Store closings, losses, stock prices cut in half...
Community group buying is "strangling" step by step. How can physical supermarkets regain lost ground?
Another store of Renrenle (002336.SZ) is about to close. Around this store, there are at least 30 community group buying and picking points; Yanjin Shop (002847.SZ) also realizes the difficulty of market layout, and sighs in the announcement. Underestimated community group buying"...The fact that offline physical supermarkets have come to this point seems to confirm the original sentence: "Affected by community group buying, the supermarket format has reached the darkest moment of life and death."
However, the strangulation of community group buying on physical supermarkets is far from over. Can the supermarkets regain their lost market share?
Everyone who keeps closing the shop
A 15-year-old store is surrounded by 30 community group buying and picking points
Renrenle, once known as the "Little Wal-Mart", is about to close a store.
In the first half of 2021, Renrenle closed a total of 19 stores, and this time it was Renrenle Yuefu Store in Jinjiang District, Chengdu.
According to the official website, Renrenle Yuefu Store opened in January 2006. It is Renrenle’s first D-type community supermarket in Chengdu, with nearly 30,000 products.
The store is only 700 meters away from Chunxi Road in the city center of Chengdu. The main business district covers a population of more than 60,000 people.
On the wall outside the store, Renren Yuefu Store posted an announcement stating that it plans to cease operations on July 31, 2021 due to the expiration of the lease contract.
On July 20, during a visit by the Red Star Capital Bureau, it was found that the store was undergoing clearance activities, and some of the goods on the shelves had been emptied.
"The store is losing money, and it's not selling as well as before." An employee of Renren Yuefu Store told Red Star Capital Bureau.
For an old store that has been in business for more than 15 years, where have the shopping needs of regular customers shifted to?
The Red Star Capital Bureau noted that Renrenle once stated in the 2020 semi-annual report that due to the impact of the community group buying business launched by many online platform companies, the passenger flow, sales and gross profit levels of offline physical stores have generally declined.
Take Renren Yuefu Store as an example. According to incomplete statistics from the Red Star Capital Bureau, there are at least 30 pick-up points for 4 community group buying brands within a 500-meter radius of the store.
Under the impact of community group buying, Renrenle estimates that its net loss in the first half of this year will be approximately 320-370 million yuan.
Yanjin shop kicked to the iron plate
Underestimated the impact of community group buying on traditional supermarket channels
In the “encirclement and suppression” of physical supermarkets by community group buying, there are also companies in the snack food industry that have been implicated, such as Yanjin shops.
To clarify the causes and consequences of the injury to the Yanjin shop, we must first understand its "store-in-island" model, which refers to setting up a display booth in the supermarket, which can achieve the effect of presenting products and also take care of product sales.
As of the end of 2020, the products of Yanjin Store have entered 3088 stores of 36 large supermarket chains, covering Wal-Mart, Carrefour and Renrenle.
According to its 2020 financial report, Nakajima's 16,000 stores "lighted up the national territory of Yanjin stores."
It's not without reason that Yanjin Store is tilting its resources toward the supermarkets.
According to its financial report data, from 2018 to 2020, the revenue contributed by direct-operated supermarket channels is 466 million yuan, 498 million yuan and 630 million yuan, respectively, rising year after year.
However, with the rise of community group buying, the Yanjin shop has gotten into the iron plate.
On July 15, 2021, Yanjin Store stated in its semi-annual performance forecast that the company underestimated the impact of new retail channels such as community group buying on traditional supermarket channels.
Yanjin shop said in the announcement: “In the first half of 2021, the company invested too much in the marketing of personnel promotion, promotion and promotion in the supermarket channel, but the sales revenue growth and channel performance of the supermarket channel did not meet expectations.
"After the second half of last year, it was discovered that the sales of supermarkets began to decline." On July 19, Zhang Xuewu, chairman of Yanjin shop, said in a conference call that the supermarket model has been winning for so many years. By the second half of 2020, "we I found that the ratio of the entire cost to the input-output is not as good as before."
Currently, Yanjin Shop is trying to build an omni-channel matrix including community group buying and live streaming.
Zhang Xuewu said, "Today, we know that we must switch from supermarket to omni-channel."
Strangulation continues
The only double-growing supermarket performance also "fallen" in the first quarter
Not only Renrenle and Yanjin Shop, but in this battle without gunsmoke, many supermarkets have been hurt by community group buying.
Shanxi Securities has selected 13 listed companies in the supermarket industry for research. These companies have seen a significant decline in their performance since the second half of 2020.
Shanxi Securities believes that since the second half of last year, Internet giants have entered the community group buying track one after another, selling mainly fresh products, initially using low-price subsidies to seize the market, which has had an impact on the flow of customers and sales in supermarkets and hypermarkets.
In the first quarter of 2021, the passenger flow of supermarkets and hypermarkets has dropped sharply, basically at a double-digit rate, and customer unit prices and sales have also fallen to varying degrees.
Among them, fresh food has suffered the most, and grain, oil, alcohol and beverages have also declined.
Among the 13 listed companies sampled by Shanxi Securities, only Yonghui Supermarket (601933.SH) achieved both revenue and net profit growth in 2020.
In the first quarter of 2021, Yonghui Supermarket also fell.
The company's financial report shows that in the first quarter of 2021, its revenue was approximately 26.3 billion yuan, a year-on-year decrease of 9.99%; net profit was approximately 23 million yuan, a year-on-year drop of 98.51%.
Yonghui Supermarket stated in its financial report that, combined with the actual performance in the second half of last year and the first quarter of this year, as well as the short-term impact of community group buying on its business, it is expected that net profit may suffer a loss in the first half of this year.
The Red Star Capital Bureau noted that on July 22, 2020, Yonghui Supermarket’s closing price was reported at 9.65 yuan per share, with a total market value of about 91.8 billion yuan; on July 22, 2021, its closing price was reported at 4.30 yuan per share, with a total market value of about 91.8 billion yuan. The market value is about 40.9 billion yuan, less than half of the same period last year.
In the past year, the market value of Yonghui Supermarket has been cut in half.
Seek to break the game
Supermarket pushes online business to compete with community group buying
Zhang Fan, the director of operations of the supermarket division of Chongqing Department Store (600729.SH), once said in an interview with the media that community group buying has a great impact on the traditional retail industry, and "the actual impact may be greater than market estimates."
As of December 31, 2020, Chongqing Department Store has 179 supermarket formats.
The financial report shows that Chongqing Department Store’s revenue in 2020 is approximately 21.077 billion yuan, a year-on-year decrease of 38.97%; net profit is approximately 1.034 billion yuan, an increase of 4.91% year-on-year; non-net profit is approximately 566 million yuan, a year-on-year decrease of 36.35%.
Among them, the revenue of Chongqing Department Store in the supermarket format in 2020 was 8.55 billion yuan, a year-on-year decrease of 9.35%.
In Zhang Fan's view, digital transformation is a sharp sword for Chongqing Department Store to resist community group buying.
The Red Star Capital Bureau noted that as early as in the 2020 financial report, Chongqing Department Store proposed: In the supermarket format, it should rely on offline stores, use multi-point APP to connect online and offline, and explore new media marketing through live broadcast and group grouping. And community group buying, etc.
Not only Chongqing Department Store. On April 30, Zhang Xuansong, chairman of Yonghui Supermarket, said at the performance briefing, “We are confident in the future and have a clear response plan.”
What is the response plan?
The relevant person in charge of Yonghui revealed to the Red Star Capital Bureau that at present they are mainly vigorously developing online business, especially the Yonghui Life APP.
The Red Star Capital Bureau noted that although some supermarkets have launched online services, most of them are delivered home by delivery.
Compared with the community group buying method of setting up pick-up points, the cost of the former may be relatively higher.
Whether the supermarket can finally regain the lost market share still needs to be tested by the market.
Chengdu Commercial Daily-Red Star News reporter Yang Peiwen