After more than two years in operation, the website – which sells only general merchandise – has been shut as part of a broader restructuring of the group’s operations. Rather ironically, the announcement came the same week that Amazon and Google launched their e-book stores in the country. And pure play online retailers aren’t the only ones eyeing up the Brazilian e-commerce market. Global competitor Casino, already the largest retailer in Brazil, runs the country’s second largest online retail business through its Novo Pontocom division. Meanwhile, Walmart, who trails Carrefour for the number three position in the country, has prioritized Brazil as one of four markets to grow online sales.

So why the u-turn at Carrefour? According to the retailer, the move will enable the France-based retailer to focus on growth with its hypermarkets, wholesale operations and financial services unit. It’s clear that CEO Georges Plassat, who took the helm earlier this year, has been living up to his nickname “The Cleaner”. Since taking over at the troubled retailer, Plassat has made some fairly drastic changes including the exit or spin-off of non-core markets: Indonesia, Colombia, Singapore, Malaysia and Greece. Whereas his predecessor Lars Olofsson was obsessed with fixing the hypermarket, Plassat takes a far more pragmatic view. Carrefour is spread too thin.  They are in too many markets. They are unable to achieve the synergies needed to maintain their status as the world’s second largest retailer. In fact, we at Planet Retail expect them to drop from the number two slot in 2013.

While we believe it makes sense to axe non-strategic assets, we can’t help but wonder if Plassat is cutting off his nose to spite his face. Over the next five years, Planet Retail predicts that Brazilian e-commerce sales will grow by 140% to $59 billion. The country’s burgeoning middle class will be a key driver of this growth. In fact, retailers trading in Brazil such as Walmart often adapt their online ranges to reflect the higher socio-economic levels of their online shoppers, as compared to those instore. Looking ahead however, e-commerce will continue to expand beyond major cities such as Sao Paulo as lower-income consumer groups benefit from increased access to the internet. There is plenty of growth to be had and Carrefour will simply be missing out.

Who's cheapest? Everyone.

The fact is that price alone is not enough, further evidence of which we’ll see tomorrow when Tesco is expected to report its first drop in profits in two decades. Low prices are not a differentiator, they are an expectation. I recently tried out the Asda Price Guarantee, which promises to be 10% cheaper than the competition, and was surprised to find that on this occasion the retailer with the smallest price gap was in fact Waitrose. Retailers who are able to offer genuine value for money with better quality foods, improved customer service and a more compelling instore experience will be the ultimate winners.

Asda won, but surprisingly Waitrose turned out to be cheaper than Tesco, Sainsbury's and Morrisons.

But that’s not to say that price isn’t important. You only need to look at Aldi who saw sales rise by nearly one-third last year. While Justin King and Philip Clarke point the finger to cash-strapped shoppers putting fewer items in their basket, Aldi says they are in fact the only UK supermarket seeing volume growth. Just how they measure this is another story, but the point is that in a market with negative to flat volume growth the last thing Tesco needs is a discounter upping its game with higher quality foods, more brands and crucially better sites. And unlike most of the grocers, Aldi isn’t quitting the space race just yet.

The much bigger challenge for Tesco of course is sorting out its own stores. Investment has begun with 100 outlets having been remodelled. But what about the other 3,000 odd stores in the UK? Improvements in own label (overhaul of value line, extension of Venture brands) are encouraging but consumer perception will not change overnight. An ongoing concern is what to do with those large out of town superstores that shoppers today are simply shunning. Tesco, like its French peer Carrefour, is testing the removal of some non-food categories and replacing them with food. Not sure I entirely agree with this model – is the answer really to replace a few TVs with 20 varieties of tomatoes? But hypermarkets are stuck between a rock and a hard place and in categories where they cannot be the cheapest, they need to offer a point of differentiation or simply exit the category. Carrefour is doing the same with jewellery and mobile, for example – two categories that are not only non-core but also quite labour intensive.

In any case, Tesco will need to find its feet soon.

The death of big-box? Shoppers are visiting Walmart stores less frequently as they opt for online instead.

What I found most astounding was the very clear divergence between average ticket and traffic. In other words, people are buying more at Walmart (a good thing) but visiting less (not such a good thing).

This was most prominent in China which, despite being one of Walmart’s key growth markets, has been a headache for the retailer in recent times. Walmart has been guilty of land grabbing in China in the pursuit of rapid growth. As a result, they have settled for a host of inappropriate sites – too many floors, awkward layouts – which is resulting in shoppers visiting the stores less frequently. Although I fully agree that it makes sense to take a pause and come up for air (they are halving square footage growth this year), the challenge will be finding large enough sites, particularly in Tier II and III cities, that fit an American style big-box. We have revised our forecasts down quite considerably.

In Brazil, you have to admit that a 6.5% rise in average ticket is promising and, despite what we may hearing from suppliers, perhaps a sign that EDLP is beginning to work in that market after all. That said, transitioning to EDLP is not cheap. Despite reducing advertising costs (no flyers needed for EDLP!) during the quarter, Walmart Brazil is still operating at a “slight” loss. Like China, we have revised down our forecasts to reflect the slower store growth. Walmart needs to get pricing and profitability right in both of these markets before re-embarking on an expansion strategy.

But this brings us to another point. Although there is still plenty of physical room available in both China and Brazil, there will be less of a need to expand with big-box formats in emerging economies as had been done in developed markets over the past fifty years. China is expected to overtake the US as the world’s largest e-commerce market within the next few years, and the Brazilian e-commerce market is also booming. Rather than replicating growth patterns in developed markets which has now left the multi-nationals with a glut of below-optimum stores, Walmart would be better off to approach such emerging economies with a cautious but solid multi-channel strategy.

Target shoppers will benefit from Best Buy's expert product knowledge

Target certainly isn’t new to retail partnerships. They have capitalised on the elasticity of their brand by partnering with upmarket labels such as Missoni and Jason Wu for clothing, as well as retailers including independents as part of their ‘Shops at Target’ initiative and more recently department store chain Neiman Marcus in a deal that will see the retailers jointly sell a holiday collection this winter.

There’s no denying that Target has broad appeal. However, like any mass retailer today, they are up against a new set of competitive forces which is pressuring them to validate every single category, brand and SKU available on shelves in order to ensure they don’t fall victim to the showrooming effect.

Despite Target’s recent push into grocery, hardlines (of which consumer electronics, entertainment and books are major components) still account for 19% of sales. They have strengthened the electronics category in particular over the past 12 months, with new Apple concessions having launched in May. So although it may seem counterintuitive to join forces with rival Best Buy, we have to remember that there is a much bigger common threat in the form of Amazon. Target recently stopped selling Amazon’s Kindle in its stores. The impact on Best Buy has been much greater in the form of store closures and employee layoffs. They won’t beat Amazon on price or assortment, so they must leverage their renowned customer service and look for alternative revenue streams, both of which Target can help do.

A merger would prevent Target from getting too close to Best Buy's shoppers (Apple concession pictured)

So could this latest move in fact be one step closer to a merger? The consumer electronics store as a bricks and mortar concept may not be dead, but it is certainly overrepresented given new competitive threats. Best Buy may have outlived Circuit City but it must restructure in order to prevent suffering a similar fate.

158 Olympic nation flags on display on Regent Street

John Lewis has been among the more pro-active (there’s certainly nothing understated about wrapping your top stores in Olympics banners). As an official sponsor and the department store provider to London 2012, John Lewis has done some really fantastic work over the past several months, most notably its Olympics shop-in-shops which features tons of exclusive merchandise. We’ve heard just this morning that one crazy shopper bought £10,000 worth of Olympics coins and they are selling 1,000 Olympic Torch replicas every week. Bring on the Games!

John Lewis' four gift-wrapped stores will be on display until September

John Lewis is an official Olympics sponsor

A shop-in-a-shop at John Lewis sells exclusive Olympics merchandise

There is however a lot of debate about whether the Olympics will actually help the high street at all. Despite all the hype over the Diamond Jubilee, in the end it did very little for the retail sector. As for London 2012, online retailers are already moaning about the huge headache they’re expecting when it comes to delivering goods to their customers in the Southeast (which  let’s not forget will really be the only region to benefit from the big event). And any incremental spend is likely to come at the expense of future sales – watch out for the ‘Olympic hangover’ in September as it’s already been dubbed.

The Union Jack features prominently in Topshop

But on the bright side, the Olympics will undoubtedly boost consumer sentiment – especially if this summer-like weather continues – and we can’t ignore the million-plus tourists that are about to descend upon the UK.

As such, retailers have rolled out the red carpet for foreign spenders. In a bid to target Chinese shoppers for example, Harrods recently launched a mobile app in Mandarin, while many others have upped the number of Mandarin speaking store staff.

Many retailers will also be looking to take advantage of a temporary change to Sunday trading laws in the hope of driving extra footfall to stores during the Games. While every little helps at the moment, I can’t help but wonder if the extra staff and overhead needed to run the stores will in fact compensate for the potentially minimal boost in spending. At the end of the day, the UK consumer is still being squeezed. And not to mention the impact on smaller shops but that’s another story for another day.

Retailers received the green light for extended opening hours - but is it worth it?

H&M launched a pop-up sports concept ahead of the Games

Meanwhile, we have seen new flagship stores rolled out (Burberry), new store concepts (H&M sports pop-up) and even new entrants to the market (the first Victoria’s Secret finally opened their doors this week). This is a unique opportunity to showcase the UK high street and no one wants to miss out.

They started in May, but the summer sales are still out there

The summer sales, which were the one and only saving grace for June’s (still fairly dismal) retail figures, are still lingering on the high street. However, the vast majority of retailers have now ended their promotions in the hope of the Olympics being enough of an occasion to drive traffic to the high street.

British retailers will be welcoming foreign spend with open arms

Retailers are looking to capitalize on the (short-lived) boost in consumer sentiment

Last month we had Ahold’s Peapod campaign in Chicago’s State and Lake Station Tunnel. Not too dissimilar to what other supermarkets have done around the world (from Ocado in the UK to Cencosud in Chile) – and no surprise that it’s generally the online-only supermarkets that have been quickest to jump on the QR bandwagon, given the fact that their consumer base is an established tech-savvy bunch.

Ahold/Peapod made a big splash for QR codes in May

Walmart is the latest retailer to paint the Windy City’s public transportation network with those funny black & white squiggly squares. In the spirit of vendor collaboration, Walmart has teamed up with P&G on this particular campaign - and it’s worth noting that P&G is Walmart’s largest supplier, selling in excess of $12 billion worth of goods through the retailer every year. P&G has plastered Chicago bus shelters with ads promoting free delivery (on a min $45 order) for everyday consumer goods items. The Walmart.com messaging is very subtle, but when a shopper scans the QR code, products are instantly added to their Walmart.com basket. This campaign, like many that feature QR codes, is less about generating immediate sales and more about raising consumer awareness of this emerging channel. More specifically, this is about proving Walmart’s ability to go head-to-head with the growing Seattle-based thorn in its side, by leveraging its strong relationship with the world’s largest manufacturer of household goods.

Capitalizing on a captive audience

Walmart and P&G promote mobile commerce

It makes sense to target cities where Walmart is yet to have a significant presence, despite its best efforts to penetrate these untapped regions with smaller formats and a more flexible channel strategy. The QR code campaign is running simultaneously in New York City where a @PGMobile truck, also plastered with QR codes, is touring the city in order to raise awareness of both Walmart and P&G’s online capabilities. I’ll be aiming to track down the truck when visiting NY next week so watch this space! In the meantime, please get in touch if you’ve noticed any other interesting QR campaigns.

The Walmart.com messaging is very subtle

Eighty-five per cent of transactions in Walmart stores are paid for in cash or cash equivalent, and there is still a disturbing correlation between government assistance funds being paid out to consumers and essentials being purchased at Walmart. That said, surely if shoppers in this low-income bracket do not have access to credit then it is unlikely they will have the ability or desire to buy products online. Walmart clearly disagrees, stating that 81% of “unbanked” consumers still have internet access.

Regardless, I can’t help but think this takes the term ‘multi-channel’ just one step too far. Shoppers select items online from Walmart.com, then within 48 hours go to the store (either Walmart or Neighborhood Market) to pay for the item, and then arrange for the items to be delivered to their home or local store. Surely, it would be more convenient to just go to the store, pay and take the product home the old-fashioned way.

Retailers in emerging economies have been embracing a similar strategy for years except cash is often paid upon delivery, particularly in markets like India and Russia. In South Africa, consumers can purchase virtual cash vouchers from Ukash, enabling them to buy online from major chains such as Shoprite and Pick n Pay. Even in more developed markets like Japan, consumers can order online from Amazon and pay in cash at their local 7-Eleven convenience store.

Despite its complexities, Walmart’s initiative will help to raise awareness of its ongoing efforts to play catch-up in the digital world. If a success at home, Walmart will inevitably roll this out to the many emerging markets in which it operates.

The implication: This isn’t just a name change, but a move to make the packaging and quality of its bottom-tier range far more attractive to value-seeking shoppers. The products will contain no MSGs, GMOs, and many will be UK-sourced. This will help to improve both price and quality perception, but I imagine there will be an element of self-cannibalization as shoppers trade down from the standard Tesco range.

The verdict:
Better late than never, although Tesco is certainly behind both global and domestic peers in this regard. During the recession, Walmart revamped Great Value in a similar vein. Carrefour Essentials also replaced the hideous No. 1 range. What did Tesco do? They launched, errr, Discount Brands. Rather than playing to their strengths and improving Value, they complicated the offering by adding a whole new fourth tier.

Meanwhile, at home, we’ve seen some fantastic innovation in the bottom-tier category, particularly from Morrisons who has shown us that cheap can still be cheerful.

Everyday Value will give the new M Savers items a run for their money. These items are both under 50p.

Now, after their first profit warning in 20 years, they are having to go back to basics. They are not alone here. Walmart, having slashed thousands of SKUs and moving away from EDLP, suffered from two years of declining comps. They’re now back on track because they have gone back to their core – offering low prices on a wide assortment of brands. Tesco has underinvested in its stores, they’ve become too discount focused (ironically without genuinely being the cheapest) and they’ve lacked innovation in the food category with the exception of a few premium pet brands and some posh ice cream. The launch of Everyday Value isn’t rocket science, but it’s certainly a step in the right direction.

For more on private label trends, clients can read our report here.

Getting back to basics is working. WMT has added back 8,500 SKUs.

Margins were hit because some of the initiatives launched to target core shoppers, although vital and clearly working to drive topline growth, are not cheap. Layaway and the Christmas Price Guarantee (sound familiar, UK readers?) are both good examples. But Walmart is right to focus on its core customer group, which they so publicly neglected during the days of Project Impact in the hope of acquiring new and more affluent shoppers.

Walmart learned the hard way that it cannot veer too far from its core. Low prices and a wide assortment of brands are integral to its success. That said, the key challenge for Walmart going forward will be maintaining this concept in the face of the ever-growing online threat. They’ve been scrambling to make up lost ground in this area, and crucially now have a leadership team in place with the relevant experience to drive this forward. Walmart has been planting big boxes for the past 50 years but, like its global peers Tesco and Carrefour, is struggling to maintain its relevance in today’s digital world. Going forward, Walmart’s bricks and mortar strategy must become much more event-driven and supported with exclusive ranges to avoid direct price comparisons. While we maintain that Amazon poses the biggest threat, Walmart has the opportunity to leverage its physical store base. More needs to be done to create a seamless shopping experience across all channels.

Although we never rule it out, we do not envisage any additional new market entries in 2012 unless an opportunity presented itself. Longer term, we expect to see further M&A activity in existing markets such as Brazil as well as in new ones like Russia. This year, Walmart will have its hands full with further integration in South Africa and, to a lesser extent, the UK. Entry into the Middle East with George franchised stores will be cautious, but if successful could represent a new route to market in other parts of the world.

Last but not least, I’m excited to say that my book on Walmart will be launched in just over one month! Details can be found here if you’re interested, and I’ll also be discussing more on Bloomberg TV at 6:40 tomorrow.

Plassat had reportedly turned down the offer of Carrefour CEO back in November, although the retailer denied that it was searching for replacement.

The departure of Lars Olofsson has been on the cards for awhile now. His attempt to revitalise the hypermarket format, although well-intended, was unrealistic and too costly. Various profit warnings, declining share in its domestic market and slumping like-for-likes, particularly in its core European hypermarket division, meant that it was only a matter of time before we saw a change at the top.

As we said last week after the retailer’s Q4 results were announced:

The Carrefour business model is inherently flawed given its over-dependence on a dated format and slow-growth markets. The company cannot carry on in its current state; a more drastic approach is needed to revitalise the business. Although Carrefour planet is a step in the right direction, it has proven too costly as a means of saving Carrefour. Up until now, the retailer has done very little to address the undeniable fact that non-food spending has shifted online. Rather than directing capital towards indulgent remodels, money would be more wisely spent ramping up multi-channel functions such as click & collect, instore kiosks and e-commerce. Without this, the hypermarket concept doesn’t have much of a future.

The appointment of Plassat should be viewed as a big win for Carrefour. Plassat is a well-seasoned retail executive with the non-food experience that Carrefour so vitally needs to turn around its hypermarket division. Equally, his experience at competitor Casino and even Carrefour itself, means that he is well versed in the French hypermarket scene.

We expected the next boss of Carrefour to be French, given the critical need to revamp its domestic operations. At private equity-backed Vivarte, Plassat had a strong track record of buying out French clothing brands such as Naf Naf and Kookai. While we certainly do not envisage French acquisitions in his new role at Carrefour, it is his experience in non-food that Carrefour will look to draw upon. Plassat may, for example, look to reduce the size of the average Carrefour hypermarket, moving many non-food items online, in order to improve sales densities. Pricing will need to become sharper and, although Carrefour has taken steps to improve price perception as recent as this week (with the announcement of a new price guarantee and reductions on 500 items), it still has a long way to go in comparison to its peers. We also imagine that the roll-out Carrefour Planet will be halted temporarily – and perhaps even permanently – while Plassat comes up with a Plan B for revitalising the hypermarket.