Carrefour to launch hypermarkets as 2 U.S. firms ready versions

Discount Store News,  July 6, 1987  by Arthur Markowitz

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Carrefour to Launch Hypermarkets As 2 U.S. Firms Ready Versions

SECAUCUS, N.J. -- Carrefour, the French hypermarket pioneer, will finally test its 20-year-old concept in the United States just as two American companies are poised to roll out a number of these combined supermarket/general merchandise store mini-malls.

Carrefour, the $8.6 billion international retailer that operates over 100 hypermarkets in four countries, planned to enter the U.S. market with two stores this year (see DSN, Nov. 10, 1986, page 1), but ran into a zoning setback. Instead it will only launch one unit this fall in Philadelphia, with the second due next year in the Brookhaven, Long Island, suburb of New York.

Executives said the two proposed company-owned stores should help answer the question of "whether hypermarkets can capture a significant share of the U.S. market and make an impact as a new retailing concept or turn out to be just a phase that American merchants can forget."

Carrefour USA president and chief executive officer Girard de Ganay said the Philadelphia store would be a good test because the unit's Northeast market meets the hypermarket's demographic criteria of high population density, middle- and upper-income consumers as well as easy shopping accessibility through an extensive network of roads.

"We should know within a year . . . whether Carrefour's hypermarket concept is right for the American market," he said.

Carrefour in the U.S. will rely on food to draw traffic, he said. The store's projected food volume and sales per square foot are expected to be "much higher than traditional supermarkets; [which] will enable us to go with low margins of around 10 percent to 12 percent in food," he said.

General merchandise "is more complex. We will make a large offering and be competitive with K mart and other discounters, who are our main competition," he added.

Membership warehouses, he explained, are "competition in some areas: for consumers, hypermarkets are more convenient than membership warehouses, but for businesses, the warehouses are more attuned to their needs in areas like furniture."

Carrefour's Philadelphia prototype is due to debut about the same time as retailing giant Wal-Mart launches its first two hypermarkets, called Hypermart USA, with another duo already planned for 1988 (see story, page 1).

Carrefour's second store is due to open in 1988, the same year in which Biggs, the three-year-old, one-unit Cincinnati-based hypermarket, will hit the expansion trail by opening stores in the Cincinati suburb of Fairfield and in Thorton, Colo., following with a unit in Tampa, Fla., in 1989. Biggs, whose owners include $2 billion-plus Euromarche, Carrefour's big rival, and Super Valu Stores, the Minneapolis food retailer and parent of discounter ShopKo, projects opening up to 30 hypermarkets by 1995.

Despite the growing American retailer interest in hypermarkets, de Ganay does not expect to see these stores account for the same high percentage of the food and general merchandise market in the U.S. as in France.

"We probably should have developed hypermarkets in the U.S. 20 years ago as we did in Europe. Our move now will show us whether hypermarkets are a past or future retailing format [in the U.S.]," he said.

If the concept proves viable, Carrefour "would prefer to grow as a regional operation, with the Northeast as the likely market," he said, while acknowledging that the area doesn't have the space for fast development. Carrefour could eventually open a total of 15 hypermarkets in the New York and Philadelphia metro markets, he said.

Hypermarkets have been compared to mini-malls because they offer food, general merchandise and specialty shops and services like banks, shoe repair shops, fine jewelry stores, auto centers and fast food restaurants.

While Carrefour will own and control each hypermarket, the French firm's U.S. arm is a highly decentralized operation. Each hypermarket is almost a separate business with its own merchandising and operational staffs.

Each store has a top executive called a vice president of store operations, who is responsible for the entire Carrefour mini-mall. "He controls prices, services and image, rather than the shopping center approach, with different operators for the food and non-food stores," he said.

"Our management philosophy is a decentralized operation, with management, buying and operational responsibilities taken at the lowest level. Each store is a profit center, running its own departments and handling operations like human resources," he said.

Each store will have about 30 buyers, one or two per department, all reporting to the unit's merchandising vp.

Carrefour will have 60 checkouts to handle up to 15,000 customers a day shopping its full-service supermarket (with deli, bakery and seafood departments), as well as its basic assortment of general merchandise (that excludes categories like computers, RTA furniture, fashion jewelry and building supplies, but includes lawn & garden).