Sudden Store Closures On August 19 last month, the Metro store at Beijing Dacheng Road Mall also announced it would close for renovation. A nearby resident told the author that the store opened in December 2022 and was Metro's fifth store in Beijing. In addition to the above store, on Dianping, Metro stores at Chengdu Chenghua Mall and Wuhan Panlong Mall are shown as "suspended", while the Shanghai Hutai Road store is listed as "closed". Since January this year, Metro stores in Chengdu, Shanghai, Wuhan, and other places have announced closures one after another. Although these stores have not explicitly announced permanent closure, only saying they are "closed for renovation", they have not disclosed when they will reopen. The sudden closure of Metro's Shanghai Hutai Road store, which began renovation on January 16 this year, also surprised some local paid members. According to Xinmin Evening News, in January 2023, Ms. Xue purchased a Metro membership card and renewed it for 199 yuan in January this year. But in February, when she visited the store again, she found the doors closed with a renovation notice posted. Although the store promised that members could "shop, redeem points, and get after-sales service at other 8 Metro stores in Shanghai", there was no clear information on when the renovation would be completed. When Ms. Xue tried to cancel her membership, Metro customer service replied that she could only get a refund of 16 yuan for the 199 yuan card. The customer service explained that the membership card is valid for one year, and since Ms. Xue had used it for two months, she could get a refund for the remaining ten months. However, because Ms. Xue had used three "spend 50 get 50 off" coupons, 150 yuan would be deducted. So, she could only get 16 yuan back. Ms. Xue expressed confusion, saying, "The store closure is a unilateral decision by Metro, and the consumer has no fault. If I had been informed of the closure, I would not have renewed my membership." She also thought it unreasonable to deduct the value of coupons for the refund. "If this is the practice, it is entirely possible that the 199 yuan membership fee could be refunded to zero, or even that the consumer would have to pay extra." In addition, many people had purchased memberships specifically for free parking at the mall, but now with the store closed for renovation, the parking benefit cannot be realized, and Metro has not mentioned any solution, causing dissatisfaction among many netizens. According to the author, the store is located in Baoshan Sunlight Center and opened in November 2022 as Metro's first membership store in Shanghai. In late May this year, when media asked Metro customer service about the "renovation closure", the service did not admit to a "closure" but said "no notice has been received" regarding reopening.
Membership Services Criticized As early as 1996, Metro opened its first store in China at Zhenguang Road, Putuo District, Shanghai, officially entering the Chinese market. At that time, it led the B2B business boom, but now, under the impact of e-commerce and competitors like Sam's Club, it has long lost its former glory. According to Sina Finance, a poll initiated by Sina Finance with 440 participants showed that 20.5% of consumers have always been Metro customers, another 24.5% said they used to be customers but stopped after Metro introduced paid membership, and 31.1% said they prefer Sam's Club among warehouse stores. From the poll data, nearly 40% of original customers were lost due to paid membership. Moreover, in the Chinese market, Metro is far less attractive than Sam's Club among foreign warehouse-style supermarkets. In recent years, many netizens have complained about Metro's membership services. Some netizens said that after switching to membership, many good brands disappeared, and staff began busy promoting membership cards. "I have mixed feelings about Metro. I like the brand, but now I feel disappointed." On Black Cat Complaint, Metro has 1,077 complaints, most of which focus on difficulties in membership refunds and deduction of points; some complaints are related to food quality and safety. Some consumers said they found foreign objects like hair in food purchased at Metro, but Metro did not resolve the issue, while others said Metro refused refunds for moldy food. In this regard, an industry insider told the author that before Metro was acquired by Wumart, it was one of the companies with good quality control, but after being acquired by a local company, whether it can maintain the previous quality control standards remains to be seen. For example, in April last year, according to The Paper, the National Enterprise Credit Information Publicity System recently disclosed that Beijing Fozhou Sunshine Trading Co., Ltd. was fined over 1.91 million yuan by the Beijing Dongcheng District Market Supervision Bureau for violating the Food Safety Law, with illegal gains of over 30,000 yuan confiscated. It is understood that the company was the supplier of the "Han Daxia Fire Chicken Flavor Seaweed Sandwich" sold at Metro stores, which had been found to have total colony counts not meeting standards. Previously, the State Administration for Market Regulation issued a notice on unqualified food in random inspections, showing that the "Han Daxia Fire Chicken Flavor Seaweed Sandwich" imported by Beijing Fozhou Sunshine Trading Co., Ltd. and sold at Metro's Fuzhou Cangshan store in Fujian had total colony counts not meeting national food safety standards. In 2022, The Paper also reported that consumers who purchased vegetables and fruits from Metro's Shanghai Pudong Beicai cloud warehouse through group buying received rotten and smelly vegetables and short-weighted fruits. In fact, when Metro first entered China in 1996, it was precisely because of its membership model that it led the industry. In 2008, Metro China turned a profit, with average sales per store reaching 330 million yuan, surpassing the then-popular Walmart and Carrefour, second only to RT-Mart, ranking second among foreign chain retailers. But the good times did not last. With the rapid development of e-commerce and domestic supermarkets, Metro failed to seize the dividends of e-commerce and the C-end consumer market, developing sluggishly, and its current situation is getting worse year by year.
Supply Chain Revenue Declines Year by Year In 2021, Wumart packaged Wumart Supermarket and Metro China as Wumart Technology and submitted a listing application to the Hong Kong Stock Exchange, but it failed due to not passing the hearing. Subsequently, Wumart pinned its hopes on the supply chain, splitting Metro China's retail and supply chain businesses, with the latter renamed Metro Supply Chain. In August this year, Metro Supply Chain submitted a listing application to the Hong Kong Stock Exchange. According to its prospectus, as a food and FMCG supply chain solution provider, as of the end of 2023, it provided distribution solutions to 100 Metro stores, 366 Wumart supermarket stores, and 304 Wumart convenience stores under the Wumart Group. Prospectus data shows that from 2021 to 2023, the company's revenue was 27.8 billion yuan, 27.1 billion yuan, and 24.9 billion yuan, respectively; gross margins were 9.1%, 9.7%, and 10.7%; adjusted net profits were 108 million yuan, 412 million yuan, and 430 million yuan. Regarding the revenue decline in 2023, Metro Supply Chain stated in the prospectus that revenue from retailer distribution solutions decreased from 16.414 billion yuan in 2022 to 14.932 billion yuan in 2023, mainly due to reduced product sales to Wumart Group, which was due to a decrease of about 15% in the number of Wumart Group stores. In this regard, Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, told media that from the performance from 2021 to 2023, the net profit margin was relatively low in 2021 and 2023, and negative in 2022, indicating that the company lost money that year. Large performance fluctuations can affect investor confidence, especially when the company incurs a loss in a certain year. However, the company's gross margin improved year by year during the reporting period, indicating improvements in cost control. On the other side of performance fluctuations, as of December 31, 2021, 2022, and 2023, and April 30, 2024, the company recorded net current liabilities of 679 million, 1.897 billion, 4.375 billion, and 8.231 billion yuan, respectively, showing a significant increase in net current liabilities. Metro Supply Chain pointed out that during the track record period, the main components of its current liabilities were amounts due to related parties, borrowings, and trade and other payables. The company cannot guarantee that it will not encounter liquidity problems in the future. If it fails to maintain sufficient cash and financing, it may not have sufficient cash flow to fund its business, operations, and capital expenditures, and its business, financial condition, and operating results may be materially adversely affected. At the end of each reporting period, Metro Supply Chain recorded contract liabilities of 936 million, 990 million, and 1.022 billion yuan, respectively. It is worth mentioning that according to Tianyancha, from November 2009 to February 2024, Metro was listed as a person subject to enforcement 59 times, with a total amount of 8.0868 million yuan. Overall, Metro Supply Chain still has not solved problems such as relying on Wumart for 60% of its revenue and limited development space for offline retail stores. Some industry insiders believe that Metro Supply Chain's listing is a helpless move under pressure. In this regard, industry insiders said that in any case, according to the current retail trend, the future of Metro and Wumart Supermarket will continue to be difficult, and in comparison, the supply chain has become the most likely segment for growth.
Is the To C Membership Model Difficult to Succeed? In recent years, competition among membership-based supermarkets in China has become increasingly fierce. According to the report "Development Status of China's Warehouse Membership Supermarket Industry 2023-2024" by iiMedia Research, the market size of China's warehouse membership supermarket industry continued to grow from 2012 to 2022, reaching 33.5 billion yuan in 2022, a year-on-year increase of 10.1%, and is expected to reach 38.78 billion yuan in 2024. Take Sam's Club, which is in a period of rapid expansion, as an example. On September 5, Walmart's recruitment official WeChat account released "September New Store Recruitment Information", announcing that Sam's Club will open new stores in six cities including Dongguan, Shaoxing, Quanzhou, Wenzhou, Wuhan, and Jiaxing, and is actively recruiting relevant staff. As of now, Sam's Club has nearly 50 stores in China, with total revenue exceeding 80 billion yuan last year. Costco is also expanding. Although it started relatively late in China, Costco has a large following. In May this year, on the opening day of its new store in Nanjing, consumers had to queue for more than an hour to enter. On the other hand, domestic supermarket brands are also continuing to explore the membership store model. In April this year, Hema restarted its membership system and optimized and upgraded original member benefits. Local brands are also entering the fray. On September 10, RT-Mart's M membership store opened in Wuxi, its sixth store nationwide. In recent years, as paid membership stores have become popular, Metro China has once again chosen to enter the fray. In June 2021, Metro China announced plans to convert all 100 stores in China into membership stores. On June 27 of the same month, two PLUS membership stores opened simultaneously in Beijing and Chengdu, marking Metro China's official entry into the paid membership track. Five months later, Metro China announced a brand strategy upgrade, saying it would fully deploy membership stores, upgrading from mainly serving B-end customers to serving both B-end customers and C-end members. On November 27, 2021, Metro opened 16 membership stores in eight cities: Beijing, Chengdu, Nanjing, Qingdao, Dalian, Wuxi, Changchun, and Changzhou. As of early 2023, Metro had 24 membership stores nationwide. In terms of opening speed, since early 2023, the opening of new Metro membership stores has stalled. In this regard, Chen Yuefeng, founder of Lingshou Media, said that membership stores' To C and To B are two different business models and concepts, and in principle, they are different. For example, C-end consumers and B-end consumers have different procurement needs, product categories, quality requirements, and logistics methods. Regarding whether local brands' paid membership stores are doing well or not, Chen Yuefeng said that the most direct or best evaluation criterion is whether consumers are willing to replace their Sam's Club membership card or get an additional membership card. "In the Chinese market, there are many companies doing membership stores. You can take a look. If there is a Sam's Club near you, and a local membership store also opens nearby, would you be willing to get an additional membership card for the local store, or replace your Sam's Club card? This is the most direct and simple way to test whether a membership store is recognized by the market," Chen Yuefeng said.
From Glorious Achievements to Decline Metro, once a foreign retail giant with glorious achievements, has failed to save itself after being "sold" and has begun to decline. In 1964, Metro was founded in Dusseldorf, Germany. With excellent management and supply chain, it became a global leader in self-service wholesale and retail, and is Germany's largest and Europe's second-largest traditional retail enterprise. Thirty years later, Metro began to enter the Chinese market. It debuted in Shanghai as a large warehouse-style, membership-based, chain-operated department store, targeting institutional small and medium-sized wholesale "limited customers". At that time, Metro was very popular among Chinese consumers because of its good quality and low prices. Just two months after landing in China, Metro achieved sales of 120 million yuan. In the late 1990s, Metro took advantage of the momentum to rapidly expand in cities such as Shanghai, Wuxi, Ningbo, Nanjing, and Qingdao, targeting China's first- and second-tier markets. In the nearly two decades since entering the Chinese market, Metro can be said to have had a smooth ride with brilliant achievements. In 1998, the third year after entering China, Metro achieved sales of 2 billion yuan; in 2001, it reached 5 billion yuan; in 2005, 7.546 billion yuan; in 2006, 9.367 billion yuan; the peak was in 2012, reaching 17.9 billion yuan, a year-on-year increase of 29.7%, setting a growth miracle. In 2013, the 20th year of Metro's entry into the Chinese market, was an important node for Metro. That year, sales growth turned negative for the first time, and performance began to decline sharply. In 2015-2016, sales growth fell by 1% for two consecutive years, which was unexpected. At that time, industry insiders analyzed that the overly confident and conservative Metro did not pay enough attention to the rapidly developing Chinese retail market. Around 2010, a wave of e-commerce swept through major Chinese cities, and Chinese consumers began to try the convenience and affordability of online shopping, and this force became increasingly unstoppable in the following decade. It was not until 2015 that Metro began to enter Tmall Global, cooperating with Alibaba in product supply chains, cross-border e-commerce, and big data. Regarding entering Tmall, a Metro official said: "In 2014, we saw the excellent performance of our peers in the 'Double 11' event on Tmall Global, which strengthened our determination to enter the Tmall Global platform." The statement "seeing peers' excellent performance on Tmall" before making a move shows that Metro did not foresee the trend, did not keep up with the times, and did not sense the unstoppable development of Chinese e-commerce. It simply followed the trend, inevitably being dragged along by changes. In recent years, amid anxiety over declining performance, Metro has made many attempts, chasing several trends, but all ended in failure. With the rise of various consumption channels such as e-commerce and micro-commerce in China, the retail industry has more and more players, and Metro has tried to support new businesses but has hit walls everywhere, making it harder year by year. Metro China has had a tough time in recent years, facing development bottlenecks and declining performance, so it began to prepare to "cut losses" in 2019. With more than 30 self-owned properties in first- and second-tier cities and accumulated 13 million B-end loyal customer resources, it sought to sell. In October 2019, Metro sold 80% of its equity to Wumart, forming a joint venture. From then on, Metro China began to obey its new owner, Wumart Group. At that time, regarding Metro China after being acquired by Wumart, an industry insider told the author that originally Metro China's management and operation capabilities were stronger than Wumart's, but now a company with weak management capabilities is controlling a company with stronger processes and regulations, and the challenges and difficulties can be imagined. And Metro China, after being infiltrated by a localized enterprise, will no longer be "Metro". Of course, Metro did successfully monetize its bright assets, but after selling off its growth-type properties, its remaining value has become blurred. Today's situation is lamentable. This Metro is no longer the Metro of the past.