Carrefour
Carrefour
In mid-1972
Decisions about speed and direction of future growth, and how to finance that growth
Company Background
• Begun operations in 1960 with a supermarket (650 mts2) in France
• In 1963 opened the first hypermarket (2.500 mts2) just outside of Paris, France
• Between 1965 and 1971 sales grew at an annual rate exceeding 50% (non food products accounted for 40% of that volume).
• Corporate assets growth as faster as sales
• Starting in 1970, new stores called “commercial centers” (25.000 mts2) were opened
• At the end of 1971: Carrefour had 16 stores wholly owned, 5 stores operating as joint ventures, and franchise agreements with 7 stores
• Their strategy was to build stores outside of towns in land that could be acquired very inexpensive. Total investment per m2 of selling space fully equipped equal to about one-third that of traditional supermarkets and stores
• Each store manager operated as a profit center with almost complete freedom in decision making (decentralized management)
Factors favoring growth
• Consumer acceptance was due to Convenience and price. o Variety of products (almost any product purchased more than once a year could be bought at a Carrefour store) o Carrefour operated discount gasoline outlets at many stores o Carrefour operated on an average gross margin of about 15% (on food and nonfood items) o The gross margins (and by implication, the prices) of traditional retailers averaged 5 to 10 percentage points above Carrefour´s
Obstacles to growth
• Political force of small shopkeepers.
• National and local governments made it difficult to obtain construction permits to build new large retail stores, as an effort to slow the growth of hypermarket.
• Tax to retail store to provide pensions for smalls shopkeepers that were unable to continue in business.
Joint ventures and franchises
• Under franchising, Carrefour received a fee of 0,2% of total store sales and a fee of 1% of the store´s sales of
In mid-1972
Decisions about speed and direction of future growth, and how to finance that growth
Company Background
• Begun operations in 1960 with a supermarket (650 mts2) in France
• In 1963 opened the first hypermarket (2.500 mts2) just outside of Paris, France
• Between 1965 and 1971 sales grew at an annual rate exceeding 50% (non food products accounted for 40% of that volume).
• Corporate assets growth as faster as sales
• Starting in 1970, new stores called “commercial centers” (25.000 mts2) were opened
• At the end of 1971: Carrefour had 16 stores wholly owned, 5 stores operating as joint ventures, and franchise agreements with 7 stores
• Their strategy was to build stores outside of towns in land that could be acquired very inexpensive. Total investment per m2 of selling space fully equipped equal to about one-third that of traditional supermarkets and stores
• Each store manager operated as a profit center with almost complete freedom in decision making (decentralized management)
Factors favoring growth
• Consumer acceptance was due to Convenience and price. o Variety of products (almost any product purchased more than once a year could be bought at a Carrefour store) o Carrefour operated discount gasoline outlets at many stores o Carrefour operated on an average gross margin of about 15% (on food and nonfood items) o The gross margins (and by implication, the prices) of traditional retailers averaged 5 to 10 percentage points above Carrefour´s
Obstacles to growth
• Political force of small shopkeepers.
• National and local governments made it difficult to obtain construction permits to build new large retail stores, as an effort to slow the growth of hypermarket.
• Tax to retail store to provide pensions for smalls shopkeepers that were unable to continue in business.
Joint ventures and franchises
• Under franchising, Carrefour received a fee of 0,2% of total store sales and a fee of 1% of the store´s sales of