Carrefour bails out after failing to reach critical retail mass

Paris-based retailer Carrefour is blaming restrictive urban development laws and intense competition for too few retail sites for its decision to close its four Hong Kong hypermarkets.

Carrefour, in Hong Kong since 1996, will be closing the stores from September 18 after failing to expand its existing business.

A company official in Paris said the urban development laws in Hong Kong were 'very restrictive for retail' and the group's original plans to expand could not go ahead.

'In Hong Kong, we had a shortage of places and we had no sites. It was not possible to find new locations and we wanted to become a significant size in Hong Kong,' the official said.

However, retail industry sources speculated whether other retailers had effectively blocked discounter Carrefour from renting larger sites to stop its expansion.

One Carrefour supplier also suggested that the spectre of discounting problems might have again reared its head for Carrefour.

When Carrefour first arrived in the SAR, it attacked the comfortable duopoly run by the established ParknShop and Wellcome.

But local suppliers quickly said they would no longer deliver products unless the French retailer put a halt to its discounting. At that time the Consumer Council quizzed 22 firms which had allegedly black-listed Carrefour.

Seven confirmed taking action to enforce minimum prices, 12 denied the charge and three declined to comment on principle.

Carrefour refused to comment yesterday on speculation that it had been squeezed out of Hong Kong.

Andrew Brent, marketing director for ParknShop, said his group might be interested in renting some Carrefour sites.

'We will look at those sites and consider if they are potentially good investments,' he said. He pointed out ParknShop had not contacted either Carrefour or the sites' landlords at this time. Meanwhile, the Labour Department yesterday said about 490 people would be retrenched as a result of the Carrefour store closures. Hotlines had been set up to deal with their queries.

Carrefour's Hong Kong managing director Bernard Rolland said the company was 'committed' to helping staff find alternative employment.

'We regret to have to dispose of our Hong Kong operations,' he said in a statement.

'We are working closely with the Labour Department to ensure Carrefour meets the requirements of the labour law.'

Carrefour is one of the largest retailers on the mainland and it also operates stores in Singapore, Taiwan, Korea and Indonesia. The group runs 5,246 integrated stores in Europe, Latin America and Asia. Its four Hong Kong outlets are in Heng Fa Chuen, Tsuen Wan, Tuen Mun and Yuen Long.

The retail market has proved tough with many Japanese department stores closing and a fierce supermarket price war breaking out after the entry of Jimmy Lai Chee-ying's Admart last year.