By
with contributions from Mimosa Spencer
 on January 23, 2018

PARIS Carrefour SA’s chief executive officer Alexandre Bompard on Tuesday unveiled the long-awaited details of a massive overhaul aimed at securing the retailer’s future in a world dominated by Internet behemoths like Alibaba and Amazon.“We need to transform our group at every level so that the richness, scale and diversity of our operations reveal their value,” Bompard, who joined Carrefour last year, told analysts, investors and journalists at a conference held here to present the plan. “I’m convinced that our group is perfectly capable of succeeding with this transformation.”Highlights of the strategy, to be implemented between now and 2022, include ramping up omnichannel by increasing investments sixfold, with 2.8 billion euros in total allotted for this area by 2022.A simplification of Carrefour’s operational structure, especially in France, is also part of the plan, as well as the forging of partnerships in areas where the retailer is not competitive with a focus on becoming the leader of what Bompard described as the “food transition for all,” in line with consumer demand across the world for more traceability and healthier food.Carrefour’s ambition is to become the global e-commerce leader for food, and it is targeting 5 billion euros in online food sales by 2022. The move comes as Amazon is stepping up its activities in food following the acquisition of Whole Foods last year, while Wal-Mart Stores Inc. is aiming to grow its online sales, including in food, to better compete with Amazon.In total, Carrefour will invest 2 billion euros a year in its operations, focusing on increasing IT and digital investments as well as those in its supply chain. It will also initiate cost savings of 2 billion euros in total by 2020.Despite catering to 104 million households worldwide with its 12,000 stores in 33 countries, Bompard said, Carrefour, the world’s second-largest retailer after Wal-Mart, has failed to respond quickly enough to the changes of recent years, notably e-commerce, fluctuating consumer loyalty and changes in consumption habits.“These shocks are of an exceptional magnitude for everyone in our sector, and they are all the more so for Carrefour, because we delayed in taking account of these changes and acting on them,” said Bompard. “Carrefour has not evolved enough in line with its customers, and has moved away from their expectations.”He continued, “Carrefour is present in every store format, but is still not multiformat. Carrefour is present in every distribution channel, but is not omnichannel. Carrefour is present in 33 countries, but does not know how to take advantage of its size. Without coordination, its operations generate complexity. Because of this weight, Carrefour has distanced itself from its fundamentals.”Last week, Carrefour cut its 2017 profit guidance for the second time in six months, as reported, on the back of rising costs and weak performance, notably in France and China.“I am aware of the scope of the challenge,” said Bompard. “But we owe it to ourselves to achieve our aims. I am proud of this ambition, and infinitely determined to accomplish it.”The market reacted positively to the overhaul plan, sending shares up 6.5 percent to 19.68 euros in early trading on the Paris Bourse. Carrefour’s share closed up 3.22 percent at 19.06 euros Tuesday.Bompard continued, “Our organization is too compartmentalized, in order to improve efficiency we need to put an end to the dispersed nature of the company,” he said. Some 500 projects that were taken on during his predecessor Georges Plassat’s tenure, for example an e-book initiative, will be abandoned.Its cost-cutting plan includes 2,400 voluntary redundancies in Carrefour’s back-office operations in France, as well as the cancellation of plans for a new headquarters south of Paris. Instead of 12 headquarters in the Paris area, there will now be a single office, Bompard said.Also in France, which still represents around half of Carrefour’s sales, 273 former Dia doors, which generated losses of 150 million euros last year, will either be sold or closed, potentially impacting a further 2,100 employees.Despite the underperformance of the retailer’s hypermarket model, however, it does not plan to close any of its big-box stores in France. Five will be transferred to a management-lease model, and elsewhere, store sizes will be reduced by a total of roughly 1 million square feet between now and 2020, for example by selling the space to the shopping centers where they are located or renting it out.“The hypermarket is our shop window, and it needs to be considered as part of a local ecosystem,” said Bompard. The convenience store format will continue to be an area of focus, however, with 2,000 to open in the next five years in major cities.Forging partnerships will be a key part of the strategy going forward, and three tie-ups were unveiled concurrently with the transformation plan.“In order to succeed tomorrow, we need allies,” said Bompard, citing Carrefour’s partnerships with Showroomprive.com, revealed earlier this month, and Fnac Darty, Bompard’s former employer, as examples.Firstly, Carrefour has signed a preliminary agreement to collaborate with Chinese Internet services company Tencent, which is a leader in social media in the country thanks to its WeChat platform, to improve the French retailer’s online visibility in China and develop smart retail initiatives.“This will allow us to play a primary role on the Chinese food e-commerce market,” said Bompard. “Tencent is passionate about the store of the future and we will work on that together.”In tandem, Tencent and Chinese supermarket operator Yonghui are also potentially to take a minority stake in the French retailer’s Chinese business.To accelerate its digital transformation, Carrefour will collaborate with Publicis.Sapient to develop a unique business platform in each of its markets.Instead of a diversity of banners — in France, Carrefour operates several e-commerce operations, including Ooshop — the retailer’s online operations will operate under a single Carrefour nameplate, reducing confusion. This will be implemented in France this year.“The Carrefour brand name must be visible everywhere,” said Bompard.Vertical platforms like Greenweez and Rueducommerce, both of which Carrefour bought in 2016, will continue to exist, but will also be integrated onto the global platform.French national mail service La Poste, meanwhile, will join forces to accelerate the development of home-delivery services for food and nonfood shopping. Carrefour already collaborates with La Poste in Paris and its close suburbs as well as four other cities to offer one-hour delivery, and the service will be rolled out to 10 new cities this year. Pilot schemes offering delivery from the retailer’s Drive operations will also be tested this year.Overall, Carrefour will hone its assortment, reducing its sku's by 10 percent and working to generate synergies by forging contracts with suppliers on a group level, rather than by individual operation.It will also reinforce its private-label offer, seen as key to tapping into consumer demand for healthier foods, more transparency and more organic products in all of Carrefour’s markets.It hopes that private label will account for one-third of its food sales by 2022, compared with 22 percent currently.Initiatives here include a partnership with WWF to help farmers convert to organic methods, driving local production to account for half of fruit and vegetable sales, reinforcing partnerships with farmers and offering a market-leading proposition in sustainable seafood.For categories beyond groceries, there are also changes afoot, although Bompard remained vague on details. “Nonfood is a significant source of value but it is difficult to differentiate,” he said. “In certain categories and in certain countries, we are no longer competitive.”“My aim is that when customers come into a department in one of our hypermarkets, they have access to the best possible offer, the right products, the right services and the right prices,” he went on. “In certain categories, this means that we need to work with other players, that’s what we’re already doing in purchasing with Fnac Darty. We will develop this in other segments, and you will see this developing progressively, and there will be a certain number of announcements that will show we are working, either in purchasing or further upstream, with other brands.”

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