Inflation Is Driving Carrefour Franchises Out Of Business In China

carrefour china

Photo: gruntzooki on flickr

The biggest foreign retailer in China, Carrefour, not Walmart, is closing stores left and right because of shrinking margins.Employees in Changchun and Shaoxing say they have stopped replenishing stock and will be closing soon, according to Global Times. Along with other store closings, this would represent Carrefour’s biggest shutdown in 16 years in China.

The reasons are obvious from a macro perspective. Price inflation is increasing input costs and hurting consumers.

On a store level, Carrefour has an especially loose franchise structure, where owners rely on sales commissions and entrance fees for profit, according to Global Times. Carrefour’s attempts to pass price increases on to the consumer have been stopped by the government.

Wal-Mart doesn’t franchise in the same way, but the corporation will still eat the cost of Chinese inflation — on both sides of the Pacific.

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