Watch out for Carrefour Express outlets near you

BT: Late last month, Carrefour opened a convenience store in Kuala Lumpur under the franchise concept in a move to gain a bigger slice of the RM64 billion retail market in Malaysia. MALAYSIA'S smallest hypermarket in terms of outlets, Carrefour, appears to have skirted rules by moving into the convenience store business. It is a clever move because the stores, which are not allowed for foreigners under current rules, will be run under the franchise concept. By doing so, the business falls under a different set of rules under the Ministry of Entrepreneur and Cooperative Development. Currently, hypermarkets are regulated by the Ministry of Domestic Trade and Consumer Affairs. Carrefour officials have declined to comment.

Late last month, the French retailer opened a convenience store under the brand, Carrefour Express, in Wangsa Maju, Kuala Lumpur. More stores will be opened, one source told Business Times. This means that the franchise concept may help Carrefour gain a bigger slice of the RM64 billion retail market in Malaysia. Although it was the first to enter Malaysia in 1994, Carrefour has the least number of outlets at 13. It trails Hong Kong's Dairy Farm, which has 28 Giant hypermarkets, and the UK's Tesco, which has 14 stores. Dairy Farm also operates Giant and Cold Storage supermarkets/superstores and the Guardian health and beauty/pharmacy chain. Tesco, meanwhile, also runs six Tesco Extras which cater for both retail and wholesale buyers.

.... Carrefour is the second largest retail chain in the world in terms of revenue, after the US' Walmart. According to the Carrefour group website, it currently operates four main grocery store formats: hypermarkets, supermarkets, hard discount and convenience stores. It has more than 15,000 stores, either company-operated or franchises. As at December 31 2007, there were 4,800 convenience stores worldwide, 95 per cent of which are operated under franchise agreements.

MyTake. A very clever move by Carrefour to outsmart some of the local protectionist guidelines set by the Ministries. By franchising, Carrefour capitalised its brand name and enables it to expand quicker, deeper and further to the customers without taking too much risk. I believe the stores set would be similar to the ones like 7-11 but having a wider range of fresh daily groceries produce ala small mini markets. Because of economies of scale, the price will be very competitive. I think the housing mini markets will be badly affected by this move as competition sets in but it is definitely a plus for consumers. I can smell this franchising concept a success already provided the Ministries don't step in and stop it.

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