Online orders increased by 25% year-on-year Revenue fell by 5% year-on-year Can Gaoxin Retail "Nirvana"?

Per reporter: Chen Ting Per editor: Liu Xuemei

On the evening of November 1, Gaoxin Retail handed over the report card for the first half of fiscal 2022 as of September 30. According to the financial report, during the reporting period, Gaoxin's retail revenue was 41.534 billion yuan, down 5.0% year-on-year, and the net profit was 112 million yuan, down 793 million yuan from the same period last year. The number of stores of its supermarket brand RT-Mart reached 497, covering 236 cities across the country.

"The challenges to brick-and-mortar retail over the past six months have been enormous." Gaoxin Retail CEO Lin Xiaohai said. Gaoxin Retail's response strategy is to "adhere to the multi-format omni-channel strategy, offline becomes the experience center, and online becomes the fulfillment center".

It can be seen from the first half of the financial report that similar to other physical retailers, Gaoxin Retail, which is mainly based on hypermarket formats, is being affected by the downturn of hypermarket formats.

RT-Mart Guangzhou Xintang store (per reporter Wang Fan photo)

However, for the results of the first half of fiscal 2022, as if expected by Gaoxin Retail, the current CEO Lin Xiaohai previously said: "Even after experiencing the biggest challenge in history in the first quarter of fiscal 2022, we are still confident that in this fiscal year, Gaoxin Retail can return to high-digit growth." ”

Since he was officially appointed CEO in May this year, Lin Xiaohai is leading into a period of change, while carrying out new retail transformation of offline RT-Mart stores, small and medium-sized formats are also in the layout to break the situation, and the integration with Ali is also deepening.

According to the financial report data, revenue in the second quarter of the fiscal year (July 1 to September 30) increased year-on-year. Among them, the online order volume from RT-Mart Youxian APP, Taoxianda, Ele.me and Tmall Supermarket increased by 25% year-on-year, and the average daily order volume of stores increased to 1400.

In addition, while releasing the semi-annual report for fiscal 2022, Gaoxin Retail announced that all 497 stores of RT-Mart across the country participated in Double 11.

For the future of brick-and-mortar retail, Lin Xiaohai said, "The challenges are still there, but we believe in the value of long-termism and have confidence in future growth." ”

According to the "2020 Top 100 Chinese Supermarkets" released in July, Gaoxin Retail still ranks first. However, in the eyes of industry insiders, small and medium-sized formats are difficult bones to gnaw, and the direction of RT-Mart's self-transformation is also the same as the reform direction of the entire physical retail industry, and if Gaoxin Retail wants to maintain the throne of "Top 100 Supermarkets", it needs to come up with the results of "reform" as soon as possible.

Recently, the data released by the China Chain Store & Franchise Association shows that the top 100 chain companies have suffered the first negative growth in overall sales since the association had statistics in 1997: the sales scale of the top 100 chains in 2020 was 2.4 trillion yuan, down 7.2% from the previous year, of which the sales of 52 of the top 100 companies fell year-on-year, a decrease of 15.4%. The sales scale of the top 100 chains accounted for 6.1% of the total retail sales of social consumer goods, down 0.2 percentage points from 2019.

In this environment, Gaoxin Retail continues to carry out new retail transformation. As early as 2013, RT-Mart founder Huang Mingduan founded "Flying Bull Network" to start the first step in digital transformation, and in October 2020, Ali announced that it intends to invest HK$28 billion to directly and indirectly hold 72% of the shares of RT-Mart's parent company Gaoxin Retail, becoming the controlling shareholder of Gaoxin Retail.

In May this year, Lin Xiaohai succeeded Huang Mingduan as CEO of Gaoxin Retail. According to the data, Lin Xiaohai, 49 years old, has served as vice president and general manager of Retail Connect since July 2016. Prior to joining Alibaba, Lin Xiaohai was The Director of Marketing for P&G Greater China and Vice President of Sales for P&G Greater China. His term at Gaoxin Retail will end in May 2024.

Under the leadership of Lin Xiaohai, Gaoxin Retail has officially entered a period of change. At the time of the release of the 2021 fiscal year annual report, Gao Xin Retail said that Lin Xiaohai had formed a new generation of management team based on nearly 25 years of experience in the retail industry and the Internet industry, and formulated a strategy of "multi-format omni-channel development".

In the 2021 fiscal year annual report, Lin Xiaohai said that he will be committed to building RT-Mart into an offline experience center for consumers and creating reasons for customers to come to the store; as well as an online logistics fulfillment center to become the first echelon of fresh e-commerce to meet the needs of customers to their homes.

In addition, due to the narrowing of the customer's shopping radius, Gaoxin Retail will accelerate the exhibition of medium-sized supermarkets based on RT-Mart's supply chain capabilities, test the "RT-Mart" model, and increase the coverage density of existing cities to improve supply chain efficiency and expand the online coverage radius.

Lin Xiaohai said at the time that the cooperation between Ali and Gaoxin Retail will be further deepened, and the supply chain of 500 stores of Gaoxin Retail will be used for the supply of goods for Ali's retail in the same city, and Ali's technical strength will improve the digital capabilities of Gaoxin Retail.

Under the strategy of "multi-format omni-channel development", RT-Mart of small and medium-sized formats is becoming the "new favorite" of Gaoxin Retail. During the financial reporting period, Gaoxin Retail opened 3 new RT-Mart stores nationwide, 36 new RT-Mart innovative formats, and 16 medium-sized supermarkets "RT-Mart Super" signed contracts. The "Daily Economic News" reporter learned that this innovative format is expected to focus on opening stores in the next fiscal year.

Although Gaoxin Retail anchored the small and medium-sized formats in advance as an important driving force for the group's revenue growth, as of now, how much energy can be exploded by small and medium-sized formats is still unknown.

Looking at the industry, there is no case of a physical retail giant successfully relying on small and medium-sized formats to obtain new growth. Zhuang Shuai, founder of Bailian Consulting, told the "Daily Economic News" reporter that small and medium-sized business stores are completely different from hypermarkets, and the selection, site selection, organization, and process all need to use a new system, and the ability accumulated by RT-Mart before may not be of much use in small and medium-sized formats.

It can be seen that if Gaoxin Retail wants to rely on ZhongrunFa and Xiaorunfa to go out of a new way, it needs to cultivate new capabilities and playing styles. This is not an easy task for an established retailer.

It is worth mentioning that under the new strategy, business ideas have begun to change. Gao Xin Retail said in the latest financial report that the transformation of shopping streets will be integrated into the hypermarket reconstruction version 2.0, and the shopping streets will be changed from "traffic realization" to "traffic entrance", and as of September 30, 2021, the empty shop rate of shopping streets will be controlled within 2%.

Industry insiders told the "Daily Economic News" reporter that at present, in the Chinese market, there are very few retailers who can make multiple formats at the same time. Only Wal-Mart, due to its previous layout in Sam's Club, now has a head start on the multi-format development route.

According to the China Chain Store & Franchise Association, the top 100 supermarkets have increased online sales by increasing the number of online goods SKUs, carrying out community group buying, and live broadcasting business. The average number of online products in the top 100 supermarkets has risen from more than 8,300 to more than 11,000; 60% of enterprises have carried out community group business; 70% of enterprises have carried out online live broadcasting business.

In 2020, the store coverage rate of the top 100 supermarkets to carry out home business increased to 65.1%, and the proportion of online sales reached an average of 5.0%.

The above-mentioned industry insiders said that on the whole, most of the domestic supermarkets are currently carrying out multi-format and omni-channel layout, and how to continue to walk in the forefront in the direction of homogenization transformation will be a great test for RT-Mart.

The current indications show that Gaoxin Retail is deeply integrating with Alibaba New Retail, so it has more "Ali flavor" and is entering the fast lane of digital transformation.

At present, Gaoxin Retail is continuing to carry out new retail transformation of RT-Mart stores. According to the financial report data for the first half of fiscal 2022, RT-Mart has built 3 fresh processing centers, covering 490 stores in the fast picking warehouse, 370 stores with hanging chains, and about 150 stores sharing inventory in Tmall supermarkets.

At the same time, under the goal of making RT-Mart the first echelon of fresh e-commerce, Gaoxin Retail is increasing its investment in B2C business.

As early as 2019, Gaoxin Retail began to share inventory with Tmall Supermarket, and in March 2021, RT-Mart China agreed to cooperate with Hangzhou Taoxianda, and RT-Mart accessed Taoxianda.

During the reporting period, the number of online and offline visitors to Gaoxin Retail increased, and the revenue in the second quarter of the fiscal year (July 1 to September 30) increased year-on-year. Among them, the online order volume from RT-Mart Youxian APP, Taoxianda, Ele.me and Tmall Supermarket increased by 25% year-on-year, and the average daily order volume of stores increased to 1400.

Gaoxin Retail also carried out community group buying business. In May, Lin Xiaohai said at the Gaoxin Retail Performance Conference call that the current community group buying format under RT-Mart is divided into two types: the self-operated "Flying Bull Group" and the "Yifa Purchase" cooperating with Cainiao. In view of the synergistic strategy between RT-Mart and Alibaba, Feiniu Group will abandon the pursuit of scale, return to the essence of business from the strategy of promoting with competitors, and focus on experience and profit model. At that time, Lin Xiaohai expected RT-Mart's Flying Bull Group to become the first profitable community group buying format in the industry.

It is worth mentioning that Gaoxin Retail has also become an important core supply side in the Ali community group purchase business. According to the reporter's understanding, RT-Mart has played an important role in the e-commerce layout of the Taocai community. According to Chen Tongtong, head of Alibaba's MMC commodity operation, RT-Mart's DC warehouse and five central warehouses have always been the supply force of Taocai cuisine, and more than 30 brand owners are from RT-Mart's warehouse distribution network. "Next, in the franchise center and the industrial warehouse based on the agricultural industry, both ends of the fresh will cooperate and integrate with RT-Mart."

However, if Gaoxin Retail really wants to enter the first echelon of fresh e-commerce, it will inevitably need to face competitors such as Dingdong Grocery Shopping and Daily Excellent Fresh in the future. On October 12, JD.com and Dada Group also officially released the "hourly purchase" business, increasing the size of instant retail. What Gao Xin is facing is not a "fuel-saving lamp".

In addition, as the top 100 supermarkets, if Gaoxin Retail does not want to completely become ali's "big rear" and continue to maintain its leading position in the supermarket industry, it needs to consider how to integrate with Ali and find its own new growth point in physical retail as soon as possible.

Gaoxin Retail hopes to leverage Ali to explore specific and feasible solutions to physical retail, which is the current priority. According to media reports, at the interim results conference held on November 2, Lin Xiaohai hoped that Gaoxin Retail's performance in the second half of the year would achieve net growth or equalization.

Lin Xiaohai said frankly that the current operation of physical retail is very difficult, the past six months is the most difficult period faced by the group in the past 24 years, "it can be said that there is no one", but compared with peers, Gaoxin Retail is still excellent. "The profit gap between us and our biggest competitor widened from the previous 2 points of profitability gap to 4 to 5 points, and the advantage over the second place opponent is widening." He believes that customers have a reason to come to the store, and believes that in the future, customers' offline shopping scenes will achieve a balance.

As of the close of Hong Kong stocks on November 2, Gaoxin Retail closed at HK$3.70, down 13.55%, with a total market capitalization of HK$35.297 billion.

Daily economic news