According to incomplete statistics, in 2017, 125 retail listed companies in China across 7 retail formats achieved total revenue of 2,023.01 billion yuan and net profit of 132.08 billion yuan (note: excluding Watsons China's net profit). These 125 companies include 56 department stores/shopping malls, 15 supermarket chains, 35 footwear and apparel companies, 5 home appliance retailers, 5 drug and cosmetics chains, 6 e-commerce companies, and 3 snack food companies. ▲Note: The chart is based on incomplete statistics, currency is RMB, companies marked with × are US-listed, and net profit is calculated under Non-GAAP. For the top 100 listed companies ranked by revenue, compared with 2016, the average revenue rose to 19.9 billion yuan, and the threshold for the top 100 also rose from 1.368 billion yuan to 2.053 billion yuan; revenue growth was 19.72%; average net profit increased to 1.306 billion yuan, with net profit growth of 34.00%. Overall, the above performance does not indicate a significant improvement in the industry average, mainly because the rapid development and performance improvement of large companies such as JD.com, Alibaba, and Suning.com pulled up the industry average. There is still a long way to go to comprehensively improve the overall level of China's retail industry. The road ahead is long and arduous!

  1. Decline in listed company performance gradually narrows From 2015 to 2017, except for the loss-making proportion expanding by more than 1 percentage point in 2017 compared with the previous year, the proportion of retail listed companies with declining revenue, declining net profit, declining both revenue and net profit, and loss-making companies all declined year by year. The performance decline has been effectively controlled, and the decline rate has narrowed year by year.
  2. Large companies lead China's retail development In 2017, the average revenue of 125 listed companies was 16.184 billion yuan, up 3.37% year-on-year; average net profit was 1.065 billion yuan, up 15.76% year-on-year; based on this, the net profit margin of 124 listed companies (excluding Watsons China) was 6.60%, up 0.72 percentage points from the average net profit margin of 107 listed companies in 2016. It is worth noting that the combined revenue and net profit of JD.com, Alibaba, and Suning.com increased by 41.16% and 55.14% respectively in 2017. Excluding these three companies, revenue decreased by 5.96% year-on-year; net profit decreased by 12.34% year-on-year; net profit margin decreased by 0.20 percentage points year-on-year. Thus, the overall operating performance of retail listed companies in 2017 was mainly driven by three e-commerce companies.
  3. Revenue and net profit continue to concentrate in large companies Overall, in 2017, the revenue and net profit of retail listed companies continued to concentrate in large companies. Four companies with revenue above 100 billion yuan: JD.com, Alibaba, Suning.com, and Sun Art Retail, with combined revenue of 902.786 billion yuan and net profit of 95.22 billion yuan, accounting for 44.63% and 72.09% of total revenue and total net profit respectively. Three companies with revenue between 50 billion and 100 billion yuan: Vipshop, Gome Retail, and Yonghui Superstores, with combined revenue of 202.941 billion yuan, accounting for only 10.03% of total revenue, and net profit of 4.367 billion yuan, accounting for only 3.31% of total net profit. The "750 phenomenon" in 2016 (7 companies achieving more than 50% of revenue) was rewritten as the "650 phenomenon" (6 companies including JD.com, Alibaba, Suning.com, Sun Art Retail, Vipshop, and Gome Retail achieving 51.76% of revenue). The "570 phenomenon" in 2016 (5 companies achieving 70% of net profit) was rewritten as the "370 phenomenon" (3 companies including Alibaba, JD.com, and Suning.com achieving 69.98% of net profit). Adding six more companies such as Heilan Home, Vipshop, Sun Art Retail, Yonghui Superstores, Gongxiao Daji, and Golden Eagle Retail, the nine profit-generating giants achieved net profit of 106.059 billion yuan, accounting for 80.30% of total net profit. There are 8 companies with losses exceeding 200 million yuan: Lianhua Supermarket, despite a 5.4% decline in revenue, still suffered a loss of 283 million yuan; Metersbonwe's revenue declined slightly, but losses increased significantly to 305 million yuan; Gome Retail's revenue declined by 6.60%, and losses increased significantly to 450 million yuan; Ningbo Zhongbai, despite nearly 8% revenue growth, saw losses increase significantly to 457 million yuan; Huiyin Smart Community suffered a loss of 507 million yuan amid declining revenue; Renrenle saw revenue decline by nearly 13%, resulting in a loss of 538 million yuan; Daphne International saw revenue decline by nearly 20%, with continued losses of 611 million yuan.
  4. Retail format classification Revenue and net profit by format are shown in Chart 2 below. ▲Note: Drug and cosmetics profit margin excludes Watsons China's revenue of 21.783 billion yuan. Total revenue: E-commerce companies dominate. Among the 7 retail formats, e-commerce's revenue share has surpassed the combined share of department stores and apparel, becoming the highest revenue share among listed companies, reaching 34.45%, up 6.41 percentage points year-on-year. ▲Revenue overview of major e-commerce listed companies, companies marked with × are US-listed, net profit calculated under Non-GAAP. Second is the department store industry, with a revenue share of 23.96%, down 2.86 percentage points year-on-year. ▲Revenue overview of major department store and shopping mall listed companies. Third is supermarkets, with a revenue share of 15.05%, down 1.18 percentage points year-on-year. ▲Revenue overview of major supermarket listed companies. Fourth is home appliance retail, with a revenue share of 13.94%, down 0.82 percentage points year-on-year. ▲Revenue overview of major home appliance retail listed companies.
  5. Summary and outlook In the past three years, China's retail industry has undergone drastic changes. The industry is in a period of turbulence and transformation, and short-term financial reports of individual companies are no longer sufficient to explain the situation. Some companies may experience short-term losses, declining net profit, or even declining revenue, but this may be the painful cost of transformation. Some companies may turn losses into profits in the short term through transformation, but that does not mean they can rest easy. In the long run, who is first is not important; what matters is that even if you rank last, you can still survive well. (1) China needs a "clean" retail ranking. Currently, there are many retail rankings in China, but there are a series of inaccurate statistics such as data inflation, overlap, different calibers, and concept substitution. These "problematic data" are made public, which is not conducive to the industry grasping the correct development direction, nor is it conducive to the government taking appropriate regulatory measures. Industry associations, research institutions, universities, media organizations, consulting firms, retail enterprises, and relevant government departments should jointly explore the authenticity of retail data. (2) Services will bring about the third revolution in retail. The first revolution in retail was the shift from small shops to large companies. Whether it is department stores, supermarkets, chain stores, or direct selling companies, large companies dominate retail. The second revolution in retail was the emergence of e-commerce, leading the transformation of the entire retail industry. But to this day, one thing has not changed: retail is still mainly about "selling goods." This is basically the case for the 125 retail listed companies. In terms of the number of retail listed companies, department stores, shopping malls, and footwear and apparel companies account for more than 70%, while supermarkets and snack food chains account for less than 15%. Although drug and cosmetics companies are growing steadily, their future development is constrained by policy factors. The third revolution in retail is that services become an important part of retail. The services referred to here are not services related to goods, nor are they in-store experience services, but rather the provision of various types of "life services," mainly targeting two groups: "young people who don't want to move" and "elderly people who can't move." The concept of retail will evolve from a narrow, purely "buying and selling goods" to a broad range of activities providing all terminal services. The structure of China's retail listed companies will also undergo major changes, with more community fresh supermarkets and life service industries going public. (3) The role of capital in retail is somewhat like "chemotherapy" for "cancer patients." Only those patients who are physically and mentally strong can survive chemotherapy by luck. Therefore, retail that relies solely on capital and inducements will ultimately lead to a dead end. (4) The development of e-commerce faces many unpredictable variables. At present, e-commerce companies are rich and willful, buying endlessly, and they are too big to be ignored in terms of employment and too influential to be regulated. But if they become as rich as a country, the government will have to intervene to make the market more dynamic through competition, make competition fairer, and allow consumers to enjoy more legitimate rights and interests. (5) The cultivation of retail brands and gaining user trust is more important than anything else. Big data and datafication are not meant to fool customers or sell them out, but to give customers a more genuine and better experience. Data mining should consider "data rights" issues: data that should not be mined should not be mined, data that should not be promoted should not be promoted, data that should not be publicized should not be publicized, and data that should not be displayed should not be displayed. With the internet, we should be more open and transparent, fair and just, and not abuse technical means to mine consumers' private data, nor use technical means to obtain virtual praise, performance, and reputation! Brand building cannot rely on "mirage"; it is a continuous battle of wits and courage. Source: Lianshang.com -END-