towns of first tier cities.

Carrefour closed four stores last year. It is said their closure was all due to bad location choice and poor management. The Carrefour China press office says that Carrefour currently has 180 stores, therefore the closing down of unprofitable ones is normal and in accordance with its strategic adjustment.

But a well-placed Carrefour source said that because of China's change in policy to favor domestic enterprises, it is now impossible for Carrefour to obtain locations in core business districts, particularly in places like Shanghai and Beijing.

In addition, virtually all of the 180 Carrefour stores are rented, whereas Walmart and Tesco and other foreign companies have all invested in real estate in China.

Trying to keep up with China's boom

Carrefour's first stores in the country signed their 20-year lease contracts in 1995. This means that it will face a huge cost rise in 2015. And the fact that local governments no longer offer preferential policies for foreigner investors makes all the difference.

Lars Olofsson, the chairman and CEO of Carrefour, announced the company's semi-annual report in August. As the world's second biggest retailer, it had a net loss of 249 million euros in the first quarter of 2011. The French media quickly predicted that restructuring will be unavoidable for Carrefour China.

Over the past year, Walmart has being expanding its investment in China, while RT-Mart's market share continues to rise. Carrefour's ranking of its sales in hyper-markets has been seriously affected. In 2009, out of China's top 100 chain stores, the Brilliance Group, Dashang Group and Vanguard all exceeded Carrefour.

Over the past two years, Carrefour China's staff turnover has been very high. In June last year, numerous manager-level employees of its East China stores resigned en masse. It's said the pressure on employees came directly from Eric Legros, the current president of Carrefour China. Legros has focused much of his attention on the connections between the farm and the supermarkets, as well as food security. He is determined to reform Carrefour China.

In an earlier interview, Mr. Legros confirmed that his reforms did encounter quite a bit of controversy and questioning, but he is seeking the balance point between the centralization and decentralization. All he needs, he says, is time.

But the anonymous company source says that Mr. Legros has had difficulty understanding Chinese customs. He thinks in a French way and does not take into account "Chinese characteristics." For instance, when a Chinese development manager hands in an evaluation report about a new site, very often the manager's viewpoint would be at odds with his.

"He rarely listens to anyone. And so the next time, the manager will not bother to give his opinion, but just listen to him and execute whatever he wants," the source said.

When foreign retailers first came to China, their decisions about where to open stores were very different compared to what was done back at home. At that time, Chinese customers rarely owned a car, so the stores were not usually opened on the outskirts of a city, but rather in residential areas and often crowded locations.

But these days, such locations cost too much and are difficult to obtain. So the speed of opening new stores has been slowing down. A store in Beijing which has a turnover of around 200 million RMB, of which between 5-10% goes to rent before even counting the other costs in water and electricity etc., won't be able to make any profit, says one Chinese retailing expert

In this respect, Carrefour's strategy of going into suburbs and mid-sized cities is on target. Even Chinese companies are following this trend. But compared to the increasing technological investment that Walmart put into its logistics system and satellite information centers, Carrefour lags behind, spending more resources on marketing, says the source. "If Carrefour still counts on its human resources only, it won't even be able to compete with the local retailers."

Read the original article in Chinese

photo - nicolas-auvinet

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The Food Truck, A Sign That The White And Wealthy Are Moving In

In San Diego, California, a researcher tracked how in the city's low-income neighborhoods that have traditionally lacked dining options, when interesting eateries arrive the gentrification of white, affluent and college-educated people has begun.

Balboa Park Spring Fling Food Truck festival

San Diego Food Trucks via Facebook
Pascale Joassart-Marcelli

SAN DIEGO — Everybody, it seems, welcomes the arrival of new restaurants, cafés, food trucks and farmers markets.

What could be the downside of fresh veggies, homemade empanadas and a pop-up restaurant specializing in banh mis?

But when they appear in unexpected places – think inner-city areas populated by immigrants – they're often the first salvo in a broader effort to rebrand and remake the community. As a result, these neighborhoods can quickly become unaffordable and unrecognizable to longtime residents.

An appetite for gentrification

I live in San Diego, where I teach courses on urban and food geographies and conduct research on the relationship between food and ethnicity in urban contexts.

In recent years, I started to notice a pattern playing out in the city's low-income neighborhoods that have traditionally lacked food options. More ethnic restaurants, street vendors, community gardens and farmers markets were cropping up. These, in turn, spurred growing numbers of white, affluent and college-educated people to venture into areas they had long avoided.

This observation inspired me to write a book, titled The $16 Taco, about how food – including what's seen as "ethnic," "authentic" or "alternative" – often serves as a spearhead for gentrification.

Take City Heights, a large multi-ethnic San Diego neighborhood where successive waves of refugees from places as far away as Vietnam and Somalia have resettled. In 2016, a dusty vacant lot on the busiest boulevard was converted into an outdoor international marketplace called Fair@44. There, food vendors gather in semi-permanent stalls to sell pupusas, lechon (roasted pig), single-sourced cold-brewed coffee, cupcakes and tamarind raspado (crushed ice) to neighborhood residents, along with tourists and visitors from other parts of the city.

Informal street vendors are casualties.

A public-private partnership called the City Heights Community Development Corporation, together with several nonprofits, launched the initiative to increase "access to healthy and culturally appropriate food" and serve as "a business incubator for local micro-entrepreneurs," including immigrants and refugees who live in the neighborhood.

On paper, this all sounds great.

But just a few blocks outside the gates, informal street vendors – who have long sold goods such as fruit, tamales and ice cream to residents who can't easily access supermarkets – now face heightened harassment. They've become causalities in a citywide crackdown on sidewalk vending spurred by complaints from business owners and residents in more affluent areas.

This isn't just happening in San Diego. The same tensions have been playing out in rapidly gentrifying areas like Los Angeles' Boyle Heights neighborhood, Chicago's Pilsen neighborhood, New York's Queens borough and East Austin, Texas.

In all of these places, because "ethnic," "authentic" and "exotic" foods are seen as cultural assets, they've become magnets for development.

Food vendor at outdoor international marketplace called Fair@44.

Fairat44 via Instagram

A call for food justice

Cities and neighborhoods have long sought to attract educated and affluent residents – people whom sociologist Richard Florida dubbed "the creative class." The thinking goes that these newcomers will spend their dollars and presumably contribute to economic growth and job creation.

Food, it seems, has become the perfect lure.

It's uncontroversial and has broad appeal. It taps into the American Dream and appeals to the multicultural values of many educated, wealthy foodies. Small food businesses, with their relatively low cost of entry, have been a cornerstone of ethnic entrepreneurship in American cities. And initiatives like farmers markets and street fairs don't require much in the way of public investment; instead, they rely on entrepreneurs and community-based organizations to do the heavy lifting.

In City Heights, the Community Development Corporation hosted its first annual City Heights Street Food Festival in 2019 to "get people together around table and food stalls to celebrate another year of community building." Other recent events have included African Restaurant Week, Dia de Los Muertos, New Year Lunar Festival, Soul Food Fest and Brazilian Carnival, all of which rely on food and drink to attract visitors and support local businesses.

Meanwhile, initiatives such as the New Roots Community Farm and the City Heights Farmers' Market have been launched by nonprofits with philanthropic support in the name of "food justice," with the goal of reducing racial disparities in access to healthy food and empowering residents – projects that are particularly appealing to highly educated people who value diversity and democracy.

Upending an existing foodscape

In media coverage of changing foodscapes in low-income neighborhoods like City Heights, you'll rarely find any complaints.

San Diego Magazine's neighborhood guide for City Heights, for example, emphasizes its "claim to authentic international eats, along with live music venues, craft beer, coffee, and outdoor fun." It recommends several ethnic restaurants and warns readers not to be fooled by appearances.

Longtime residents find themselves forced to compete against the "urban food machine"

But that doesn't mean objections don't exist.

Many longtime residents and small-business owners – mostly people of color and immigrants – have, for decades, lived, worked and struggled to feed their families in these neighborhoods. To do so, they've run convenience stores, opened ethnic restaurants, sold food in parks and alleys and created spaces to grow their own food.

All represent strategies to meet community needs in a place mostly ignored by mainstream retailers.

So what happens when new competitors come to town?

Food vendor at outdoor international marketplace called Fair@44.

Fairat44 via Instagram

Starting at a disadvantage

As I document in my book, these ethnic food businesses, because of a lack of financial and technical support, often struggle to compete with new enterprises that feature fresh façades, celebrity chefs, flashy marketing, bogus claims of authenticity and disproportionate media attention. Furthermore, following the arrival of more-affluent residents, existing ones find it increasingly difficult to stay.

My analysis of real estate ads for properties listed in City Heights and other gentrifying San Diego neighborhoods found that access to restaurants, cafés, farmers markets and outdoor dining is a common selling point. The listings I studied from 2019 often enticed potential buyers with lines like "shop at the local farmers' market," "join food truck festivals" and "participate in community food drives!"

San Diego Magazine's home buyer guide for the same year identified City Heights as an "up-and-coming neighborhood," attributing its appeal to its diverse population and eclectic "culinary landscape," including several restaurants and Fair@44.

When I see that City Heights' home prices rose 58% over the past three years, I'm not surprised.

Going up against the urban food machine

Longtime residents find themselves forced to compete against what I call the "urban food machine," a play on sociologist Harvey Molotch's "urban growth machine" – a term he coined more than 50 years ago to explain how cities were being shaped by a loose coalition of powerful elites who sought to profit off urban growth.

I argue that investors and developers use food as a tool for achieving the same ends.

When their work is done, what's left is a rather insipid and tasteless neighborhood, where foodscapes become more of a marketable mishmash of cultures than an ethnic enclave that's evolved organically to meet the needs of residents. The distinctions of time and place start to blur: An "ethnic food district" in San Diego looks no different than one in Chicago or Austin.

Meanwhile, the routines and rhythms of everyday life have changed so much that longtime residents no longer feel like they belong. Their stories and culture reduced to a selling point, they're forced to either recede to the shadows or leave altogether.

It's hard to see how that's a form of inclusion or empowerment.The Conversation


Pascale Joassart-Marcelli is a Professor of Geography and Director, Urban Studies and Food Studies Programs at San Diego State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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