French retailer Carrefour S.A on Tuesday announced a preliminary collaboration with Chinese tech giant Tencent Holdings Ltd., becoming the latest companies to combine online and offline selling, in an effort to help boost the brick-and-mortar company’s presence in China.
The companies stated that they seek to merge Carrefour’s global retail expertise and Tencent’s digital strengths through smart selling, mobile payment, and data analysis to increase Carrefour China’s online visibility and customer traffic.
E-commerce is growing at a remarkable rate in China. As a result, this has put traditional retailers on guard. Online sales formed 20 percent of Chinese retail spending in 2017, but have since risen by 32.2 percent. Overall retail has also grown 10.2 percent.
Carrefour also stated that it aims on becoming a global leader in food e-commerce. It is targeting €2 billion ($2.5 billion) in cost savings by 2020. This would be done through optimization of direct buying, rationalization of indirect purchasing, and cutting of logistics expenses.
The company also seeks €5 billion ($6 billion) in annual online food revenue by 2022. Carrefour said measures to achieve this are by investing €2.8 billion ($3.4 billion) in digital offerings and introducing an e-commerce platform in France.
Tencent Plans to Invest in Carrefour’s China Unit
As part of Carrefour and Tencent’s plans to develop online retailing and other technology, the WeChat operator is also planning for a potential investment in the retail company’s business division in China.
Tencent, along with Chinese supermarket group Yonghui Superstores Co. Ltd. has agreed to buy a stake in Carrefour China. Financial details regarding the investment were not provided.
If a deal does take place, it could help revive the retailer’s troubled unit in the country. Carrefour has over 200 hypermarkets in China. However, as consumers shifted to online shopping, its business in the country has weakened.
During the fourth quarter, its sales had declined 5.4 percent amid growing competition from domestic chains.
China’s internet companies have been looking for new sources of growth for their businesses. They were either partnering with well-known retailers or launching their own bricks-and-mortar chains.
The tie-up could raise significance for Tencent’s WeChat application by including shopping to its platform. 93 different industries are now using WeChat Pay, with retail being the most important.
Analyst Naoshi Nema said that the transaction is intended to capture the offline retail market’s penetration ratio in China. Nema explained that e-commerce penetration ratio is quite high in the country, but the offline retail market is much bigger.