Carrefour bets on store bosses in French revamp

PARIS: A cultural shift is underway at Europe's largest retailer, Carrefour, as bosses at its French stores get more freedom after years of control from headquarters near Paris.

Empowering local managers is part of retail veteran Georges Plassat's 10-month old effort to revive the monolithic retailer, under siege from more agile competitors such as Leclerc and Intermarche.

Last week Carrefour reported results which showed the first fruits of his turnaround efforts, and said more could be achieved as he now had the cash to renovate stores.

His vision is on display at Carrefour's 12,000 square metre Bercy hypermarket in Charenton Le Pont, an affluent eastern Paris suburb, where decisions on ordering and displaying merchandise are now up to manager Thierry Excoffier.

"There is a change in culture," Excoffier said during a visit to the store, which was renovated last summer.

"We have specialists in the store who know what is selling," he said, explaining that top management was now listening to store staff best-placed to know which items were in demand.

When Plassat took over as CEO in May, his diagnosis was that Carrefour, which has 220 hypermarkets in France and 524 elsewhere in Europe, suffered from "excess centralisation preventing it from delivering results". He made handing back power to store managers in France a key component of his plan to revive the fortunes of the world's No 2 retailer after Wal-Mart.

He wants to push the idea throughout the group but is starting in France because that is the largest market and one where local managers have found their autonomy particularly restricted.

Plassat, whose French revival also relies on cost cutting and lower prices, has said he needs three years to turn Carrefour around and most analysts are expecting a long and gradual recovery amid a tough economic climate in Europe.

But they say the former top executive at Carrefour's top listed rival Casino, has already made a difference.

"The results demonstrate how CEO Plassat's initiatives - empowerment of local management, cost reduction, more targeted advertising spend, change in assortment (the range) - have already started to pay off," Morgan Stanley analysts said in a note.

Despite a sprawling empire spanning from Brazil to China, domestic hypermarkets still accounted for about a quarter of Carrefour's euro86.6 billion (RM351 billion) of group sales last year, and investors are eager to see whether their overhaul can be replicated elsewhere.

Plassat has said that restoring power to store managers was vital to winning back clients.

"We have to deal with local competitors who have a closer relationship with customers, who are often very much decentralised," Plassat said.

Carrefour is battling years of underperformance in its main European markets, where hypermarkets have been hit by competition from specialist stores like Zara and Decathlon as well as inroads by online shopping.

The solid growth of these rivals spotlights the benefits of granting managers more autonomy, analysts say, although the differences are not always completely clear cut.

Lower prices are still the most important factor in winning over shoppers with smaller budgets in an economic slump.

Reducing the price of essential goods has also been part of Plassat's success.

But non-food products such as electronics, which comprise 30 per cent of revenue, remain a trouble spot for the company as shoppers cut spending on all but essential goods or go to more specialised stores. Reuters