---
title: "RT-Mart's Transformation: Can New Shoes Pave a New Path?"
description: "RT-Mart's transformation is an irreversible move, as it implements Alibaba's 'New Retail' concept, accelerates its online presence, and pursues multi-format development. Alibaba's acquisition of RT-Mart is driven by commercial strategy to expand into offline retail and complete its 'retail empire' from online to offline, a clear vision of Daniel Zhang during his tenure at Alibaba."
author: "龙商网"
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published: "2023-06-15"
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# RT-Mart's Transformation: Can New Shoes Pave a New Path?

> RT-Mart's transformation is an irreversible move, as it implements Alibaba's 'New Retail' concept, accelerates its online presence, and pursues multi-format development. Alibaba's acquisition of RT-Mart is driven by commercial strategy to expand into offline retail and complete its 'retail empire' from online to offline, a clear vision of Daniel Zhang during his tenure at Alibaba.

RT-Mart's transformation is an irreversible move, as it implements Alibaba's 'New Retail' concept, accelerates its online presence, and pursues multi-format development. The logic behind Alibaba's acquisition of RT-Mart is certainly not because one of its permanent partners is Taiwanese and they particularly admire Taiwanese entrepreneurs, but rather from a commercial perspective to further capture the offline retail market, thereby completing Alibaba's 'retail empire' from online to offline. This is the fundamental purpose of the deal. This was a clear strategic intention of Daniel Zhang during his tenure at Alibaba: to expand New Retail and seize the offline retail market where Alibaba was not particularly strong. 'Supermarket No.1' undoubtedly best fits the expansion ambition of the 'retail empire', so in 2020, RT-Mart was acquired by Alibaba. However, RT-Mart has long lost its former glory. Whether Alibaba's entry can smoothly transform this traditional retail giant in the mobile internet era remains to be seen.

**No Longer Glorious** After Alibaba's acquisition, RT-Mart did not soar but instead reported its first loss in 2022. Financial reports show that Sun Art Retail Group (RT-Mart's listed parent company) recorded a loss of 826 million yuan in fiscal year 2022, with revenue of 88.134 billion yuan. Sun Art explained that the 826 million yuan loss was mainly due to impairment losses (including store assets) and one-time litigation provisions; after excluding these, operating net profit was positive. That said, RT-Mart's weak growth is an indisputable fact. According to Longshang.com Supermarket Weekly, starting from 2013, Sun Art's revenue growth rate began to decline, and by 2015, the growth rate was only 4.96%. In 2017, Sun Art's revenue began to see negative growth, followed by consecutive negative growth. Data shows that in 2017, Sun Art's annual revenue was 102.32 billion yuan, but in 2018 and 2019, it was only 99.359 billion yuan and 95.357 billion yuan respectively. By 2021, RT-Mart's revenue growth rate was -24.53%. Until 2022, RT-Mart recorded its first loss. Longshang.com Supermarket Weekly found that over the past decade, RT-Mart's growth has followed a continuously declining curve. As the recognized 'Supermarket No.1' in mainland China, its performance, to some extent, represents the current situation of the 'hypermarket' traditional retail format in the domestic market and its ups and downs.

Once upon a time, RT-Mart opened stores in mainland China at a doubling rate each year. In the late 1990s, RT-Mart first entered mainland China, originally intending to do warehouse wholesale. At that time, the 'hypermarket' model was at its peak worldwide, so then-CEO Huang Mingduan quickly changed his business approach and entered the hypermarket sector. In mainland China at that time, this was definitely a novelty. Without this shift, there would be no RT-Mart as we know it. In 1999, RT-Mart entered the new century with revenue of 24 billion yuan, then began to expand aggressively nationwide. By 2003, the total number of stores had grown to 40, and then expanded at a doubling rate each year. By May 2010, it had opened 120 stores in mainland China. But then RT-Mart's development began to turn downward. Over the past decade, with the rise of e-commerce and significant changes in residents' lifestyles and consumption habits (it's hard to say which is cause and which is effect, but it's an established fact), traditional offline retail has been strongly impacted. Coupled with the three-year pandemic, RT-Mart has shown a clear decline after its rapid development, losing its former glory.

**The Bigger the Ship, the Harder to Turn** Can Alibaba's entry enable RT-Mart to achieve transformation again? If we compare RT-Mart's first transformation to a small sampan, now RT-Mart has become an aircraft carrier, and turning around is incomparably more difficult. But transformation is unavoidable, as clearly shown in Sun Art's annual reports. In fiscal year 2022, despite the first loss, there are still some changes worth noting. Most notably, online business revenue reached 24 billion yuan, accounting for nearly 30% of total revenue. Additionally, B2C business single-store daily average grew 12.8% year-on-year, and its own app 'RT-Mart Fresh' achieved a high growth of 28.9% year-on-year. This data saw further breakthroughs in fiscal year 2023: B2C business revenue grew over 15%, and 'RT-Mart Fresh' revenue grew 40% quarter-on-quarter. This indicates that RT-Mart's transformation is entering deep waters. But clearly, one-third of online business volume is not enough to completely turn the aircraft carrier, so overall revenue in fiscal year 2023 still showed a downward trend. Before taking control of RT-Mart, Alibaba had already deeply intervened in RT-Mart's operations and management through shareholding, carrying out online transformation. Starting from 2017, Alibaba enabled all 484 stores of RT-Mart and Auchan under Sun Art to go online, connecting to Ele.me, Taoxianda, and Tmall Supermarket for shared inventory, and all stores offered 1-hour delivery within a 5-kilometer radius. Perhaps the transformation has shown initial results, or perhaps in offline retail, RT-Mart remains the unshakable 'Supermarket No.1', so despite declining revenue, Alibaba still unreservedly incorporated RT-Mart into its 'retail empire' in 2020, making them one family. In December 2020, Lin Xiaohai succeeded founder Huang Mingduan as CEO of RT-Mart. Before that, Lin Xiaohai was Vice President of Alibaba Group, responsible for the Retail Link business. Since then, RT-Mart's transformation has been an irreversible move. Implementing Alibaba's 'New Retail' concept, accelerating online expansion, and pursuing multi-format development will be RT-Mart's clearest development goals for the next few years.

**Still Need to Find Breakthrough Points** Lin Xiaohai's three fires upon taking office at RT-Mart are: 'Restructuring hypermarkets', 'Multi-format omni-channel development', and 'Digital operation'.

As of March 31, 2023, RT-Mart has completed the restructuring of over 80 hypermarkets, upgrading them to version 2.0; added 5 Zhongrunfa and 21 Xiaorunfa stores, and completed the organizational construction of M Membership Stores; all 500 existing stores have completed digital transformation, including the addition of hanging chain systems, creating a new retail operation model suitable for hypermarkets.

With the deepening of transformation, after the online and digital upgrades are basically completed, RT-Mart has shifted its focus to developing new formats this year. On April 28, 2023, RT-Mart's first M Membership Store opened in Yangzhou, covering 35,000 square meters, with around 3,000 SKUs, over 10% of which are private label, and a large number of customized, price-competitive exclusive products. Clearly, RT-Mart M Membership Store directly benchmarks against the leading warehouse membership supermarkets Sam's Club and Costco. The membership store format is currently one of the few blue ocean markets in the traditional retail industry with good development opportunities, and many retail companies are entering, including RT-Mart's fellow Alibaba company Hema Fresh's X Membership Store. From a positioning perspective, Alibaba obviously will not let M and X compete with each other. M Membership Store targets the American-style large warehouse supermarket market, while X Membership Store takes the path of a middle-class lifestyle service characterized by fresh food. But RT-Mart clearly does not have Walmart's excellent global supply chain model; it relies on RT-Mart's brand influence and domestic supply chain system cultivated over many years, and after comprehensive renovation and upgrading, it aims to build its own warehouse membership store format. Whether it can form a comparative advantage in market competition, gain a foothold, and seize market share remains to be seen. Therefore, Lin Xiaohai said that there are no profit requirements for membership stores in the next three years. In addition, the Zhongrunfa and Xiaorunfa formats have also been key areas of RT-Mart's continuous efforts in recent years. In July 2020, the first 'Xiaorunfa' opened in Nantong, positioned as a community fresh food store; in September of the same year, the first 'Zhongrunfa' store landed, aiming to create a fresh food supermarket targeting young consumers. The strategy is clear: RT-Mart can cover urban shoppers within a 5-20 km radius, Zhongrunfa covers 3-5 km, and Xiaorunfa fills the last mile, thereby achieving full coverage of regional shoppers. But is it really good to have a 'big and comprehensive' store format? The traditional retail market is already fully competitive and saturated. Under such fierce competition, extending the battle line further and increasing operating costs will make the company's progress heavier. An interesting data point: at the end of September 2022, Xiaorunfa had 99 stores nationwide; but at the end of March of the same year, Xiaorunfa had 103 stores, meaning four Xiaorunfa stores closed in six months. Opening and closing is normal, but for a new format that has only been established within the company for one year, closing stores just after starting is not good. In response, Sun Art said: Xiaorunfa still needs to continuously polish its multi-model development. The 2023 financial report shows that Sun Art turned losses into profits, but revenue was 83.662 billion yuan, still down 5.1% year-on-year. The profit is not because the new model has entered a profitable cycle, but because Sun Art carried out large-scale cost reduction and efficiency improvement over the past year: reducing employees by 14,000 and cutting labor costs by over 300 million yuan. On one hand, opening new stores; on the other, laying off old employees. RT-Mart's transformation and development path remains full of challenges.


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