Wal-Mart - Enrico Colla

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crisis (Weinberg (2000), CEO of the. Pinault-Printemps Redoute .... difficulties in certain regions where the two former competitors ... Sam's Clubs. 9,430. 14,749.
For the UK retailing, Wal-Mart’s arrival is an event which is comparable with the oil crisis (Weinberg (2000), CEO of the Pinault-Printemps Redoute group).

Research and managerial issues on global retail competition: Carrefour/Wal-Mart

In recent years, two major retailers have been in the headlines of the specialised press, namely Wal-Mart and Carrefour-PromodeÁ s. According to the most recent rankings, they are, respectively, numbers one and two in the world in terms of turnover and employment. The irresistible ascension of these two giants brilliantly illustrates the argument surrounding the worldwide low price challenge (Colla and Dupuis, 1997) of which they have been and continue to be among the most ardent supporters. It also symbolises the internationalisation of the competitive battlefield in a sector where the combatants have been waging battle on a local level for a much longer time than has been the case in industrial sectors.

Enrico Colla and Marc Dupuis

The authors Enrico Colla is Professor and Research Dean at NEGOCIA, Paris, France. Marc Dupuis is Professor at the European School of Management (ESCP-EAP) in Paris, France, and Chairman of the CERIDICE.

The facts

Keywords Retailing, Globalization, Research, Case studies Abstract Looks at the development of Carrefour-PrimodeÁ s and Wal-Mart, the world current leaders in terms of turnover and employment. Presents seven issues of particular interest to leading managers and researchers and examines how these are dealt with by the two leaders. Concludes that Wal-Mart and Carrefour present two different models which stand in opposition on many points, and questions whether a convergence of the two will not result in a perfect model. Electronic access The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0959-0552.htm

International Journal of Retail & Distribution Management Volume 30 . Number 2 . 2002 . pp. 103- 111 # MCB UP Limited . ISSN 0959-0552 DOI 10.1108/09590550210418128

The concentration movements which the retail system has been experiencing these last two years have moved to a new level which is of concern to company managers, and which researchers cannot fail to note. In early 1998, having undertaken little international development, Wal-Mart decided to enter the European market by purchasing Werkauf, as well as 74 Interspar hypermarkets. What did these acquisitions mean? Knowledgeable observers were not fooled: Wal-Mart, which was quite probably the first retailer to develop a domestic coverage strategy for the US market (on the basis of medium-sized cities) was far from convincing everyone of its ability to reach beyond the borders of the USA. In fact, it had taken its first steps in this direction in 1991, with the opening of its first store in Mexico, and then in 1994, with the acquisition of Woolco in Canada. However, this was not sufficient proof that the Wal-Mart model would be easy to extend internationally, given the company’s oft-cited lack of flexibility and adaptability during the introduction phase. After incursions in Argentina, Brazil and China, the world leader decided that internationalisation should be a major strategic priority as part of an expansion policy, the speed and scope of which have been exceptional. As proof of its worldwide

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Research and managerial issues on global retail competition Enrico Colla and Marc Dupuis

International Journal of Retail & Distribution Management Volume 30 . Number 2 . 2002 . 103- 111

aims, Wal-Mart struck a great blow in Europe when, in the summer of 1999, it built on its efforts in Germany by acquiring ASDA, the No. 3 retailer in the UK. From that point, Wal-Mart’s global strategy was no longer in doubt, and everyone knew that France was one of the priority objectives of this new global retail giant. At the same time, the question arose as to which would be the weakest link among the ‘‘takeoverable’’ companies. For the firm created by Sam Walton, taking over Carrefour would have been killing two birds with one stone, by eliminating a potentially dangerous competitor and establishing a position as potential leader in France. It therefore came as a surprise to everyone when Carrefour and PromodeÁ s acted first by announcing their merger at the start of 1999 (Cliquet, 2001). That changed the worldwide competitive landscape, and from that point, the new Carrefour/PromodeÁ s group became Wal-Mart’s challenger (Tables I and II). In 2001, the world’s two retail giants are simultaneously in a difficult development step, partly for different reasons and partly for similar ones. Wal-Mart is far from having completely exploited the potential North American food market. It recently moved into first position among the country’s food retailers, but its ‘‘supercenters’’ may yet see considerable growth in coming years. The discount stores are no longer developing, but their slow drop in market share is more than compensated by the growth of the supercenters. However, the American economic situation is depriving the leader in like-for-like sales growth, and this is the only element which can increase short-term profits. On top of that, the international and e-business are not doing so well . . .

With regard to the former, Germany is turning out to be as big a difficulty for Wal-Mart as it was for PromodeÁ s and Intermarche´. Selling at prices that are lower than (or equal to) Aldi’s in the latter’s country could be a risky strategy for a company which has only limited purchasing power in the food sector. In the UK, ASDA is generating profits but is requiring significant investments offering deferred profitability. E-business has not started generating profits in the short-term, and nor will it. In the long-term . . . perhaps it will, but only for those who find the proper economic model. In the meantime, it generates nothing but losses, though limited ones. Carrefour has also succumbed to the lure of e-business, though to a lesser degree than its competitors, and its losses have been modest. However, the international situation is difficult in areas of the world other than those which are of interest to Wal-Mart. For the French leader, development difficulties of an economic nature (Argentina) or of a political/administrative nature (China) are coming on top of the consequences of the PromodeÁ s merger. The crisis in Argentina is affecting Carrefour more so than the other companies, as it is the leader in that market. The slowdown in China, resulting from actions from a central government which is anxious to control what happens on a local level, may indeed be temporary, but the previously very rapid growth is likely to suffer. In addition, the hope of obtaining significant profits is fading. In Spain, the merger with PromodeÁ s has created difficulties in certain regions where the two former competitors were so well-established that the new company is having trouble retaining the cumulative market shares. In France, Carrefour also witnesses this phenomenon which is exacerbated by the

Table I Wal-Mart stores Inc.: sales (millions $) Divisions

1991

1993

1995

1997

1999

2000

Discount stores Supercenters Sam’s Clubs International McLane/others Total Net Income

31,342 600 9,430 ND 2,515 43,887 1,609

44,900 3,500 14,749 ND 3,977 67,345 2,333

54,611 11,512 19,100 3,700 4,704 93,627 2,740

58,286 25,534 20,668 7,517 5,953 111,958 3,526

61,929 46,752 24,801 22,728 8,763 165,013 5,377

121,889

Note: ND: not available Source: Discount Store News

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26,798 32,100 10,542 191,329 6,295

Research and managerial issues on global retail competition

International Journal of Retail & Distribution Management Volume 30 . Number 2 . 2002 . 103- 111

Enrico Colla and Marc Dupuis

Table II Carrefour sales and profit evolution (Eur. mil.)

Net sales Net profit Per cent

1997

1998

1999

2000

25,804.9 607.2 2.3

27,408.7 721.2 2.6

51,948.0 1,134.8 2.2

64,800.0 1,050.0 1.6

Source: Carrefour

organisational consequences of the merger, which are negative in the short term but should be positive in the long term. Carrefour had already experienced this situation when it acquired Euromarche´. Given this situation, Leclerc is grinning from ear to ear while continuing to acquire market share. Certain analysts are now starting to express doubts. Might Carrefour be in the process of excessively weakening its image as a discounter? For the French, price remains a very important factor in the choice of one’s main store, and any company which forgets that fact and loses the delicate balance of the retailing mix which ensures consumers’ value for money might well have a ‘‘price’’ to pay for this oversight . . . Carrefour can react to Leclerc’s pressure, and it must do so in order to anticipate more of the same from Wal-Mart. Carrefour and Wal-Mart have both had, from an historical point of view, an obsession with low prices (Colla and Dupuis, 1997), but the similarities stop there. They have a differing approach to the future of retailing (Table III), and each one can put considerable financial strength behind its view. Moreover, there are other matters which need to be looked into in greater depth given their high managerial implications.

Seven managerial and research issues The new face of retailing is leading managers and researchers to adress a certain number of important issues, seven of which we felt to be of particular interest: Question 1: Vertical competition or horizontal specialisation? In the 1920s, the world’s top group in terms of turnover were in the metallurgy industry, in the automobile sector in the 1950s, in the petrochemical industry in the 1980s, and in multimedia at the end of the 1990s; retail groups could take over among the first places during the second decade of this twenty-first century. In terms of turnover, is Metro not

already the leading company in Germany? And is Carrefour not getting close to first place in France? Over and above the quantitative side, it is retailers’ contribution to the value chain which must be reconsidered. Large-scale retailers are getting more and more involved in product design (private labels) they develop concepts, are learning to use the very powerful and sophisticated computer systems; on this basis, the worldwide Wal-Mart vs Carrefour battle may re-ignite the debate on the retail place in a global economy. Wal-Mart’s philosophy is based on a careful analysis of the retail value chains which, given its size, the giant from Bentonville can impose on suppliers with a single objective in mind: to reduce costs in order to be more competitive and to simultaneously increase profitability. With this in mind, Wal-Mart sees itself purely as a distributor having one key weapon, i.e. the information revolution (Tibi and du Brusle, 1998), in order to carry out what it considers to be its line of business. Quite the contrary, certain major European retailers, such as Zara or H&M, want to have more control over the value chain and to become vertical competitors of the manufacturers not only in terms of production/distribution, but also with regard to product design. Some are promoting own brands, such as Carrefour, while others are integrating part of the production, such as Intermarche´ (Pache´, 1999). This leads to an interesting area for study, i.e. which will be the winning strategy? Striving to control the entire process, or devoting all of one’s efforts to the downstream side? Question 2: The place for innovation in retailing? Both Carrefour and Wal-Mart are innovators, but in different areas. With the hypermarket, Carrefour was the innovative pioneer of this concept (Burt, 1994) which brilliantly applied the ideas preached by Trujillo and the NCR company at the end of the 1950s. After four decades of existence, the hypermarket has demonstrated its ability to become a considerable war machine on both the national and international levels. Wal-Mart, for its part, has not really created any new formats; for a long time, it followed

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Research and managerial issues on global retail competition

International Journal of Retail & Distribution Management Volume 30 . Number 2 . 2002 . 103- 111

Enrico Colla and Marc Dupuis

Table III Comparative strategies of Carrefour and Wal-Mart

Vision of the market

Main formats

Product coverage Coverage of the domestic markets International development strategy Entry strategy in foreign countries International coverage (number of countries) Logistical and information technology expertise Strength of own brand Type of relationship with suppliers Marketing positioning

Communication Management of the manpower

Carrefour/Promode`s

Wal-Mart

’’Globalisation is a reality which has been imposed on all retailers; underlying it is the emergence of a global middle-class which has a new consciousness which comes from the freedom to move around, to choose, and to reflect on what it wants, and will therefore buy.’’ (Daniel Bernard) Hypermarket, supermarket, hard discount

Rule 8: Exceed your customers’ expectations. If you do, they will come back over and over. Give them what they want - and a little more Rule 9: Control your expenses better than your competition. This is where you can always find a competitive advantage (Sam Walton) Discount department stores, wholesale members’ clubs, supercenters, neighbourhood markets Strong penetration of general merchandise; increasing food diversification Leading US distributor

Products and services becoming commonplace Strong food penetration Leading French and European company by turnover Worldwide ambition. Strong presence in Latin America and Asia Organic development or alliances with management control 26 Has still to improve Quite strong ’’Back margins’’ strategy Low prices/new services Offering a rational and pleasant buying experience First worldwide campaigns Large-scale attraction promotion Decentralisation culture

on the heels of K-Mart in the discount department stores sector, which it only gradually took over. It then imitated the wholesale membership club (WMC), developed by Costco, becoming the No. 2 player in that market. Finally, it borrowed the hypermarket concept from Meijer (as well as from Carrefour and Auchan), while adapting it to the US market (Vance and Scott, 1994). Up to now, Wal-Mart’s main asset has not been that it was first with new store concepts, but rather the impressive speed and efficiency with which it integrated and built on new formats. Indeed, one of Wal-Mart’s great strengths is its sophistication in real-time data gathering from its network, which has helped it to develop sophisticated data warehouse tools and computerised data exchanges with suppliers, thus providing impressively accelerated stock turnover. Some observers say that Wal-Mart’s information technology investments are even higher than NASA’s!

Recent worldwide ambition Strong presence in Europe Small scale organic entry and purchases of existing businesses 7 Very high expertise and performances Weak Cooperation in the management of the value chain ’’Every day low prices’’ Customer satisfaction and cost-oriented distributor In the process of internationalisation Employees are ’’associates’’

Question 3: The key factors for successful internationalisation? The internationalisation of retail companies has become a major area for investigation by researchers in this field. The problem is no longer deciding if or where one should internationalise, but rather how to succeed in different cultures and on different continents (Dupuis and Prime, 1996). The introduction strategies, but also the survival and development strategies within increasingly difficult competitive contexts, and the problems surrounding the international management of multicultural and multi-channel networks are among the management and research areas which are still in their earliest stages. Moreover, as certain companies have reached a maturity phase, the cross-fertilization of know-how and of experience is a source of new questions on the no longer unilateral impact of a dominant company on its subsidiaries, but also of the latter’s impact on the parent company, as we

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Research and managerial issues on global retail competition Enrico Colla and Marc Dupuis

International Journal of Retail & Distribution Management Volume 30 . Number 2 . 2002 . 103- 111

have seen with 7-Eleven, in Japan, and with Habitat France in Europe. Dia, developed by PromodeÁ s in Spain, might well therefore become the limited line discount specialist of the new Carrefour group. The Wal-Mart/Carrefour struggle is, in this regard, symbolic of the new global retailing battlefield. Carrefour is present in 26 countries (Table IV), whereas Wal-Mart has barely made it to ten (Table V). Wal-Mart, however, is present in Europe, the world’s largest market, whereas Carrefour is absent from the USA, where its penetration never really succeeded beyond two or three retail outlets. Carrefour has succeeded in exporting a strong concept, i.e. the hypermarket, which is well-suited to the start-up and development phase in developing countries. It is through the use of an adaptable strategy on the store level that French-style hypermarkets are currently expanding in southern Europe, South America, Asia and increasingly in central and eastern Europe (Colla, 2001). In the same markets, Wal-Mart has displayed little adaptability in terms of its marketing mix, which has resulted in considerable difficulties; might its means be better suited to the highly-

developed countries of northern Europe? The future may help us to answer this question which merits the implementation of special observation systems. In terms of developing the range, an ability to develop retail brands with local suppliers is an important factor. The same is true of distribution contracts with local small- and medium-sized enterprises which have locally popular brands or products. Carrefour is somewhat further ahead than Wal-Mart in this regard, particularly with food and beverages. Also of increasing importance are the international management of human resources and experience in the management of multicultural teams (Lanis, 2000). In this area, the greater know-how developed by Carrefour has become a significant competitive weapon. Daniel Bernard, Carrefour CEO, feels that his group has the greatest number of international teams. Another critical success factor is the ability to control all logistical phases. For multinational retailers, it is no longer a question of buying from import-export companies or of placing orders with international shippers, it is rather a question of managing a process which covers everything

Table IV International development of Carrefour in 1999 Country Argentina Belgium Brazil Chile China Colombia Czech Republic Greece (Marinopoulos) Indonesia Italy Korea Malaysia Mexico Poland Portugal (Sonae) Singapore Spain Slovakia Taiwan Thailand Turkey

Number of stores 300 483 193 2 23 2 5 313 7 912 15 6 17 16 366 1 3,098 1 23 10 32

Formats 22 (HM), 133 (HD), 145 (SM) 60 (HM), 423 (SM) 69 (HM), 124 (SM) HM HM HM HM 14 (HM), 133 (SM), 166 (HD) HM 38 (HM), 288 (SM), 532 (CS), 9 (C&C), 47 (FF) HM HM HM 7 (HM), 27 Global (SM) 17 (HM), 64 (SM), 283 (HD) HM 117 (HM), 180 (SM), 2239 (HD), 532 (CS), 30 (CC) HM HM HM 7 (HM), 25 (HD)

Note: HM = hypermarkets, SM = supermarkets, HD = hard discount, CS = convenience store C&C = Cash and carry Source: CIES (2000)

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Research and managerial issues on global retail competition

International Journal of Retail & Distribution Management Volume 30 . Number 2 . 2002 . 103- 111

Enrico Colla and Marc Dupuis

Table V Wal-Mart international in 1999 Countries

Number of stores

Argentina

13

Brazil

14

Mexico (53 per cent Cifra) Puerto Rico Canada Korea China Germany UK

Formats 10 Supercenter Wal-Mart 3 WMC Sam’s 9 Supercenter Wal-Mart 5 WMC Sam’s 27 Supercenter Wal-Mart 31 WMC Sam’s + 129 Cifra stores 9 Wal-Mart DDS 6 WMC Sam’s Wal-Mart DDS 5 WMC Sam’s 5 Supercenters 5 Supercenters 1 WMC Sam’s 74 Interspar (hypermarkets) 21 Wertkauf (hypermarkets) Asda (superstores and hypermarkets)

458

15 166 5 6 95 282

Source: CIES (2000)

from the sourcing to the delivery to the stores. The systems required to manage such procurements are highly complex, particularly for products of a fashion nature, of which the variety and uneven demand are major difficulties (Maquin, 2000). The complexity increases even more if we introduce just-intime stock management systems. Unfortunately for Carrefour, Wal-Mart is out in front in this domain. Among the factors which have allowed it to benefit from this competitive advantage are its market experience in the management of non-food products, and textile products in particular, in the USA, its ‘‘every day low price’’ policy, the early adoption of the latest technologies and its very centralised management. Question 4: The international critical size? Wal-Mart’s national basis is continental, whereas Carrefour’s is limited to the countries of southern Europe. This means that Carrefour will remain smaller than its rival for a long time, while waiting for the development of the Asian markets. The alternative would be acquisitions in the USA, as were carried out by Ahold, Sainsbury and Delhaize. And yet, the risks are enormous and who knows what the returns might be? Another option would be to enter the other European countries, where Wal-Mart has already done three acquisitions (Wertkauf, Interspar, ASDA). But does Carrefour have

the means to do this? Will the synergies in Europe be great enough and will Carrefour truly have the ability to provide the consumers in those countries with greater value than that provided by the leading local retailers? But is global size really important? Carrefour has achieved leading market shares in South America (Argentina and Brazil) and in Asia, where Wal-Mart is still a small operator. Moreover, Carrefour is the leader in each European country in which it has stores (Spain, Belgium, Portugal, Grece) or at least is a second player (Italy), while Wal-Mart is in third position in UK and is even weaker in Germany. Recently discussed by certain researchers (Filser 1998), the notion of the critical size seems to haunt the management of large-scale distribution. The Carrefour/PromodeÁ s merger naturally brought to mind the notion of the maximum acceptable market share in a competitive economy in a given zone. This being the case, is there truly a minimum critical threshold which is necessary in order to develop an international competitive advantage? The globalisation of competition has reactivated the debate surrounding this issue, and on the problem of measuring such thresholds on different levels: purchasing and logistics; the sales front; data warehouses; EDI; communications;

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human resources; and inter-cultural know-how. The race for international development does not result from a desire to reach a particular critical threshold: the primary reason is to increase the value of the firm. Retail companies create value for their shareholders (and for their managers) through growth, and so they must always keep after it. Size is also not the main success factor for a given format or company when operating abroad; this success is more often tied to innovation, expertise in the line of business and a differentiating positioning. This having been said, scale and experience can result in savings on the level of each country, and even of each larger region (Eastern Europe, North America, Latin America, Asia). Carrefour experienced this firsthand in the USA when it tried to implement its hypermarket concept when up against Wal-Mart, but without a sufficient purchasing capacity. Savings related to the size of the company (purchases, logistics, communication) strengthen the competitive advantages of the leaders and help them to maintain and reinforce their national and/or regional domination (e.g. Carrefour in Latin America). In addition, and with different methodologies, both Wal-Mart and Carrefour have accumulated war chests which have allowed the former to acquire large networks, as it has done in Europe, and for the latter to quickly develop its establishments in a given continent, as Carrefour has done in Asia. The development of international trade and of trading agreements (GATT), free trade areas (NAFTA) and custom unions (European Union) have also resulted in changes to the playing field, both in terms of purchases (European associate buying centres and world-wide virtual marketplaces) and of logistics (creation of continental or sub-continental logistics poles). In such cases, scale- or experience-related savings will be possible on an international scale. Retailers which are less active abroad, or which have only a national basis, could find themselves in a weak position. Question 5: The portfolio of store formats? When it comes to the exportation of store concepts, the major successes had involved single format strategies, such as:

cash and carry (Makro and Metro); hypermarkets (Carrefour); hard discount (Aldi); large-scale specialists such as IKEA; or hyper-specialisation such as Benetton. The retail internationalisation also implies multi-format strategies (hypermarket, supermarket, hard discount, category killers), the emergence of varied or combined organisational design (franchise/branches) or even purchase operations with modifications of the sales formulas, such as Wal-Mart is attempting in Germany by injecting its vision and logistical/informational know-how into the networks which it has acquired. Wal-Mart’s multiple formats result from its growth policy within the internal market and from its development policy, initially for the DDS (discount department stores), and then the WMC (wholesale membership clubs) and finally of the ‘‘supercenters’’. Up to now, the Bentonville company has mainly exported ‘‘Supercenters’’ and WMCs; only in Canada does it have discount stores, after having acquired a local chain (Woolco). It is not impossible that the company’s next step will be a probable launch of medium-sized local supermarkets (Neighbourhood Markets), similar to English and German superstores. PromodeÁ s has always been a multi-format group (hypermarkets and supermarkets), while diversification efforts are more recent for Carrefour (like for Auchan and Ahold). As a result, the new Carrefour group is automatically a multi-format group, which will not fail to eventually bring to light internal cannibalisation problems inherent to this type of strategy, the opposite one to that of the category killers, namely H&M or IKEA, which are keeping to single-format strategies. Question 6: The new considerations of the information society and the electronic commerce challenge? The main competitive advantage credited to Wal-Mart is that it was able to use the new information technologies to systematically lower costs, and by extension the margin rates and prices. This helped it to obtain productivity results greater than those of its competition. On the other hand, Carrefour has never been a leader when it comes to introducing new technologies. Notwithstanding the innovation of the hypermarket concept, its competitive

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advantages include an ability to adapt its stores to their catchment areas, thanks to motivated and autonomous managers and decentralised organisation. In recent times, and prompted by Daniel Bernard, the company has made considerable efforts in order to increase centralised decisions, logistical efficiency and the use of computerized management systems. Still, Wal-Mart seems to be ahead of Carrefour in Internet-based B2B and B2C activities. For the former, its connection system with its suppliers (‘‘Retail Link’’) and its very high purchase volume, allow it to act on its own marketplace. On the other hand, at the beginning of March 2000, Carrefour announced an alliance with Sears and the Oracle company for online procurement services. Shortly thereafter, three other groups came on board, namely Sainsbury, Kroger and Metro. The most recent arrival is the Australian company, Coles Meyer. In terms of purchase volumes, this marketplace (global net exchange) is smaller than the one in which Auchan is participating (WWRE), though larger than Wal-Mart’s. Of course, the latter does not have to obtain the agreement of six partners in order to carry out its operations. The economic advantages of marketplaces probably result more from productivity improvements (such as lowering the cost of invoices), than from the pooling of purchases between very different partners. From this point of view, Wal-Mart may well maintain its advantage, but Carrefour should be able to reduce the gap separating it from the leader. In terms of B2C, Wal-Mart was the first major large-scale retailers to open an Internet site in July 1996. Consumers did not like the site, and complained of its unattractive merchandising presentation and slow, laborious navigation; after making improvements, Wal-Mart modified the site in 2000. At the end of 1999, Wal-Mart and AOL, the world’s No. 1 Internet access provider, with 20 million subscribers, announced a partnership. Wal-Mart online with AOL now offers a low-priced access, one intended primarily for clients living in small cities lacking local Internet access. The US leader has also increased the integration between online sales and in-store sales: it is planning to install Internet stations in its stores, thereby allowing clients to order products which are unavailable in the stores.

They will also serve to inform clients of the promotions in any given store, and to offer exclusive products (e.g. DVD players and top-of-the-line cameras). This click-andmortar strategy seems to be well perceived by consumers as confirmed by a recent market survey (Reda, 2001). Unlike Wal-Mart, Carrefour’s entry into the B2C field began without much in the way of alliances or partnerships, a possible weakness in this area. Its online supermarket site, Ooshop, has the lowest market share in France, and it benefits neither from the company’s very good brand image nor from its communications expenses. The announcement (in 1999) of the opening of specialised sites and, eventually, of a portal have not been realised. In this area, the French leader’s strategy seems less clear to observers and financial analysts than that of Wal-Mart. Moreover, its click-and-mortar connections are yet to be developed. Given the uncertainties surrounding online food sales, all of these elements could actually result in the risk of falling behind Wal-Mart and other international leaders, such as Tesco, the European leader in groceries online commerce. However, consumers will continue to visit stores in order to be able to see, smell and feel quality products, particularly when it comes to fresh produce, but also for textiles, perfumes and so on. Though Wal-Mart may well be the leader on a technological level, Carrefour is out in front in marketing and merchandising (Filser, 2001). Which competitive advantage will be most important in the future? Which company will be quicker to correct its weak points? These and other questions will have to be considered by managers and retail academics. Question 7: Suppliers-retailers relationship, ‘‘back margins’’ or working on value chains? The confrontation symbolised by Carrefour and Wal-Mart stems, as we stated (Question 1), from two different approaches in supplier/ distributor relationships. The legal contexts of the home countries of our two giants have increased this business distance. In France, the tradition of producer/large distributor relationships has often been mired in conflict, the aim of which was the lowest possible purchasing price (Manzano, 1997). The supplier credit terms, longer than the stock

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turnover, are among the financing sources for the development of retailers. Some suppliers feel that the problems of surrounding ‘‘back margins’’ and multi-form trade allowances (merchandising support, trade deals and slotting allowances) (Colla, 2001), have perverted the notion of relationships. WalMart’s arrival in Europe, with its tendency to negotiate net prices after a careful examination of the value chains, may change the situation. European suppliers might not be against having a newcomer like Wal-Mart impose a new relationship business culture. Despite its bargain strength, Wal-Mart may offer a better relationship to its suppliers than its smaller retail competitors (Bloom and Perry, 2001). ECR and Category Management, present more in theory than in fact in countries such as France, might then have an easier time. Wal-Mart is more used than Carrefour to develop a working relationship and share information with key suppliers. Without entering into this question here, let us just say that an objective and comparative study of the relationship practices on either side of the channel and of the Atlantic would be particularly worthwhile in a debate where objectivity is not always as plentiful as one might desire.

Conclusion The global scale of the retail battlefield is of particular interest to both managers and researchers, and will most likely see new and spectacular movements during the coming years. Tremendous reactive capabilities will be required to be successful and strategies will have to focus on the long-term while maintaining an ability to react very quickly. In this battle of Titans between Wal-Mart and Carrefour, two retailing models stand in opposition on many points, despite the shared battle cry of low prices. Will the two models converge or not toward some ‘‘ideal’’ model? Will the convergence, if any, concern some of the issues, and which one? Or will they maintain strong differences confirming that, even in mass retailing, different successful models may exist? We hope that the seven issues that we pointed out in this article are useful answers to those questions. In any case, they are part of a framework for further research that the authors are developing.

References Bloom, P.N. and Perry, V.G. (2001), ’’Retailer power and supplier welfare: the case of Wal-Mart’’, Journal of Retailing, Vol. 77, pp. 379-96. Burt, S. (1998), ’’Carrefour: internationalising innovation’’, in McGoldrick, P. (Ed.), Cases in Retail Management, Pitman Publishing. Cliquet, G. (2001), ’’The megamerger: CarrefourPromodeÁ s’’, European Retail Digest, No. 30, pp. 32-5. Colla, E. (2001), La Grande Distribution Europe enne, Vuibert, Paris. Colla, E. and Dupuis, M. (1997), Le DeÂfi Mondial du Bas Prix, Publi-Union, Paris. Dupuis, M. and Prime, N. (1996), ’’Business distance and global retailing: a model for the analysis of key success/failure factors’’, International journal of Retail & Distribution Management, Vol. 24 No. 11, pp. 330-8. Filser, M. (1998), ’’Taille critique et strate gie du distributeur’’, DeÂcisions Marketing, No. 15, September-December, pp. 7-17. Filser, M. (2001), ’’Reenchanting the shopping experience: case studies from France’’, European Retail Digest, No. 30, pp. 23-6. Lanis, C. (2000), ’’La gestion des ressources humaines dans l’entreprise globale: le point de vue du chasseur de teÃte’’, Market Management, No. 1. Macquin, A. (2000), ’’Globalisation de la distribution et besoins logistiques’’, Market Management, No. 1. Manzano, M. (1997), ’’The relationship between manufacturers and retailers in French marketing channels’’, Proceeding of the EAERCD 9th International Conference on Research in Distributive Trades, Leuwen. PacheÂ, G. (1999), ’’When logistics threaten to become a source of competitive disadvantage: the Intermarche cooperative case’’, in Dupuis, M. and Dawson, J. (Eds), European Cases in Retailing, Blackwell Publishers. Reda, S. (2001), ’’Websites drive in-store holiday sales’’, Stores, February. Tibi, E. and du Brusle, A. (1998), Wal-Mart on the March in Europe, Warburg Dillon Read. Vance, S. and Scott, R. (1994), A History of Sam Walton Retail Phenomenon, Twayne Publishers, New York, NY. Weinberg, S. (2000), Assises du Commerce et de la Distribution, MinisteÁre de l’EÂconomie, des Finances et de l’Industrie, Paris, 13 January.

Further reading Colla, E. (2002), ’’Retailing in France’’, in Howe, S. (Ed.), Retailing in the European Union: Structure, Competition and Performance, Taylor and Francis, London (forthcoming). Dupuis, M. (2000), ’’ReÂussir sa glocalisation’’, Market Management, No. 1.

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