Text/Tu Lin
Source/Mantis Finance (ID: TanglangFin)
2020 will not be a good year for the supermarkets. It is hard to catch up with the digital progress that has fallen behind in the new retail era. The emergence of the epidemic has caused the offline business of the big supermarkets to be hit again.
Regardless of whether it is unmanned retail stores under the blessing of new technologies, or mini formats such as convenience stores and small supermarkets, it seems that they are more able to adapt to this era than large supermarkets.
Facing the new challenges of the times, “accelerate digital transformation, tighten hypermarket business, and test diversified new business formats” has become a key word for the supermarkets in 2020.
The giants are accelerating the layout, how about the 2020 of the big supermarkets?
The "cold winter" of the physical retail industry came again with the epidemic at the beginning of the year. For the big business and supermarkets, holding hands with giants is undoubtedly a good choice, and this also coincides with the giants’ strategy of accelerating their offline deployment.
In terms of Alibaba , on May 26, Alibaba Group announced the acquisition of 18% of domestic shares in Lianhua Supermarket from Yiguo Fresh , officially becoming the second largest shareholder of Lianhua Supermarket.
At the same time, on October 19, Ali also announced that it plans to invest 28 billion Hong Kong dollars to directly and indirectly hold 72% of RT-Mart’s parent company Gaoxin Retail. This means that Ali's voice over RT-Mart and its parent company Gaoxin Retail has further increased.
Behind the frequent shares in the Supermarket, it actually verified Ali's determination to accelerate the "drop" line.
For JD.com, it has targeted China Resources Vanguard, the leader in the domestic retail sector.
At this year's JD Daojia "1020 Supermarket Carnival", all brands of China Resources Vanguard including Vanguard Mart, Vanguard LIFE, Olé, blt, Suguo, etc. made their debut to participate in the carnival.
According to the "1020 Supermarket Carnival Report" released by JD Daojia, the event covered about 1,000 counties, districts and cities, among which sales in third- and fourth-tier cities were 4.4 times that of last year. The sales of China Resources Vanguard also increased to 2.5 times last year. It can be said that this cooperation between the two parties has achieved a win-win situation.
At the same time, JD.com has also incorporated the strategy of local fresh produce into its cooperation with the Supermarket.
On December 15, BBK Supermarket issued an announcement stating that it had signed the "Shareholders Agreement on the Establishment of a Joint Venture Company" with Suqian Jingdong, and planned to jointly fund the establishment of Changsha Qixian Information Technology Co., Ltd., responsible for the Qixian brand's retail fresh food business in Hunan Exhibition shops and operations in the provincial market.
As we all know, BBK is the first listed private supermarket chain in China, and it has been in the Hunan market for many years. JD’s move will undoubtedly find a good "partner" for its deployment in the local fresh food sector, which will accelerate its rapid implementation in second and third tier cities.
In fact, for these large supermarkets, it is also a wise move to "leverage" the giants when the transformation has not made great progress in the new era.
For example, after Suning acquired 80% of Carrefour China last year, in the fourth quarter of 2019, Carrefour China achieved its first single-quarter profit in seven years. According to the relevant person in charge of Suning, in the first half of this year, Carrefour China once again achieved two consecutive quarters of profit. With the help of Suning, Carrefour China has officially opened the "Second Spring".
In 2020, in addition to holding hands with giants, the entire supermarket industry has also accelerated the "integration reshuffle". The main manifestation is the merger and acquisition of domestic supermarkets and foreign-invested supermarkets.
On the one hand, the “Metro acquisition incident” that attracted much attention from the industry last year ended with Wu Mart’s 1.9 billion euros to win the Metro China business. The transaction was completed as scheduled on April 23 this year. Under the new shareholding structure, Wumart Group will hold 80% of Metro China's shares, and Metro Group will hold 20% of the shares.
Since the acquisition of all South Korean Lotte stores in North China in 2008, Wumart has once again acquired most of Metro China's shares. As one of the largest supermarket chains in China, Wumart's comprehensive strength cannot be underestimated.
On the other hand, British retail giant Tesco also officially announced on February 25 that it will sell 20% of the equity in Gain Land, a joint venture with China Resources, to China's China Resources Group.
Like Wal-Mart and other foreign-funded companies, Tesco has also become "unaccustomed" in the Chinese market. As early as 2014, Tesco had formed a joint venture company Gain Land with China Resources Group. At that time, China Resources held 80% of the joint venture, and the remaining 20% was in Tesco's hands. Now Tesco will transfer all the remaining part to China Resources, which means that Tesco will completely withdraw from the Chinese market.
Generally speaking, in 2020, the development of foreign-invested supermarkets in China will continue to be sluggish, while local supermarkets are gradually ushering in a new round of development opportunities, supported by new moves such as handing in giants and annexing foreign-invested supermarkets.
Who is better in digital transformation?
Due to the impact of the offline business due to the impact of the epidemic, the online business of the supermarkets has to "strength" again. Therefore, "Accelerating Digital Transformation" has become the first keyword of the supermarkets in 2020.
As for RT-Mart, its digital transformation is progressing rapidly due to its backing on Ali.
According to data released by Alibaba in October, RT-Mart and Auchan, another supermarket brand under Gaoxin Retail's 484 stores, have been fully online, and have access to Ele.me, Taoxianda and Tmall's shared inventory business . At the same time, the supply chain and intelligent logistics system of Ali's new retail format Hema Fresh is slowly being synchronized to RT-Mart stores.
With multiple measures taken at the same time, the effect is also remarkable. According to the 2020 semi-annual report of Sun Art Retail, the company's net profit increased by 16.8% year-on-year.
Also "leveraging" the giants is China Resources Vanguard.
In April this year, China Resources Vanguard launched its membership service on the third-party platform of JD Daojia for the first time. In just over two months, the number of members has increased by 14.6 times.
On July 24, China Resources Vanguard also officially upgraded its strategic partnership with Dada Group. Dada's JD Daojia platform Jiang Wei and China Resources Vanguard provides technical output of three performance solutions: full warehouse, half warehouse and full store. Moreover, in terms of product management, JD Daojia will also provide China Resources Vanguard with intelligent product management tools and continue to output category extension suggestions.
According to official data released by China Resources Vanguard, since the second quarter of this year, China Resources Vanguard has gradually resumed positive growth in operating income. Due to the timely follow-up of digital transformation, Wanjia's online business increased by 532.2% in the first half of the year.
In contrast, Wumart Group has achieved "self-reliance" under the blessing of Dmall.
Multi-point Dmall was founded by Zhang Wenzhong, the founder of Wumart Group. Its original intention was to help physical retail companies realize online and offline integration with comprehensive digital services.
With the help of multi-point Dmall, Wumart has solved a series of pain points in the retail industry such as logistics efficiency, cargo management and cost control. As early as 2018, Dmall, which has "tested the water" in the community group business, also allowed Wumart to smoothly advance its online business during the epidemic.
In addition to Wumart's own supermarkets, the digital capabilities of Dmall also cover Metro China, which was acquired by Wumart. In November of this year, Metro's first paid membership system-Metro plus membership was fully launched. Consumers only need to open the "multipoint DmallApp" to complete the membership upgrade and enjoy new benefits including "delivery to home within 5 kilometers as fast as 1 hour".
In addition, some major supermarkets that have not been fully “electrically shocked” on the line have also accelerated their digitalization process under the influence of the epidemic.
During the epidemic, Bubu Gaoyuan’s home delivery orders surged, but the delivery was faced with a dilemma of insufficient staff. Taking this as an opportunity, Wang Tian, the chairman of BBK, proposed that orders should be placed in the community, and its own logistics should be used for daily distribution by bands, and the warehouse will directly deliver to the community. This also accelerated the birth of BBK's community group buying business "Xiaobu Youxian".
Due to the short establishment time, "Xiaobu Youxian" did not launch the APP, but opened it to consumers in the form of small programs. And like other community group buying projects, Xiaobu Youxian also adopts the form of WeChat group orders and small programs to place orders directly from the warehouse to the community by its own logistics.
Statistics show that on the fifth day of the Lunar New Year, "Xiaobu Youxian" was launched in 27 communities in Changsha, and it exceeded 1,000 orders within one hour of going online.
However, after inquiry by "Mantis Finance", Xiaobu Youxian did not seem to have developed into an independent business of BBK, but was strategically integrated into the "Timely Delivery" section of "Better Purchase".
It can be seen that although BBK has its own offline supermarket, logistics center and reserve department, and has potential to be tapped in community group buying, it does not seem to want to get into the "community group buying battlefield" that has developed to a feverish stage.
It is not difficult to find that in 2020, RT-Mart and China Resources Vanguard have entered the accelerating stage of digitalization, while Metro and BBK are gradually catching up. With the increasingly fierce online business competition, digital transformation will still become a "key issue" for the supermarkets in the future.
Under the new wave of consumption, where does the hypermarket business go?
It is worth noting that, compared with smaller formats, the traditional hypermarket business has gradually entered a period of slow growth.
According to the "China Shopper Trend Report-Convenience Stores" released by Nielsen in February 2019, the number of supermarkets (increased by 10%), small supermarkets (increased by 9%) and convenience stores (increased by 14%) has grown in the past three years Strong, but the number of hypermarkets has fallen by 1%.
As a result, some large supermarkets have adopted "tightening" measures.
According to statistics from Yingshang.com, in the third quarter of this year, both Wal-Mart and Carrefour closed their three stores. On December 16, Wal-Mart’s Donghai branch in Wenzhou also posted an announcement stating that it will officially close on December 22. This is expected to be Wal-Mart’s seventh store to close in the Chinese market this year.
Although the expiration of the lease is naturally one of the reasons for store closures, according to industry veterans, the fundamental reason for the closure of some stores is actually that the store’s business volume is insufficient to support various costs. For example, Carrefour's Zhengzhou Beihuan Store has been losing money for three consecutive years, with an annual loss of about 10 million yuan. In this context, closing the store is a helpless move.
In the third quarter, the hypermarket business of some local supermarkets continued to expand.
Statistics show that in the third quarter of this year, Wumart opened 6 new hypermarkets in Beijing, Tianjin and other places, and China Resources Vanguard also opened 4 new hypermarkets in Guangdong, Shaanxi, and Jiangxi.
Facing the same declining hypermarket format, the supermarkets have adopted a different attitude. There are many reasons behind, but they are inseparable from two reasons.
On the one hand, the "localization bonus period" for foreign-invested supermarkets is nearing completion. In the new consumer era where diversified business formats such as fresh food stores and convenience stores are gradually being valued, it is even more difficult for foreign merchants who are already "unaccustomed" to survive. Although most of their Chinese businesses have been moved to the "under the leadership" of giants, Rome was not built in a day, and it will take time to settle for the "new life".
On the other hand, compared with foreign-owned supermarkets, local supermarkets represented by China Resources Vanguard and Wumart are more sophisticated in digital transformation. In fact, regardless of changes in consumer trends, the improvement of store efficiency is a long-term issue for major supermarkets. Local supermarkets, which have been more successful in digital transformation, are obviously more calm than foreign-invested supermarkets in dealing with new consumption trends.
But taking a step back, it is an indisputable fact that despite the limited growth space of hypermarket formats. However, the physical industries that have been stumbled by the epidemic are not in a "sleep". In the new retail era, the co-prosperity of online and offline businesses is the new trend. Therefore, although it is difficult to say what the future hypermarket format will be at present, it will not disappear at least in a short time.
Will diversified formats be the new "combustion aid"?
When the hypermarket format is gradually tightened, the new diversified format will become the next "power point" for the supermarkets. Most large supermarkets have focused on the expansion of small businesses.
In terms of China Resources Vanguard, at the beginning of this year, China Resources Vanguard Jiangxi Company launched the first batch of over-standard formats "Wanjia LIFE". From the perspective of positioning, Wanjia LIFE pays more attention to family-centeredness, and is committed to creating a preferred shopping place for residents within a 5-10 minute walk. The area is basically between 200m2 and 1000m2, which is a veritable small business.
For Hema, it has been experimenting with small formats, including Hema Vegetable Market, Hema Mini, and Hema Station for three meals a day, and Hema F2 and Pick'n Go for office buildings and convenience stores. Among them, the Hema mini, which focuses on cooked food and fresh food, is expected to become a solution for Hema to enter the sinking market.
Coincidentally, Yonghui also has great expectations for the mini store. At the shareholder exchange meeting in 2019, Zhang Xuansong, the founder of Yonghui Supermarket, set the goal of opening 1,000 mini stores throughout the year. Of course, this goal has not yet been completed. As of the end of the third quarter of 2020, Yonghui currently has 405 mini stores.
In addition, Carrefour China also started to try community fresh food stores with the support of Suning. On September 30, Carrefour's first community fresh food store "easy Carrefour" landed in Shanghai. According to the "1+2+1" new business plan formulated by Carrefour, community fresh food stores are the second "1", which will be based on users' doorsteps, covering fresh food, daily necessities and other categories.
So, how is the performance of these new formats?
According to the official website of Hema Xiansheng, Hema mini currently has 8 stores located in Beijing and Shanghai. Although there is still some way to capture the sinking market, Hema is accelerating its expansion. Throughout December, the number of Hema's new stores across the country reached 21, involving 13 cities. At this speed, it is only a matter of time before the Hema mini runs.
Of course, the expansion of new formats is important, but whether its operations can enhance the overall business of the supermarkets also needs to be considered.
According to the financial report released by Yonghui for the first half of 2020, Yonghui’s mini store lost 130 million yuan. Although there were 16 new stores, the number of closed stores was even higher, reaching 88.
In fact, this also reflects from the side that the advancement of new business formats still needs time to settle. After all, there are many differences between the small business format and the traditional store format in terms of store area, digital investment level, labor cost, etc. Therefore, in store operation, it is necessary for supermarkets to constantly adjust trial and error.
What's more, these new formats generally regard fresh food as the main category. If you want to open the market by going deep into the community, you actually need to face many tests. After all, around the community, there are not only community group buying physical stores like Xingsheng Optimal, but also other small businesses such as convenience stores and mom-and-pop stores. The pressure of competition is not small.
According to the "Top 100 Chinese Supermarkets in 2019" released by the China Chain Store & Franchise Association in June this year, China Resources, RT-Mart, Yonghui, Wal-Mart, Lianhua, Hema Xiansheng, Wumart, Carrefour, Jiajiayue and Backgammon ranked in the top ten.
As 2020 comes to an end, the big business super market also needs to start next year's "new action". What will happen to this list next year? We will wait and see.
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