Carrefour’s e-commerce service to be launched by next year’

An interview with Gyu Taeg Kim, Country Manager of Carrefour Pakistan at Majid Al Futtaim Retail:

BR Research recently sat down with Gyu Taeg Kim, Country Manager of Carrefour Pakistan at Majid Al Futtaim Retail, on the group’s 10th anniversary in Pakistan. Kim has over 23 years of retail experience and has worked for Carrefour in Korea, Iran and Armenia before joining as the Country Manager of Carrefour Pakistan three years ago. We discuss Carrefour’s experience in Pakistan, its growth plans and the dynamics of the modern trade sector in Pakistan.

Below are edited excerpts from the interview

BR Research: It has been ten years since Carrefour came to Pakistan. Please walk us through the journey so far.

Gyu Taeg Kim: I’d like to start off with an introduction of our group Majid Al Futtaim which is the leading shopping mall, communities, retail and leisure pioneer across the Middle East, Africa and Asia. Majid Al Futtaim holds the exclusive franchise rights to operate Carrefour in 37 countries and currently operates over 270 Carrefour stores in 15 countries. The recently announced Uganda market will be its 16th country.

Majid Al Futtaim opened its doors in Pakistan in 2009 by starting the first of its kind hypermarkets in the country called Hyperstar. Pakistan has immense potential and has a young dynamic population with an average age that is amongst the lowest in the world. The adaptation of the younger generation is much faster when it comes to embracing new retail channels. When I started off as Country Manager in January 2016, we were operating only two stores with one in Lahore and the other in Karachi. Since then it has grown to 7 hypermarkets and one supermarket with presence in Islamabad and Faisalabad as well.

In December 2018, Hyperstar was re-branded to Carrefour by Majid Al Futtaim across Pakistan. This year marks our tenth anniversary in Pakistan and since then, Majid Al Futtaim has invested Rs8 billion in Pakistan and has created 7000 jobs both directly and indirectly. We plan on providing employment to an additional 2000 people every year on the back of our expansion plans.

BRR: What is the difference between supermarkets and hypermarkets?

GTK: According to our definition, if the area is more than 50,000 square feet it is a hypermarket and includes a full range of products including textile, clothes, house-ware products and electronic items under one roof. A supermarket is below 20,000 square feet and sells mostly basic commodity items.

BRR: What about future expansion plans?

GTK: Generally, we remain open to opportunities that will enable us to grow our footprint. We will focus on tier-2 cities in the next phase and plan to open stores in Gujranwala, Hyderabad and Multan within the next two years.

BRR: The footprint of Imtiaz Supermarket and the Al-Fatah group is growing rapidly in the supermarket segment. How do you view this competition?

GTK: The retail space in Pakistan enjoys healthy competition, which we embrace. While other retailers focus on very specific customer segments, i.e. mainly high-end customers or customers with lower spending power, categorized as C&D customers, Carrefour is able to cater to a wide variety of customer segments by offering an unbeatable choice, quality and value at the best price. At our hypermarkets we deliver a best in class shopping experience to our customers and create great moments for them every day. Our main business is consumer goods and fresh produce and in fact more than 70 percent of our total turnover is generated by these two categories.

BRR: How much is Carrefour’s market share in the modern trade space in Pakistan compared to its competitors?

GTK: In Pakistan, 20 percent of the total retail sector is modern trade, which was roughly 12 percent back in 2013. In the modern trade space, we have one of the top market shares. But if I consider it from the end consumer perspective, then we are number one followed by our local competition. We are occupying 30 percent and the remaining percentage is divided amongst our local competitors and other medium sized players.

BRR: The economy is going through a rough patch these days with tough macro-economic adjustments taking place. Consequently, the purchasing power and disposable incomes have squeezed. How do you see this impacting your business?

GTK: You are right. Over the past two years the economic situation has become more challenging. One of the main reasons is the currency depreciation which has resulted in rising inflation. This has made both local and imported products more expensive.

Fortunately, our company’s core business is consumer goods and fresh produce as I mentioned earlier. So, we are impacted much less than our competitors because consumer spending on food items will not go do down much. We are investing more in order to keep the same growth rate. We have experienced double-digit growth since the last two years and foresee this continuing in the years ahead.

BRR: Online retailing is gaining increased traction around the globe. Does Carrefour plan on adding an online segment for its retail business?

GTK: Out of the 14 countries that we operate in, Carrefour is already running e-commerce platforms in ten of these countries. We are also in the final stages of launching our online business in Pakistan, which will be in line with our e-commerce initiatives in other countries. You can expect it to be rolled out within a year.

BRR: Globally, big retail chains such as Wal-Mart enjoy immense bargaining power due to their size and volume. How much bargaining power do you enjoy?

GTK: We are gaining more bargaining power and are developing our private label segment to offer better prices to customers by investing in regional sourcing and purchasing. We have already started supporting local manufacturers to export to other countries. Our products include home linen products and other textile items. By the beginning of next year, we will launch the exporting centre for our group in order to support local manufacturers in an even larger capacity.

BRR: You mentioned that the majority of Carrefour’s revenue comes from consumer goods and fresh produce. Are you investing in the local value chain for these items?

GTK: We have increased direct purchasing from farmers and are ensuring guaranteed procurement in order to sustain prices for basic items throughout the year. The impact of Carrefour extends beyond millions of customers, to more than 700 suppliers and partners across Pakistan. This includes local farmers, manufacturers and producers.