YongHui Supermarket was rarely in the hot search, because of the YongHui Life App (under YongHui YunChuang) selling Maotai only collects money but does not ship, which triggered public anger, and finally had to come out to apologize and compensate for the matter.
This incident shines a light on the hidden corner of Yonghui, the mother-son enterprise of Yonghui Supermarket and Yonghui Yunchuang, which are separated and merged. In the past few years, Yonghui Yunchuang, which undertakes innovative business, has incubated Super Species and Yonghui Life, but none of them has succeeded in becoming the next 20 years of Yonghui Supermarket.
This leading retail company out of Fujian has been moving forward at high speed for 20 years, the innovative business has not run out, the deduction of non-net profit margin of listed company Yonghui Supermarket has been cut down from 2017 to 2019, and the share price of Yonghui Supermarket has been hovering at a low level in the capital market for a long Time. As of March 18, Yonghui Supermarket’s share price has shrunk 37.3% from RMB 11.05 per share to RMB 6.93 in less than a year, and its total market capitalization has evaporated a total of RMB 39.2 billion to RMB 65.948 billion. How exactly did it get to this situation today?
It’s the turn of super species
After the New Year, although Super Species, located on the B1 floor of Chongqing Xixin Starlight Times Square, was still open for business, people working nearby found that it was no longer possible to order Super Species take-out from third-party platforms, with the page showing that the business had been suspended. The store staff revealed that the store has been clearing goods since a year ago, and now there are especially many discounted goods. As for whether the store will be closed, “we haven’t received a notice yet, the above is just a notice to take it offline from the third-party platform.”
At the same time, the news that “Super Species will close all stores outside Fuzhou” is circulating everywhere. Li Ziwen, who has worked for Super Species for two years, was not surprised to hear this news, “When Yonghui Yunchuang was separated from the listed company system three years ago, Super Species was equivalent to being abandoned.”
Super Species is a new retail business of Yonghui, similar to Boxma Fresh Life, which focuses on “Food and beverage + retail”, under the system of Yonghui Yunchuang, which was established in 2015. At the time, Yonghui was testing this new format because offline stores were under huge impact from e-commerce and sales were declining. Wanting to find a second growth curve, Yonghui Supermarket eventually incubated Yonghui Yunchuang, which was personally operated by Zhang Xuanning, one of the founders.
Zhang Xuanning once confessed, “If Yonghui has no innovative business, it will be very dangerous if users don’t like it one day.” In 2017, Yonghui opened its first super species store and shouted its goal of opening 100 stores by the end of 2018, but by the appointed time, things took a sharp turn for the worse.
In December 2018, Yonghui Supermarket transferred its 20% stake in Yonghui Yunchuang to Zhang Xuanning personally for $394 million and dissolved the concerted action agreement, citing too big a loss. In the announcement, Yonghui explained that Zhang Xuan Ning and his brother Zhang Xuan Song had a big disagreement on the development positioning of YFY Yunchuang.
Zhang Xuan Song also confessed at the shareholders’ meeting, “For super species, Zhang Xuan Ning and I have differences, he is optimistic about food and beverage, I think the focus should be on ‘delivery to Home‘.” In fact, there is another reason for this “brotherly separation”, as Yonghui Cloud is like a bottomless pit, exhausting Yonghui Supermarket’s money and patience, and starting to drag down the performance of the listed company.
In the first three quarters of 2018, Yonghui supermarket net profit was 1.018 billion yuan, down 26.9% year-on-year, including a loss of 617 million yuan in the cloud business.
With consecutive years of losses, there was no way to explain to investors, so Yonghui Supermarket could only cut out this business that “needed to be nurtured”. Four months later, Yonghui veteran Peng Huasheng, the legal representative, chairman and general manager of Yonghui Yunchuang, returned to Yonghui Supermarket to take up the post of vice president.
“From this moment of separation, in many aspects such as the degree of support and cooperation, supply chain response, we have felt less like a Family.” Li Ziwen told reporters, “Previously, Yunchuang and the supermarket procurement supply chain was shared, but less than six months after opening, they scaled back the supply quota, and about 20% of Yunchuang’s goods needed to find another supplier.”
“As a Maotai dealer, Flying Maotai in the store for a long time out of stock, this can not make up, then make up the full rose Gold Maotai line? Penfolds red wine series can not give me a full complement? The normal demand for goods can not meet.” Li Ziwen said helplessly.
Staffing has also shrunk significantly. Li Ziwen revealed that his store originally needed 70 people in 2019, but the CEO of Yonghui Yunchuang disagreed, fuming several times and repeatedly asking for compressed staff. “I think the service industry will not be able to keep up with the service if there are not enough people, and only after making arrangements for job consolidation and multi-posting did we end up with 40 to 50 people.”
“When Yonghui spun off Yunchuang from the listed company, it meant that it started to clean up its mess.” Li Ziwen revealed that “Li Guo, CEO of Yonghui Supermarket, thought that Super Species was not operating very well, and the board of directors thought the same way, that the money had been burned almost, and if we did it again, we would need more investment and did not want to do it anymore.”
In the 2018 semi-annual report, Yonghui had disclosed that the impact of Yonghui Yunchuang on the parent company amounted to 51%, and the operation of Super Species had never been disclosed separately and publicly. Li Ziwen revealed that “at its peak, there were 88 stores in total, and only 20% of them were profitable.”
New retail species hit a bump in the road across the board
According to Wang Guoping, a senior consultant at United Business Network, the problems of super species are too fast expansion, misplaced locations, limited middle and high spending power and mismatched scenes.
In his opinion, site selection for high-end businesses has always been harsh, and the expansion of stores such as Blt and Ole, the old high-end supermarkets in the early days of the country, has been very slow. “The price is high, the customer base is very picky, the ability to choose the location of the network is very limited, for example, in Fuzhou also on the CBD consumption strength is strong. A lobster so expensive, occasionally eat can, often eat unrealistic, and is not a business entertainment scene.”
For offline stores, the location is the most emphasized factor, the location is good, the store will be a large part of the success.
Li Ziwen’s Super Species was located in a well-known high-end property and wanted to do business with the white-collar workers in the surrounding office buildings, so the merchandise configuration was set. However, the conditions given by the property owner were not good, as the signboard of Super Species could hardly be seen on the front, and the most basic brand exposure could not be done, and less than 2,000 residents were covered within 1 kilometer, so the traffic was low.
“This store was finalized after our boss had a meal with the owner of the first party.” Li Ziwen revealed that despite the good personal relationship between the two bosses, the later property cooperation is not high, including interaction with other merchants, integrated marketing and other actions are difficult to start. In his opinion, the boss’s idea is that high-end business should be opened to high-end occasions, but the site selection has a series of measurement tables, such as customer flow, customer unit price, customer type, etc..
There are many super species stores with inherent flaws in site selection. in July 2019, the super species Wujiaochang Wanda store closed, the first store it opened in Shanghai, less than two years after it opened. Li Ziwen said the store’s property conditions were not very good either, and the store entrance was so small that it was hard to notice that some stores in Shenzhen gave up after six months of opening. He found that the two important features of stores that are profitable for Super Species are good location and no competitors around them.
In addition to expanding stores on their own, Super Species also tried to find partners in various regions to replicate at scale, including in Sichuan, where it chose Grassroots Knowledge, an investment and financing platform owned by New Hope. The two sides announced a joint venture, Sichuan New Yunchuang Commercial Management Company, on Tanabata Day in 2017, ready to open 12 stores in Chengdu in 2018.
However, according to the sky-eye search, there is no such company as “Sichuan New Yunchuang Commercial Management Company”, and there is no super species in Chengdu now. A partner of Yonghui Yunchuang who was involved in the cooperation disclosed to AI Financial News, “The two sides did promote the cooperation, and opened stores in 2018.” But after he left the position in the same year, it was unclear what happened.
A person who worked at Chengdu Super Species revealed, “At the end of 2019, all Super Species stores in Chengdu were closed all at once.” As for the reason, its closed mouth.
Although Super Species had shouted a target of 100 stores, the number of its newly opened stores from 2017-2019 was only 27, 46 and 15, adding up to less than 100 new stores in all three years.
“At the beginning, the opening scenes of super species were so hot that shopping centers would send people to test the market heat and give high scores to introduce them as innovative businesses.” Wang Guoping told AI Financial News that although everyone could not understand the business at that time, the market heat was very high, but not long after but found that the super species ping efficiency, rental to sales ratio and other indicators were not high.
Helplessly, in 2019, super species slowly withdrew from self-management and sublet its food and beverage stalls to other fast food snack brands to reduce the pressure of rent. According to Wang Guoping, this behavior is equivalent to a second landlord, earning a rental spread. “The shopping center is upset about this. Doing snacks I can just attract business myself, why go through the middleman.”
This year, Super Species’ internal and external difficulties have been particularly evident. Of course, other “food and beverage + retail” new retail projects are also having a hard time. Founded in May 2018, Meituan’s Little Elephant Fresh was also one of the new retailers that rushed into the market, opening seven stores in one breath in the first five months, but closing five stores in less than a year’s time and becoming a complete abandonment of Meituan in October 2020. Chen Shaohui, CFO of Meituan, has explained that “the reason for the closure is that the return on investment of small elephant fresh is lower than expected.”
Jingdong’s 7FRESH is also hardly optimistic, in May 2018, the then head of Wang Xiaosong shouted five years of a thousand stores target, however, the first year only opened 10 stores, only one-fifth of the year’s task. in April 2019, Wang Xiaosong was transferred out, Wang Jing took over. In January this year, Wang Jing was replaced, and Zheng Feng, a professional manager from Walmart, took over. Three years, two changes of command, on average, the three helmsmen have only done one year each. Thousands of stores target can not be discussed.
According to Wen Zhihong, an expert in chain management at Hejun Consulting, new retail projects such as boxma fresh produce and super species have an ideal design component, with overemphasis on food and beverage, in fact without considering clearly what the deep logic of the interaction between food and beverage and retail is, and if we look at the experience of the boxma retail area alone, the dynamic lines, lighting and displays are all significantly inadequate.
In 2019, the box horse also did not escape the fate of the closure of stores, some poor operating conditions of the store all abandoned, and the main force to open stores to box horse mini.
Yonghui supermarket side also admitted to reporters, super species is no longer the core business, and there is no large area closure notice, but store performance, costs, performance measurement, unprofitable stores to be shut down, the current core business is to home and to the store.
Although the to-home business is not conspicuous among all the innovative businesses, it was chosen by fate. Yonghui’s to-home business includes third-party channels such as Yonghui Life app, small programs and Jingdong to home, etc. In 2019, Yonghui’s online sales were 3.51 billion yuan, accounting for only 4.1% of total revenue that year, but by 2020, the Epidemic amplified the demand for to-home, and Yonghui’s online sales in the first half of 2020 were 4.561 billion yuan, already more than last year’s full year, contributing 9.71% to revenue .
Why is Yonghui in a hurry?
The first half of Yonghui’s life can be described as very brilliant, Zhang Xuan Song and Zhang Xuan Ning two brothers first engaged in beer distribution, in 2001 officially registered the establishment of Yonghui supermarket, stepped in the “agricultural to super” (supermarket operation of farmers’ markets) dividend, 3 years out of Fujian, 9 years on the capital market, when Yonghui is already a national supermarket chain with sales of more than 10 billion. At that time, Yonghui was already a national supermarket chain with sales of more than 10 billion dollars, and the scenery was unparalleled.
According to Wang Guoping, Yonghui Supermarket started to emerge from the Fuzhou Liming Warehouse, and the fourth generation of stores rose to break through, positioning the public’s red label iterations to the seventh generation of stores, after which it moved to boutique green label stores, and even tried a more high-end gold label store in Fuzhou East Second Ring, but also from the gold label store, Yonghui’s innovation shifted from leading to following, as exemplified by the super species that benchmarked against Box Horse.
Not only Super Species, but also from the past five or six years of innovation attempts by Yonghui, the retail giant with more than 1,000 stores nationwide and ranked sixth among the top 100 chains, has found it difficult to replicate its success in other areas. Wang Guoping thinks that the core reason for the failure of Super Species is that Yonghui failed to quietly clarify the operational path of the new business, and replicated it too quickly, laying hidden dangers for future development.
But what is not true of other businesses? The same story is being repeated for the new businesses, such as Yonghui member stores, Yonghui Life, and Yonghui mini, which are trying out new businesses, opening stores quickly, and immediately closing them to stop losses when the funds can’t bear it. After all, retail profits are thinner than paper, can’t afford to spread money around, from the performance of Yonghui Supermarket, indeed, can’t afford to toss new business, 2017 to 2019, in the deduction of non-net profit margin, Yonghui Supermarket from 3.03% down to 1.25%, almost cut.
In 2015, Yonghui’s first member store “YH Global Food Direct” opened in Shanghai, which is the prototype of its member store, with only 200 square meters and 1,000 kinds of products, more like a small community boutique store. For YH Supermarket, the significance of this membership store is, firstly, to try out a small community store type, and secondly, YH’s plan is to direct offline member traffic to online consumption, and online traffic can be traced back to offline experience, forming a closed loop of traffic and consumption.
In 2017, the membership store was renamed as “Yonghui Life”, diluting the concept of membership and continuing to run around. By the end of 2017, the number of stores had exceeded 200, opening 100 stores in three months, an average of one store a day.
This is not even the fastest. According to the plan, Yonghui Life originally planned to open 1,000 new stores in 2018, but after Yonghui Life opened 233 new stores in the first three quarters of this year, Yonghui had to admit that it was more difficult to complete the store opening plan of Yonghui Life stores, and the company needed to adjust dynamically according to the general environment.
Super species and yonghui life ahead of the road is lost, the cloud creation segment business almost all lost, early 2019, yonghui cloud super segment decided to innovate themselves, yonghui mini store and began a new round of running, this business is also community small store type, but the positioning has been completely get rid of the yonghui life boutique state, take the affordable pro-people route.
By the second half of 2019, Yonghui Life, which was established more than 4 years ago, entered the closing moment, with stores in Beijing, Xiamen and other places on clearance promotions, and some stores have been closed. In its place, the Yonghui mini store began a new round of frenzy, with 17, 364 and 112 new Yonghui mini stores opened in the first three quarters of 2019, respectively.
Zhang Xuan Song said that he is confident to open up to 1,000 mini stores in 2019, and mini stores will become an important module of Yonghui in the future. However, as of the end of 2019, only 573 mini stores were opened by Yonghui for the whole year.
In May 2020, Zhang Xuan Song reflected at the 2019 Annual General Meeting that “any kind of incentive system is a double-edged sword.” Last year, trying to promote the mini store quickly, the loss of the mini store in the war zone was not counted in the assessment, which resulted in the mini store being undisciplined in the opening of the store. Subsequently, Yonghui mini store into the adjustment, closed a number of stores. By the end of the third quarter report, mini stores totaled 405, nearly 150 fewer than at the end of 2019.
Without running through the model to open stores quickly, the more stores, the greater the loss. 2020 in the first half of the year, Yonghui mini store sales of 1.451 billion yuan, a loss of 130 million yuan. Wen Zhihong believes that big stores and small stores have completely different operational ideas, store location, commodity structure, display, promotion and attraction methods are their own set, can not use the model of big stores to set in small stores.
Yonghui supermarket director Zhang Jing Yi said in an interview with the media, “We like to do things to pat our heads, and finally found that patting our heads is wrong, we will also pat our heads, but we dare to admit our mistakes and correct them in time before they are very far wrong, so that the same mistakes are not made twice.”
However, this is not the first time that Yonghui “want to speed up but not achieve”. Why is Yonghui’s new business in such a hurry every time? It is because the situation does not wait for people.
The supermarket started from “agricultural to super” and went all the way from Fuzhou to the whole country, and its foundation is “fresh food”, according to Wen Zhihong, around 2015, physical retail was crushed by e-commerce, but fresh food has not yet been broken through, with which Yonghui supermarket also gained more market share. Yonghui gained more market share and freed up its hands for innovative business exploration.
But since the new retail concept was introduced in 2016, all business models under the new retail concept have been interpretations of fresh food categories under the one-hour delivery model. Daily Fresh, Park Supermarket, and Dingdong began to grow in various cities based on the concept of front warehouse, while fresh food was further specialized, and fruit chains such as Baigouyuan and Xianfeng Fruit and meat specialty stores such as Qian Dama began to be seen by capital. The competition is at a higher level, with lower prices and closer pickup distances.
Each of them brings capital into the field, and subsidies to get customers become the mainstream way. In the Internet field, there is a magic spell, the boss and the second fight, the third dead.
For Yonghui Supermarket, the situation is getting more and more dangerous, young consumers are “blocked” by the front warehouse at home, do not need to go out, those who need to store in stores, the middle-aged and elderly, in the community at the entrance to the fresh store was intercepted. The first and second-tier cities have box horse, daily fresh continued Education harvest, low-tier cities have community group purchase long drive into.
“Now, the freshness advantage of Yonghui is not obvious anymore. A lot of enterprises fresh this also do very well.” In Wang Guoping’s view, one of the advantages of Yonghui is the scale, bargaining power is stronger; the second is the team of buyers, almost more than 1,000 people, so Yonghui has to do a big discourse by constantly opening stores. “Yonghui is now in an offensive state and will kill more regions, the main rival is actually still offline supermarkets.”
Wen Zhihong believes that the combination of Yonghui supermarket to home and to store is the concept of omnichannel, this concept blurs the scope of opponents, online and offline may be Yonghui’s opponents, but Yonghui’s core strength is not online, but offline, if the offline stores can not hold, may be surrounded by other businesses at the doorstep of the community.
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