Carrefour's Exit from Singapore
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Case Code: BSTR439 Case Length: 12 Pages Period: 2013 Pub Date: 2013 Teaching Note: Not Available |
Price: Rs.400 Organization: Carrefour SA Industry: Retail Countries: Singapore Themes: International Business, Globalization |
Abstract Case Intro 1 Case Intro 2 Excerpts
Carrefour Bids Adieu to Singapore
In November 2012, France-based Carrefour SA (Carrefour), the second largest retailer in the world, closed down its two mega stores in Singapore. The closure marked Carrefour's exit from the Singapore retail market. In a statement, the company said, "Carrefour Singapore announces the decision to close its Suntec and Plaza Singapura stores before end of 2012, since expansion and growth perspectives do not allow reaching a leadership position in the medium and long term." Prior to Singapore, Carrefour made an exit from Malaysia by selling its 26 hypermarkets to Aeon Co. Ltd (Aeon), a Japan-based retail group, for €250 million in November 2012. In the same year, it also exited from Indonesia by selling its 60% stake to its JV partner CT Corp , a conglomerate based in Indonesia, for €525 million. Earlier in 2010, Carrefour had sold its stores in Thailand.
According to Carrefour's top management, the exit from South East Asia was a part of the company's plan to focus only on those markets where Carrefour was leading or had chances of being among the top three retailers in the near future.
Carrefour launched its operations in Asia in 1989 when it entered Taiwan. Its entry into Asia was prompted by laws restricting the growth of hypermarkets and supermarkets in France and the recession-hit economies of Europe. Its decision to enter the Asian market was further supported by its success in international ventures in Latin America.
As a part of its plans to have a wide presence in Asia, Carrefour entered Singapore in 1997. At that time, retail in Singapore was a highly saturated sector, dominated by local retailers. Carrefour opened its first store at Suntec City Mall. Later in 2003, another Carrefour outlet was opened at Plaza Singapora.
Initially, the stores attracted customers who were happy to shop at a place that sold both food and non-food items like electronics and furniture under one roof. Gradually, Carrefour started facing tough competition from local players. Grocery retailers like Cold Storage and Shop and Save and electronic retailers like Courts and Best Denki gave Carrefour a run for its money.
In the US and Europe, consumers shopped less frequently and bought large quantities, as they had enough storage space. But in cities like Singapore where space was at a premium, consumers visited neighborhood stores frequently. Carrefour's competitors in Singapore were spread across the country with hundreds of stores. Compared to other retailers, prices at Carrefour were higher, while the product assortment was similar to that at any other retailer's as Carrefour did not offer any exclusive products. Carrefour's stores were located in some of the prime real estate locations in the major shopping areas; it therefore incurred huge costs on rent. Consumers also found it difficult to travel to a location in the center of the city due to traffic and high parking fees. As a consequence, sales at Carrefour stores started to deteriorate. Revenues declined from €98 million in 2006 to € 76 million in 2011. Its plans to expand did not materialize and in 2011, the Singapore operations incurred a loss of € 371 million. Carrefour failed to make any headway in the Singapore market and decided to exit the market in 2012...
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