French firm fined

Best check your receipt...

WiC cannot say for sure whether Carrefour sells punchbags at any of its 182 stores in China but Chen Bo must feel like one. The spokesperson for the French firm has had a tough time of late, with the retailer making a lot of the wrong kind of headlines recently.

Just before Christmas, Carrefour got into a public spat with Master Kong, China’s dominant instant noodle brand. The disagreement over how the popular foodstuff should be priced saw Master Kong withdraw its noodles from Carrefour’s stores (see WiC89). That dispute is ongoing, and puts Carrefour at a serious disadvantage versus other big supermarket chains.

In what looked like a further blow, the 21CN Business Herald reported late last month that “Carrefour was in danger of a battle with COFCO” too. The state-owned food giant is said to be angry about fees being charged to stock its edible oil brand Fulinmen on Carrefour’s shelves. The complaint is that they are eating further into slim margins for a product already pressured by rising raw material costs.

Then, in perhaps the worst PR blow of all, the National Development and Reform Commission (NDRC) fined the firm last week for overcharging customers (where cashiers charged more for an item than its tagged price). Chen released a statement in which he said Carrefour “sincerely apologises” to customers, promising to refund them five times the difference.

The supermarket was fined Rmb500,000 ($76,000) by the NRDC, the highest penalty yet to be imposed a “for such a wrongdoing”, reports the China Daily.

The Beijing Times also took aim at the French retailer, noting that in one case in Shanghai a Carrefour cashier had overcharged for a teapot by Rmb12.

The newspaper also said that Carrefour’s PR response was a confusing one, first admitting to having a “flawed pricing system” but then removing references to problems with pricing systems in a subsequent statement.

The recent debacle is all the more serious given the verdict was handed down by one of China’s most powerful government bodies. Carrefour was found to have overcharged in 11 of its supermarkets, stated the NDRC. Its widely publicised announcement is not good for business: the retailer will have to work hard to regain the trust of some of its customers. The China Daily quoted the example of a 28 year-old Beijing shopper who has resorted to taking photos of the price labels on Carrefour’s shelves “to double-check if the cashier is honest”.

The bad news comes as Carrefour struggles to regain its preeminent position as China top supermarket. Last year Taiwanese supermarket chain, RT Mart passed it in sales; while Walmart now has more stores (at 187).

In WiC76, Carrefour’s boss in China, Eric Legros admitted to CBN Weekly the firm had made strategic mistakes in China – for example, it had been embarrassed by the behaviour of local managers who’d taken kickbacks from suppliers (firing eight managers in 2008). In August, Carrefour also shut a store in China for the first time – in Xi’an. Given the much vaunted growth of the Chinese consumer market, it was picked up on in the press as a suggestion that Carrefour was losing momentum.

On a positive note: a new JV in Hebei province will add stores and may reverse its declining market share. Meanwhile Chen Bo will be hoping for less bad news in the Year of the Rabbit.

Keeping track: China Business News has reported that Carrefour may shut stores in Changchun and Shaoxing. The French chain has already closed supermarkets in Xi’an, Dalian, Henan and Foshan, states the paper. This follows a wave of bad publicity for the retailer, including a government fine for overcharging customers, as reported in WiC94.(25 February 2011)

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