Local brands 'pay more' at Carrefour

08:43, September 13, 2010      

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French retail chain Carrefour is being accused in China of taking a discriminatory approach to domestic personal-care companies and illegally charging some of them additional fees, a practice that has been described by some in the Chinese media as "a slaughter of local brands."

Meanwhile, marketing experts suggested that only when those local brands are built into globally recognized ones, can they be protected from unfair treatment from retailers in China.

A manager with a Guangdong-based company, who declined to be named, told the local Time Weekly that the Paris-based supermarket giant discriminates against domestic personal-care products.

"Procter & Gamble (P&G) is not required to pay an entrance fee, but we are. P&G products can be easily spotted, while our products are shelved in places that take consumers a lot of time to find. And our products are always being threatened to be pulled from shelves," he said, stressing that it is hard for local brands to make profits if they agree to cooperate with Carrefour.

The world's second largest retailer is reported to have begun charging additional fees, such as entrance fees, promotion fees, or other forms of additional fees, following its huge popularity in China after it entered the market in 1995. Suppliers will reportedly be granted sales rights and other preferences after paying these fees.

After Carrefour entered the market, foreign-owned supermarkets from the United States, South Korea, Japan, as well as other countries, followed suit - such as Wal-Mart, which had 189 stores in China as of August, and is the world's largest retailer ahead of Carrefour.

Chen Haichao, a researcher with the China Brand Research Institute, told the Global Times Sunday that, "due to fierce competition in the retail industry in China, large retailers such as Carrefour rely on charging suppliers additional fees to increase profit margins, which is against Chinese law."

At present, charging entrance fees from suppliers has become a common practice that has become a major revenue source for retailers, experts said, despite China bringing the Administrative Measures for Fair Transactions between Retailers and Suppliers into effect on November 11, 2006.

"Some retailers charge suppliers as many as 20 fees per item, including entry fees and store anniversary celebration fees. They also have a so-called performance-based elimination system in place to weed out those that list in last place," he said. "Those who do not cooperate with the retailer will be removed from the shelf."

Chen noted that local suppliers are facing a dilemma.

"On the one hand, they are overcharged by large retailers. On the other hand, they have to enter large supermarkets as early as possible to avoid cost hikes in the future," Chen said.

Despite the heavy cost in getting shelf space in large supermarkets, Chen said, local suppliers have to vie for securing a place in supermarkets to boost their brand image, since those supermarkets control the sales channel.

These multi-national retailers have earned a solid market share in China as their chain stores sell roughly 60-70 percent of the food and daily necessities in China, media reports stated earlier.

Li Guangdou, another leading marketing expert, suggested that local brands have to get more competitive and build into globally recognized brands to fend off discrimination and unfair practices.

Carrefour's Greater China spokesperson, Dai Wei, told the China Times newspaper Friday that "If local brands lost their shelves in Carrefour, that is a matter of market choice," rejecting the notion that the French retailer treats foreign and local brands differently.

China has become a major driving force for the French retailer's global performance, with sales in the Chinese market increasing by 16 percent year-on-year in 2009. The world's second largest retailer has announced that it plans to open 185 stores across China at the end of this year.

This is not the first time that Carrefour has been accused of charging additional fees.

Three months ago, the retailer was ordered to pay 7.5 million yuan in compensation to a Chinese retailer for imposing extra fees, the China Times reported.

By Guo Qiang

Source: Global Times


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