When Wal-Mart Stores (WMT) began expanding outside North America in the 1990s, its toughest rival was the French retail chain Carrefour. After opening the world’s first big-box superstore in 1963, Carrefour spent three decades spreading its combination grocery-and-general-merchandise stores across Europe, South America, and Asia. Today, the retailer is in trouble around the globe. On Oct. 13, Carrefour issued its fifth profit warning in less than a year as it reported slumping third-quarter sales in key Western European and Asian markets. Chief Executive Officer Lars Olofsson, recruited from Nestlé in 2009, is the company’s third CEO in seven years, and four top executives have been replaced in the past 12 months.
Carrefour shares have plunged nearly two-thirds since 2007, when LVMH Moët Hennessy Louis Vuitton CEO Bernard Arnault along with U.S. real estate investment group Colony Capital spent $5.5 billion on a 9.8 percent stake. That investment is now worth less than $2 billion. They “got the timing wrong” on Carrefour, says Royal Bank of Scotland (RBS) analyst Justin Scarborough. “The markets they’re in have come under huge amounts of pressure since 2008 and lots of those pressures aren’t going to go away.” Arnault and Colony declined interview requests.
That means Carrefour has fallen far behind $467 billion Wal-Mart. Though they have about the same number of retail locations (9,667 for Wal-Mart, vs. Carrefour’s 9,631), Wal-Mart’s international sales now top $109 billion, almost surpassing Carrefour’s total $114 billion in revenues. While Wal-Mart has generated roughly 7.5 percent operating margins in recent years, Carrefour managed only 5.5 percent. In profits, the divide is particularly acute: Walmart last year logged net income of $7,804 per employee while Carrefour earned just $1,260.
How did Carrefour veer so badly off course? Its rapid international expansion, intended to offset slow growth in France, stretched the company too thin as it entered 24 countries between 1994 and 2004. It has succeeded in some, notably China, where its $5.8 billion-a-year operation wins praise for innovative marketing such as in-store produce and fish departments modeled on traditional Chinese street markets, complete with salespeople urging customers to stop and see what’s on sale. But Carrefour since 2000 has sold off operations in 10 countries, including Mexico, Russia, Japan, and South Korea, and has publicly mulled a retreat from others.
Wal-Mart also has stumbled in some international markets, including Germany, where it pulled out after only nine years. But it expanded more cautiously than Carrefour, building a thriving business in Mexico before moving into South America and Asia. Wal-Mart could afford to take its time because it has a vast domestic market where big-box retailing still flourishes. In France—the source of 43 percent of Carrefour’s sales—it operates scores of hypermarkets in aging, congested suburbs, and zoning restrictions make it hard to build new stores. It’s increasingly a similar story in the rest of Europe, which accounts for another 31 percent of Carrefour sales. Customers are deserting the chain for smaller stores in more-accessible city centers, or to deep-discount merchants such as Aldi and Schwarz Gruppe’s Lidl chain. Those trends, along with e-commerce, are changing the way Europeans shop, particularly for high-margin, non-food items, says Natalie Berg, an analyst at Planet Retail in London.
Carrefour is “stuck between a rock and a hard place,” she says. “You could say that they’re structurally flawed.”
Olofsson, in an Aug. 31 analyst call, promised “a new game plan to fix what hasn’t worked and allow us to regain momentum.” Over the past year, the company launched a makeover of 500 superstores in Western Europe, including lower prices and more private-label goods. But with Europe’s debt crisis threatening to further pinch consumer spending and fears that France could slip into recession next year, some analysts worry any rebound will be slow. After promising in June to invest $2.2 billion in the store revamp, Olofsson in August announced that spending would be scaled back.
Investors can’t count on asset sales to revive Carrefour’s fortunes. While it spun off all of discounter Distribuidora Internacional de Alimentacion on the Madrid stock exchange in July, a plan to take public a company holding 25 percent of its European real estate assets was floated and then shelved in May following opposition from investors and unions. Carrefour last year also pulled the sale of units in Malaysia and Singapore after a strategic review, and a proposal to merge its Brazilian unit with Cia. Brasileira de Distribuiçao Grupo Pao de Açucar fell through in July. That same month, former chief financial officer Pierre Bouchut said that a public stock listing of Carrefour’s China operations was years away. For now, predicts Sanford C. Bernstein analyst Chris Hogbin: “There may be more pain before there’s gain.”
Sunday, 23 October 2011
Are we reaching ‘peak car’?
Anyone who has been stuck in big-city gridlock lately may find this hard to believe, but millions of Westerners are giving up their cars.
Experts say our love affair with the automobile is ending, and that could change much more than how we get around – it presents both an opportunity and an imperative to rethink how we build cities, how governments budget and even the contours of the political landscape.
The most detailed picture of the trend comes from the United States, where the distance driven by Americans per capita each year flatlined at the turn of the century and has been dropping for six years. By last spring, Americans were driving the same distance as they had in 1998.
The data are similar in Europe, Australia and Japan. And, although Canada doesn't keep national statistics on individual driving habits, Australian researcher Jeff Kenworthy has found that driving in the nation's five largest cities, combined, declined by 1.7 per cent per capita from 1995 to 2006.
If developed countries are reaching “peak car,” as some transportation experts are calling it, it's not just a product of high unemployment or skyrocketing fuel prices, as the pattern began to show up years before the 2008 financial crisis.
Nor is it primarily a matter of people feeling guilted into reducing their car use for the sake of the climate and the environment – the threat of separating people from their wheels (or taxing their fuel use) has long been one of the green movement's biggest stumbling blocks.
Indeed, the shift is so gradual and widespread that it's clearly not a product of any “war on the car” or other ideological campaign. Rather, it's a byproduct of a stage of development that cities were probably destined to reach ever since the dawn of the automobile age: Finding themselves caught in an uncomfortable tangle of urban sprawl, population growth and plain individual inconvenience, people, one by one, are just quietly opting out.
Adie Tomer, an infrastructure researcher at the Brookings Institution in Washington, D.C., was one of the first to spot the trend. “To me, it suggests we've started to hit this wall as far as how far and how much people are willing to drive,” he says.
No one is suggesting the car is about to disappear from North American roads – 85 per cent of us still either drive or carpool to work. But as suburbs spread out, commute times slow to a crawl and the cost of operating a vehicle climbs higher, even hard-core drivers are making what British Columbia transportation consultant Todd Litman calls a “rational choice” to find other alternatives.
“If you're a typical North American, at the end of a long, stressful day at work, you're not saying, ‘I can't wait to get in my car. I would just love to go for a drive.' It's much more likely you'll say, ‘I wish I could go for a walk,' ” says Mr. Litman, executive director of the Victoria Transport Policy Institute.
That's the point at which people run up against what's called the Marchetti Wall – the psychological barrier against spending more than about an hour getting to work or coming home.
The concept is named for a Venetian physicist named Cesare Marchetti, who posited not only that human beings instinctively adjust their lives to avoid travelling more than that amount every day, but that we've been doing so since the Neolithic era, even as modes and speeds of transportation have advanced.
Suburban Toronto resident Margaret Giles hit the wall one day sitting in her 2003 Toyota Corolla, stuck yet again in heavy traffic. She had already spent more than an hour trying to travel the 13 kilometres between her job at a downtown law office and home, and there seemed to be no end in sight.
Experts say our love affair with the automobile is ending, and that could change much more than how we get around – it presents both an opportunity and an imperative to rethink how we build cities, how governments budget and even the contours of the political landscape.
The most detailed picture of the trend comes from the United States, where the distance driven by Americans per capita each year flatlined at the turn of the century and has been dropping for six years. By last spring, Americans were driving the same distance as they had in 1998.
The data are similar in Europe, Australia and Japan. And, although Canada doesn't keep national statistics on individual driving habits, Australian researcher Jeff Kenworthy has found that driving in the nation's five largest cities, combined, declined by 1.7 per cent per capita from 1995 to 2006.
If developed countries are reaching “peak car,” as some transportation experts are calling it, it's not just a product of high unemployment or skyrocketing fuel prices, as the pattern began to show up years before the 2008 financial crisis.
Nor is it primarily a matter of people feeling guilted into reducing their car use for the sake of the climate and the environment – the threat of separating people from their wheels (or taxing their fuel use) has long been one of the green movement's biggest stumbling blocks.
Indeed, the shift is so gradual and widespread that it's clearly not a product of any “war on the car” or other ideological campaign. Rather, it's a byproduct of a stage of development that cities were probably destined to reach ever since the dawn of the automobile age: Finding themselves caught in an uncomfortable tangle of urban sprawl, population growth and plain individual inconvenience, people, one by one, are just quietly opting out.
Adie Tomer, an infrastructure researcher at the Brookings Institution in Washington, D.C., was one of the first to spot the trend. “To me, it suggests we've started to hit this wall as far as how far and how much people are willing to drive,” he says.
No one is suggesting the car is about to disappear from North American roads – 85 per cent of us still either drive or carpool to work. But as suburbs spread out, commute times slow to a crawl and the cost of operating a vehicle climbs higher, even hard-core drivers are making what British Columbia transportation consultant Todd Litman calls a “rational choice” to find other alternatives.
“If you're a typical North American, at the end of a long, stressful day at work, you're not saying, ‘I can't wait to get in my car. I would just love to go for a drive.' It's much more likely you'll say, ‘I wish I could go for a walk,' ” says Mr. Litman, executive director of the Victoria Transport Policy Institute.
That's the point at which people run up against what's called the Marchetti Wall – the psychological barrier against spending more than about an hour getting to work or coming home.
The concept is named for a Venetian physicist named Cesare Marchetti, who posited not only that human beings instinctively adjust their lives to avoid travelling more than that amount every day, but that we've been doing so since the Neolithic era, even as modes and speeds of transportation have advanced.
Suburban Toronto resident Margaret Giles hit the wall one day sitting in her 2003 Toyota Corolla, stuck yet again in heavy traffic. She had already spent more than an hour trying to travel the 13 kilometres between her job at a downtown law office and home, and there seemed to be no end in sight.
“I tried going through the city. I tried taking the expressway as well. It always took me at least an hour and 15 minutes. People were always on their horns, honking. I would just come home miserable and agitated,” she says. “I started to understand about road rage. And I began thinking, ‘I'm dying to cycle to work just once.' ”
Ms. Giles had not been on a bike since she was 18, younger than her two grown-up sons are now. But a few weeks later, she took a cycling-safety course, and made her vision a reality.
Today, she drives half as much as she once did, mostly to do major shopping and visit friends, and says she happily rides past gridlocked motorists on her way to work, thinking, “It stinks to be you.”
Commute times in Toronto are now among the longest in North America, and the frustration that pushed Ms. Giles away from her car is one of several factors fuelling recent driving trends.
The rebound in urban-centre residential growth over the past 20 years has reduced the need to drive, as many people have moved back within reach of city transit systems or even within walking distance from their jobs. Meanwhile, telecommuting, social media and online shopping have all cut back on the need for people to go anywhere outside the house at all.
Demographics also have an important impact. The two largest current cohorts are aging baby boomers and their young-adult children, known as Generation Y. The youngest of these Millennials are currently in their mid-teens, just the age when they should be getting their driver's licences.
But U.S. transportation data show that many of them are putting off that long-cherished rite of passage well into their 20s.
In fact, they're more likely than any previous generation in the automotive age never to learn to drive at all. It's a choice that may feed into their elders' suspicion that this is a group that stubbornly holds on to its adolescence rather than accommodate itself to adulthood, but is also just a mark of when they came of age. To them, cars are “an older-generation technology,” says Tara Mahoney, 28, of Burnaby, B.C.
“Cars are not as interesting as they used to be. They're an outdated ethos,” says Ms. Mahoney, who owns a Subaru all-wheel-drive but finds it much less stressful to use a combination of Vancouver's SkyTrain and a bicycle to get to her new-media company's office downtown. “I think Generation Y might think of themselves as beyond that, as the generation that can do better.”
While young people cut the cord to car dependency, the generation that yoked its identity to horsepower-driven icons such as teenage muscle cars and hippie Volkswagens may soon be joining them. With the oldest baby boomers now reaching retirement age, more and more will also be abandoning the very slow rat race that is the daily commute. Most people cut their driving by about 50 per cent when they stop working full-time.
And that, Mr. Litman says, should be enough in itself to push economists, planners and politicians to take a good hard look at the future. “A lot of current policies are misguided,” he says. “They might have made sense 40 or 50 years ago, but now it makes absolutely no sense to continue the policy distortions that encourage auto use.”
Mr. Tomer agrees: “We're going to need to look in the mirror and examine some of the concepts we've been putting down. … Do we want to build wider roads, or do people really want the chance to do their shopping close to home? Are we looking for more localized economies?”
Ms. Giles had not been on a bike since she was 18, younger than her two grown-up sons are now. But a few weeks later, she took a cycling-safety course, and made her vision a reality.
Today, she drives half as much as she once did, mostly to do major shopping and visit friends, and says she happily rides past gridlocked motorists on her way to work, thinking, “It stinks to be you.”
Commute times in Toronto are now among the longest in North America, and the frustration that pushed Ms. Giles away from her car is one of several factors fuelling recent driving trends.
The rebound in urban-centre residential growth over the past 20 years has reduced the need to drive, as many people have moved back within reach of city transit systems or even within walking distance from their jobs. Meanwhile, telecommuting, social media and online shopping have all cut back on the need for people to go anywhere outside the house at all.
Demographics also have an important impact. The two largest current cohorts are aging baby boomers and their young-adult children, known as Generation Y. The youngest of these Millennials are currently in their mid-teens, just the age when they should be getting their driver's licences.
But U.S. transportation data show that many of them are putting off that long-cherished rite of passage well into their 20s.
In fact, they're more likely than any previous generation in the automotive age never to learn to drive at all. It's a choice that may feed into their elders' suspicion that this is a group that stubbornly holds on to its adolescence rather than accommodate itself to adulthood, but is also just a mark of when they came of age. To them, cars are “an older-generation technology,” says Tara Mahoney, 28, of Burnaby, B.C.
“Cars are not as interesting as they used to be. They're an outdated ethos,” says Ms. Mahoney, who owns a Subaru all-wheel-drive but finds it much less stressful to use a combination of Vancouver's SkyTrain and a bicycle to get to her new-media company's office downtown. “I think Generation Y might think of themselves as beyond that, as the generation that can do better.”
While young people cut the cord to car dependency, the generation that yoked its identity to horsepower-driven icons such as teenage muscle cars and hippie Volkswagens may soon be joining them. With the oldest baby boomers now reaching retirement age, more and more will also be abandoning the very slow rat race that is the daily commute. Most people cut their driving by about 50 per cent when they stop working full-time.
And that, Mr. Litman says, should be enough in itself to push economists, planners and politicians to take a good hard look at the future. “A lot of current policies are misguided,” he says. “They might have made sense 40 or 50 years ago, but now it makes absolutely no sense to continue the policy distortions that encourage auto use.”
Mr. Tomer agrees: “We're going to need to look in the mirror and examine some of the concepts we've been putting down. … Do we want to build wider roads, or do people really want the chance to do their shopping close to home? Are we looking for more localized economies?”
One conclusion from policy experts such as Mr. Kenworthy and his colleague Peter Newman, at the Curtin University Sustainability Policy Institute in Perth, is that planners and developers will have to change their styles, becoming “much more adept at re-urbanizing suburbs and centres than in scattering suburbs around the urban fringe,” as they wrote in a paper this spring.
In suburbs and cities alike, the demand will rise for density: “Peak car use will generate a growing rationale for removal of high-capacity roads and conversion of space to support transit, walking and cycling and the urbanism of the new city.”
Likewise, cities banking on parking fees or toll roads to balance their budgets might find their hopes disappointed, regions dependent on the auto industry may need to look elsewhere and economists may have to measure growth by a metric other than new-car sales.
As people drive less, governments also should prepare for a drop in revenue from fuel taxes, an eventuality that could in itself limit how many roads are built, Mr. Tomer says. But over the long term, building fewer roads could bring economic relief to cities and their residents, as auto-oriented cities spend twice as much to get people around than cities that rely more heavily on public transit, walking and cycling.
Perhaps the most welcome change for many urban areas, though, would be a volume reduction in the ongoing shouting matches between partisans of different transportation models. One of the implications of Marchetti's constant is that cities become dysfunctional when they expand to more than “an hour wide,” resulting in a stressed-out population, and the symptoms are everywhere evident when users of cars, bikes and transit battle in the public sphere for shares of city budgets, road space and moral bragging rights.
In Toronto, for example, Mayor Rob Ford made ending “the war on the car” a major plank of his campaign last year, and cancelled a regional transit plan almost as soon as he took office. Mr. Litman expects the constituency for such polemics will diminish as congestion eases.
As denizens of (denser) suburbs and city dwellers each come to define themselves less by choices of wheels – and find more common ground on, for example, light rail – the polarization between centre and sprawl that affects other levels of politics may begin to ease too.
It would be a welcome détente, not in any war on the car but in cars' long, slow battle with their own drivers.
Anita Elash is a reporter for The Globe and Mail.
In suburbs and cities alike, the demand will rise for density: “Peak car use will generate a growing rationale for removal of high-capacity roads and conversion of space to support transit, walking and cycling and the urbanism of the new city.”
Likewise, cities banking on parking fees or toll roads to balance their budgets might find their hopes disappointed, regions dependent on the auto industry may need to look elsewhere and economists may have to measure growth by a metric other than new-car sales.
As people drive less, governments also should prepare for a drop in revenue from fuel taxes, an eventuality that could in itself limit how many roads are built, Mr. Tomer says. But over the long term, building fewer roads could bring economic relief to cities and their residents, as auto-oriented cities spend twice as much to get people around than cities that rely more heavily on public transit, walking and cycling.
Perhaps the most welcome change for many urban areas, though, would be a volume reduction in the ongoing shouting matches between partisans of different transportation models. One of the implications of Marchetti's constant is that cities become dysfunctional when they expand to more than “an hour wide,” resulting in a stressed-out population, and the symptoms are everywhere evident when users of cars, bikes and transit battle in the public sphere for shares of city budgets, road space and moral bragging rights.
In Toronto, for example, Mayor Rob Ford made ending “the war on the car” a major plank of his campaign last year, and cancelled a regional transit plan almost as soon as he took office. Mr. Litman expects the constituency for such polemics will diminish as congestion eases.
As denizens of (denser) suburbs and city dwellers each come to define themselves less by choices of wheels – and find more common ground on, for example, light rail – the polarization between centre and sprawl that affects other levels of politics may begin to ease too.
It would be a welcome détente, not in any war on the car but in cars' long, slow battle with their own drivers.
Anita Elash is a reporter for The Globe and Mail.
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