On December 7 (today), Wal-Mart closed a total of 4 stores in the Chinese market within one day, and Nandu reporter learned that these four stores are Shenzhen Honghu Store, Wuxi Taihu Store, Chongqing Beicheng Tianjie Store, Taiyuan Sanqiang Road Branch, the above four stores have previously issued "closure announcements". As of September 2021, the number of Walmart hypermarket stores in the Chinese market has dropped from 403 at the beginning of the year to 378, a decrease of 25 stores. Subsequently, Fujian Nan'an Wal-Mart announced that it would cease operations on November 26, and Guangdong Huidong Wal-Mart also closed on November 23. If you add the 4 stores that closed today, Walmart China has closed 31 hypermarkets in 2021.
Leases expire in a ten-year cycle
Nandu reporter investigation found that Wal-Mart Shenzhen Honghu store officially opened in 1996, has a history of 25 years; Wuxi Taihu store opened in 2010, operating for 11 years; Chongqing Beicheng Tianjie Wal-Mart opened in 2009, there are also 12 years, Wal-Mart Shopping Plaza Taiyuan Sanqiang Road branch opened in 2006, has been operating for 15 years. In addition, Wal-Mart Guangdong Huidong store and Fujian Nan'an Wal-Mart, which closed last month, have also been operating for 10 years. These stores are not only long-running, but most of them are located in the city center or the core business district.
According to Wal-Mart's explanation, the reason for the closure of the above stores is basically "lease expiration". "Article 705 of the Civil Code of the People's Republic of China stipulates that the lease term shall not exceed 20 years. For more than twenty years, the excess part is invalid. With the exception of a few special properties, hypermarket leases are usually held on a ten-year cycle. Some business veterans told Nandu reporters that around 2000 was the peak period of hypermarket expansion, and from 2011 to 2012, there was a round of lease expiration and the peak of hypermarket closures, and now ten years later, another batch of store leases have expired.
Under the superposition of e-commerce, epidemic and other factors, the number of closed hypermarkets has set a new historical record.
The life cycle of hypermarket formats is gradually aging
In addition to the lease issue, in the view of Wang Xianqing, dean of the Commercial circulation research institute of Guangdong University of Finance and Economics, the format of hypermarkets has begun to gradually age. "Affected by various factors, each format has its own life cycle, just like the hypermarket gradually replaced the traditional department stores such as The South Building and Dongshan Department Store in that year, and the hypermarket also has a life cycle of entering, growing, maturing and exiting, which is now just a matter of commercial iteration, which is a normal change."
First of all, from the perspective of cost, rent, manpower, water and electricity are rising year by year, especially with rent as the focus. "Hypermarket rents signed a decade ago were relatively low, but premiums for downtown properties have soared over the past decade, doubling the level of hypermarket rents a decade later." The business veteran said that rents in the city center and the core business district have made it unaffordable for low-margin hypermarkets.
Secondly, from the perspective of consumption, the one-stop shopping of hypermarkets that occupy the core business district has lost its original appeal to consumers, while small shops such as fresh supermarkets, neighborhood supermarkets, fruit stores, bakeries, and convenience stores in neighborhood communities near various residential areas can better meet the consumption needs of specific groups.
In addition, from the perspective of competition, the price advantage of cheap commodities in hypermarkets no longer exists, and at the same time, under the attack of new shopping channels such as e-commerce, home business, and community group buying, hypermarkets continue to lose customer flow.
According to the "Chain Supermarket Operation Report (2021)" recently released by the China Chain Store Association, large supermarkets with an area of more than 6,000 square meters account for 14% of the total stores of the top 100 chinese supermarket companies, while community supermarkets with an area of less than 2,000 square meters account for more than 70%. In 2020, the year-on-year sales growth rate of comparable stores in large supermarkets is even less than 1%.
Under the superposition of factors such as e-commerce and the epidemic, the performance of hypermarkets has fallen off a cliff. In the first three quarters of this year, jingkelong hypermarket revenue was 680 million yuan, compared with 933 million yuan in the same period last year. In the first half of this year, RT-Mart's parent company Gaoxin Retail net profit fell by 86%. As of September 30, 2021, the group had 491 hypermarkets, 6 medium-sized supermarkets and 68 small supermarkets in China.
Hypermarkets withdraw from the city center to continue the business law
"These hypermarkets in the city center or core business district, in addition to high popularity, continuous revenue growth, or special location, such as the main store of Wanda shopping malls, otherwise it is difficult to insist on renewing the lease after the lease of many stores expires." A commercial real estate source said that if the property is popular and the overflow value is high, the owner is likely to renovate and upgrade the rent and not renew the contract with the hypermarket. If the popularity of the property is not strong, and the hypermarket operation does not meet expectations, the hypermarket itself will not take the initiative to renew the contract. As a result, there will be fewer and fewer hypermarkets in the city center or the core business district, and the new hypermarkets will shift to the suburbs with cheap rents and the sinking markets of the third and fourth tiers in order to reduce costs.
"Hypermarkets withdraw from the city center, gradually suburban, sinking marketization, this is also the commercial law in the process of urbanization." Wang Xianqing said that in the past, the urbanization rate was relatively low, and consumption gathered from low-tier cities to central cities and from the periphery of cities to urban centers. It was also at that time that hypermarkets expanded, taking properties in the heart of the city for 10-20 years at very low rental prices. However, when the urbanization rate exceeds 50%, consumption begins to spread to decentralization, and hypermarkets gradually spread to the surrounding and sinking markets.
According to the "Chain Supermarket Operation Report (2021)" released by the China Chain Store Association, even in 2020, when the epidemic occurs, hypermarkets can store stores in third-tier cities with a year-on-year sales growth rate far exceeding that of small supermarkets. Nandu reporters also found that in the commercial circles of Yangjiang, Maoming and other county towns in Guangdong, hypermarkets such as Bu Bee Lotus are the most popular merchants in the locals.
"Judging from the previous business rules of the European, American and Japanese markets, there are no hypermarkets in the city center, only food supermarkets, fresh supermarkets, TESCO, Carrefour and other supermarkets have opened stores on the outskirts of the city." Zhang Guangzhong, a guangdong commercial practice expert and market observer, said that in general, hypermarkets have withdrawn from the core business circles of large cities in europe, the United States and Japan, and transferred and expanded to the surrounding new urban areas and emerging dynamic cities, which is not only the continuous improvement of land and comprehensive value in the central areas of large cities, but also the cumulative improvement and outbreak of demand in the sinking market of small and medium-sized urban areas around large urban areas. "This is also a microcosm of China's economic development and the growth of consumption power, which is a kind of historical progress."
"From the gradual fading of hypermarkets in large urban centers to the popularity of membership-based warehouses in recent years, the rise and fall and rotation of retail formats are closely related to the Internet economy and the economic and technological environment driven by digitalization." Zhang Guangzhong said that the relationship between buyers and sellers, practitioners and consumers in modern business is closer and requires interaction. Through digital technology, interconnected platforms, and online social media, the two can be well linked. "The mainstream trend of the future development of chain retail must be the comprehensive integration of offline and online." Paid-based membership stores are a format with good offline and online integration, and a business model that is in line with revenue diversification. ”
Written by: Nandu reporter Tian Aili Ma Ningning