PARIS: Carrefour, the retail giant, is planning to "reset" its strategy in France, after an ambitious reform programme resulted in a loss of commercial focus by the company.
The hypermarket group saw operating income levels decline by 22% during the first half of this year, when its net income plummeted by 49.3%, primarily due to a disappointing performance in France, Spain and Italy.
Lars Olofsson, its CEO, argued this was partly attributable to the adverse economic climate and rising commodity costs, but suggested certain in-house factors also contributed to such a process.
"We have done too much, too quickly, and when you are over-ambitious, alongside your achievements, you can also have some setbacks," he said in a presentation to analysts.
In France, Carrefour simultaneously transformed its price and category management models, rolled out new IT systems for stores and merchandising, moved its head office and trialled the Carrefour Planet hypermarket format.
This was coupled with the introduction of "overcentralised" decision-making, thus removing power from the shop floor, and all contributed to a lack of attention on intensifying price competition.
"While they were necessary, these changes ... were not always executed properly and they did overload the teams, which led at the same time ... to undesired side effects," said Olofsson.
"We lost sight of the competitive landscape, and all our efforts were put into promotions at the expense of consistency and price competitiveness."
In response, the company is pursuing new tactics in France, based on lowering prices across the board, expanding its private label range and running fewer, "but smarter", deals, which cumulatively could negatively impact turnover in the short term.
The Carrefour brand is also being repositioned, with the expectation all these efforts will take two years to achieve success, with increased traffic, not market share, taken as the main key performance indicator.
"Market share is not, short term, the appropriate way of measuring our progress," said Olofsson. "I am not walking away from monitoring market share ... but if we are transforming Carrefour, we have to have the right KPIs for measuring our transformation."
"In this challenging environment, we have clearly taken a decision to favour longer term value creation over short term objectives. We are biting the bullet in 2011."
The hypermarket group saw operating income levels decline by 22% during the first half of this year, when its net income plummeted by 49.3%, primarily due to a disappointing performance in France, Spain and Italy.
Lars Olofsson, its CEO, argued this was partly attributable to the adverse economic climate and rising commodity costs, but suggested certain in-house factors also contributed to such a process.
"We have done too much, too quickly, and when you are over-ambitious, alongside your achievements, you can also have some setbacks," he said in a presentation to analysts.
In France, Carrefour simultaneously transformed its price and category management models, rolled out new IT systems for stores and merchandising, moved its head office and trialled the Carrefour Planet hypermarket format.
This was coupled with the introduction of "overcentralised" decision-making, thus removing power from the shop floor, and all contributed to a lack of attention on intensifying price competition.
"While they were necessary, these changes ... were not always executed properly and they did overload the teams, which led at the same time ... to undesired side effects," said Olofsson.
"We lost sight of the competitive landscape, and all our efforts were put into promotions at the expense of consistency and price competitiveness."
In response, the company is pursuing new tactics in France, based on lowering prices across the board, expanding its private label range and running fewer, "but smarter", deals, which cumulatively could negatively impact turnover in the short term.
The Carrefour brand is also being repositioned, with the expectation all these efforts will take two years to achieve success, with increased traffic, not market share, taken as the main key performance indicator.
"Market share is not, short term, the appropriate way of measuring our progress," said Olofsson. "I am not walking away from monitoring market share ... but if we are transforming Carrefour, we have to have the right KPIs for measuring our transformation."
"In this challenging environment, we have clearly taken a decision to favour longer term value creation over short term objectives. We are biting the bullet in 2011."
Data sourced from Carrefour; additional content by Warc staff
