This year marks Carrefour's 13th anniversary in China. In 1995, the French company, now the world's second largest international retail chain, began operations here. The Group was immediately well received by Chinese consumers, thanks to its low prices, excellent service and comfortable shopping environment. Developing rapidly from an unknown organization to a hugely popular one, Carrefour became a model of success for Chinese retailers to emulate.

However, in recent years, the company's monopoly on the market has lessened, owing mainly to a great number of branded businesses flooding the country, including U.S.-based Wal-Mart, and French-based Auchan. Nevertheless, Carrefour's jump-start in China helped its trade volume in 2007 to increase by 24 percent compared with the previous year.

M. Claudio Gouveia, Vice President of Carrefour China Inc., and President of the firm's North Region in China, was interviewed recently by Beijing Review, and answered several questions dealing with the company and its success.

Beijing Review: Since it established itself in China in 1995, Carrefour has developed into one of the most successful retailers here, by advocating a series of strategies including localization policy. What is the key to the firm's success, in your opinion?

M. Claudio Gouveia: The success of Carrefour in China can first be attributed to the high level of localization strategy, which is carried out in terms of stocking, service and institutional organization. We have established 15 City Commission Units (CCU) all over the country, stocking and selling 95 percent of our commodities in China.

Headhunting is another key localization strategy, and an important approach to bridging cross-cultural gaps. The Group made great efforts to hunt for and cultivate local retail professionals. In March 2003, the company set up a training center in Shanghai, with the focus on local personnel. Last year, we appointed 60 heads for retail stores, with 95 percent of them being Chinese.

The retail sales market in China features fierce competition. In comparison with its rivals, Wal-Mart and Auchan, what are Carrefour's advantages and disadvantages, and what measures is Carrefour taking to retain its Chinese customers?

A saying in Chinese goes like this: a clumsy bird must start to fly before the others. Carrefour was the first foreign-funded retailer establishing business in China, and we therefore had more time to research and understand the market here. In addition, as the largest retailer in Europe and the second-largest one (behind Wal-Mart) in the world, Carrefour is able to absorb its successful experiences accumulated from many other countries and regions, and apply these experiences to its business in China. In 1989, Carrefour entered the Taiwanese market and acquired rich experience in terms of the Chinese consumer's habits; this laid a solid foundation for the business to proceed into China's mainland market.

In my opinion, to keep a competitive edge in China, a company needs to introduce its consumers to new living elements and consuming concepts, apart from its first-class service and high product quality. Carrefour, as a founder of the hypermarket chain, introduced this mode to China as early as 1995. Its one-station shopping mode was a fresh notion to local consumers, and its related services were able to cater to clients and let them enjoy "happy shopping." While guaranteeing stable and sustainable development, we have been constantly exploring and creating for future development. In 2004, Carrefour China, in an effort to instill the concepts of environmental protection and sustainable development, introduced recycled shopping bags to help consumers change their shopping habits. Not long ago, we adopted another purchasing mode -- buying commodities from farmers directly -- considered a revolution in a retail chain.

Rising prices lead to high management costs, which, no doubt, are a challenge for your company. What measures will you adopt to address such a complex issue?

The following approaches will deal with the challenge:

First, optimize management, so as to raise productivity and lower operation costs, and then return benefits to the consumers; second, unite with suppliers to deal with prices rising; third, lower energy consumption by carrying out an energy-efficient project, which is expected to save 1 million yuan ($141,000) for each Carrefour shop per year; and fourth, develop a new stocking mode, including the current adopted method of buying directly from farmers. In this way, we will reduce costs from the middle of transaction operations, thus benefiting both farmers and consumers.

Overall, as a transnational retailer, with its businesses covering over 30 countries and regions, Carrefour boasts rich experience in dealing with inflation. We will apply our successful experiences overseas to operations in China. Moreover, we believe that the Chinese Government is capable of addressing the current price rise problem. We will actively cooperate with the Chinese government in this regard.

As Carrefour chain stores have distributed in large- and medium-sized cities in China, will you develop retail stores in small cities? Which cities will you put your emphasis on to develop your strategy?

We put great emphasis on the combination of the development of inland and coastal areas, and pay great attention to the development of central, west and north China, where we have 40 percent of our chain stores. We plan to open one more new store each year in some key large cities like Chengdu and Wuhan. Our development target is closely linked with the need of the market. Where there is a need, there is our development operation.

The first energy-efficient Carrefour store opened in Wuhan early this year. When do you plan to open such a store in Beijing? Will energy-efficient stores become your blueprint for the future?

Carrefour is dedicated to sustainable development in China, and one of its targets this year is to save energy resources and decrease energy consumption. On January 15 this year, we opened a store at Wangjing in Beijing, as the first batch of energy-conservation chain stores, together with Guanggu in Wuhan. We committed to reduce energy consumption by 20 percent for newly established chain stores and 15 percent for old stores, by means of renovation.

China attracted a large amount of investment 30 years ago, when it opened up the economy. What's your perspective on the current Chinese investment environment compared with 1995, when Carrefour entered the Chinese market; is it easier or harder to earn money?

China's investment environment has improved greatly over the past 30 years, since its reform and opening up. Carrefour now owns 112 chain stores across the country, which shows that we have enjoyed the full advantages of the country's foreign investment policies and investment environment.

It is harder to earn money here with regard to the fiercely competitive market, which, however, will urge businesses to improve productivity and services, and sharpen their competitive edge, thus finally benefiting the consumers. Concerning the continuous business growth in China over the past 13 years, the market provides us many opportunities to develop our businesses, and the key lies in one's ability to grasp the opportunities.

The Carrefour Chronicle

1995: Carrefour debuted its hypermarkets in China

1996: Carrefour merged with Group Promdes, becoming a giant food retailer in Europe

1997: It became an international retailer, with more than 9,200 shops covering 31 countries and regions

2005: It readjusted its management structure from within, laying a good foundation for rapid development worldwide

2006: Its 1,000th global hypermarket opened in Beijing, China

2007: It opened a combined 112 chain stores in China

2008: It started its "Energy Efficient Plan in China," committing to reducing energy consumption by 20 percent for newly funded stores and 15 percent for old ones.

The French retailer also donated 2 million yuan ($286,000) to snowstorm-stricken areas in south China.