Wal-Mart's Tough New Global Rival: AUCHAN; Everyday Low Prices Backfire in China

BusinessWeek -- Quick, what's France's answer to Wal-Mart? Until now, it has been Paris-based Carrefour, the global No. 2 retail chain. But increasingly, another French retailer, Auchan, is giving both Carrefour (CARR.PA) and Wal-Mart (WMT) a run for their money.

Auchan now has 132 big-box hypermarkets in China, including 110 operating under the brand name RT Mart in a joint venture with a Taiwanese partner. That puts it neck-and-neck with Carrefour, but behind Wal-Mart, which has 146 stores and owns a stake in a joint venture that has another 104 outlets.

Auchan also is thriving in Russia, where it has built or acquired a total of 34 outlets since entering the country in 2002 and is now the top Western operator of big-box superstores. Carrefour, which opened its first two Russian stores this year, abruptly reversed course this month and announced it was pulling out of the country. Wal-Mart and British retail giant Tesco (TSCO.L), another big discounter, have no stores in Russia.

At the same time, Auchan is pushing into locales ranging from Ukraine, where it plans to open three new stores by the end of the year, to Dubai, where it signed a deal with a local partner in 2008 to develop outlets across the Persian Gulf.

And here's the most interesting part of the article:

Wal-Mart's "everyday low price" strategy has backfired with Chinese shoppers, who often assume cheaper products are unsafe or counterfeit. And while Carrefour has a reputation for high quality, its stores have a "ruckus atmosphere," resembling Chinese street markets, which is a turnoff to middle-class shoppers, he says. In China, people are trading up. Auchan is positioned better than Carrefour and Wal-Mart to be able to grab that.