As the saying goes: if you can’t beat them, join them. In recent months the French mass retail market has given way to calls from digital giants. Auchan has partnered with Chinese Alibaba, Monoprix with American Amazon, and on 11 June, Carrefour followed suit by signing a deal with Google.
This was an inevitable strategy as the traditional retail model, especially hypermarkets, is increasingly less adapted to consumer expectations. Users are turning more to e-commerce and organic products, as is evidenced by the fall of Carrefour in distributor rankings. Until 2001, the French group was head-to-head with the number one distributor in the world, Walmart, in terms of turnover. In 2014, it lost its place at the podium. Two years later, the group was even relegated to 9th place, behind Amazon which went from 180th to 6th place in an impressive leap.
"It was difficult to advance alone," said Carrefour.
"Carrefour has not evolved enough with its customers," confessed the group's CEO Alexandre Bompart. Hence this new partnership with Google that will be based on three pillars. First the customer will be able to order products from Carrefour, by vocal command, using Google speaker. Next, the American group will train 1,000 Carrefour employees to "accelerate [the French group’s] digital transformation".
And finally, both groups will open an Innovation Lab in Paris to bring Google’s artificial intelligence experts and Carrefour’s consumers together. "Google is a strong partner, a leader in the technological field, and this alliance will help support these changes," said a Carrefour France spokesman to Novethic.
Outsourcing is not an option for Carrefour
Ultimately, the risk is becoming Google’s subcontractor. This fear was expressed during the Amazon-Monoprix partnership announcement, as the e-commerce leader had been eyeing the French food sector for years. At the end of March, Monoprix gave Amazon the opportunity to put its stamp on the sector. The e-commerce giant will now be able to deliver Monoprix products throughout the Paris region in less than two hours.
"It's not about sub-contracting an activity from one group to another. This partnership requires us to delegate nothing and instead strengthen ourselves with a strategic partner", insists a Carrefour spokesperson. While the distributor will maintain ownership of its data and those of its customers, Google will be able to utilise them. This is especially apparent considering that the French group has agreed to move its entire computing environment onto Amazon premises.
In three years, Amazon will take the market
For traditional retailers, Google is better than Amazon. Since its purchase of Whole Foods in June 2017 for $13 billion, Google has been seen as a shark. To start, the group’s management does not sit well for the organic retailer’s corporate team. Twelve executives from Whole Foods have already left their positions since the buyout. Amazon's practices have been singled out in response: the group reportedly asked suppliers to lower their prices by 25%.
Carrefour may be less at risk with Google than with Amazon. "There's a big difference between Amazon and Google. Amazon's logic is to expand and grow its revenues as much as possible, while Google's logic is to remain influential," said Frank Rosenthal, consultant and specialist in the sector.
But Jeff Bezos's group is not limited to food. "In three to five years, there will no longer be a sector in which Amazon is not represented," said Rosenthal. Amazon now wants to offer bank accounts to its customers. It is also targeting the healthcare sector, with the sale of prescription drugs and medical equipment delivery.
Marina Fabre @fabre_marina