Click to read the original text for details "He who wins fresh food wins the world." During the pandemic, supermarkets became the least affected retail format. The ability of supermarket companies to respond was not developed overnight. Their composure can be seen from previous performance, such as Hema, Yonghui, and Jiajiayue. On June 29, the China Chain Store & Franchise Association released the "2019 China Supermarket Top 100." China Resources Vanguard topped the list with sales of 95.1 billion yuan, RT-Mart ranked second with 94.7 billion yuan, and Yonghui surpassed Walmart for the first time to rank third with 93.15 billion yuan in sales. Among the top 100 supermarkets, Hema Fresh had the fastest annual sales growth. In addition, 21 companies including Hema, Yonghui, Jiajiayue, and Hongqi Chain achieved simultaneous growth in sales and stores. In the past year, what did these supermarkets do right to achieve significant growth and "successfully rise"? -01- Hema Fresh Since its debut in 2016, Hema Fresh has jumped to 47th place on the China Chain Top 100 list in just three years. In the 2019 China Supermarket Top 100 list, Hema moved from 18th place in 2018 to the top 10, with sales growing by nearly 26 billion yuan in one year, entering the "40 billion scale club." Thus, Hema became the first new retail company to break into the top 10 in sales scale, with a growth rate of 185.7%, and it was the only company on the list with a triple-digit growth rate. As of the end of 2019, Hema had opened a total of 250 stores, with more than 100 new stores opened in 2019 alone. Given the relatively conservative overall industry growth, Hema's continued growth vitality can be attributed to two main reasons. First, exploration of new business formats. In 2019, Hema tried different formats such as Hema F2, Hema Cai Shi, Hema mini, Hema Xiaozhan, and Hema Li to meet the needs of different customer groups. Among them, Hema mini is a small store model with integrated storage, considered a supplement and iteration of the regular large stores. Based on the integrated online-offline model, it has stronger service and profitability capabilities, and is also the pioneer for Hema's foray into community commerce and lower-tier markets. Currently, Hema mini has 6 stores in Shanghai, all of which have achieved profitability, and their sales per square meter exceed that of regular large stores, showing the advantages of the model. Second, continued deepening of product and supply chain capabilities. For fresh food operations, supply chain capability is the key to success. Recently, Hema has established dedicated "Hema Villages" in Danba County, Sichuan; Xiantao, Hubei; and Chongming, Shanghai, among other places, to build a moat for fresh food products. The standardization, scaling, and branding of fresh food have always been bottlenecks in the industry, especially for fresh food e-commerce. Hema's solution is to start from the upstream of the agricultural product industry chain, secure stable supply channels and advantageous prices, and thereby form brand effects. By the end of last year, Hema's private label products exceeded 1,000 items, accounting for more than 10% of sales. Private labels are another weapon recognized by retailers in recent years to build a moat. "Hema Village" is the reservoir for Hema's private labels. Unlike traditional supermarkets, Hema's private labels are developed following the logic of brand owners, with omni-channel sales online and offline. Now, as Alibaba's "first sample" in exploring new retail, Hema Fresh has gradually clarified its positioning and development model, and has become a dark horse in the industry with its unique model. -02- Yonghui Superstores In the China Supermarket Top 100, the top three—China Resources Vanguard, RT-Mart, and Walmart—had remained unchanged for many years. In 2019, Yonghui surpassed Walmart for the first time to rank third, finally breaking this pattern. Yonghui's sales rose from 76.768 billion yuan to 93.14 billion yuan, approaching the 100 billion mark, with a gap of only 1.6 billion yuan from second-place RT-Mart. As of the end of 2019, Yonghui's supermarket business had entered 24 provinces and cities, with stores increasing from 1,275 to 1,440, a year-on-year increase of 12.9%. In terms of new store openings, Yonghui continued its rapid expansion, adding a new store every two days on average, not including Yonghui mini stores, Yonghui Life, and Super Species. An important reason is that Yonghui missed out on the acquisitions of Carrefour and Metro, so it had to achieve scale expansion through its own store expansion. Like Hema, in 2019 Yonghui also heavily increased its small format stores, opening 573 mini stores in one year. Yonghui's original intention for developing mini stores is similar to Hema's—to complement large stores and share supply chains, while occupying advantageous locations in community commerce, and to achieve a "large store drives small store" strategy for a connected offline layout. In the first half of 2019, Yonghui's financial report showed that mini stores generated total revenue of 550 million yuan, and some stores had already achieved profitability. However, in the annual report, Yonghui did not disclose the operating conditions of mini stores. According to a previous forecast by CICC, Yonghui's mini stores lost about 200 million yuan in 2019. In other words, Yonghui's revenue mainly comes from its supermarket business. In the past year, Yonghui made significant adjustments to its product structure, benchmarking hypermarkets, continuing to reduce high-margin clothing categories and highlighting fresh food. According to Yonghui's financial report, food and daily necessities increased to 52.75% of main business revenue, fresh and processed food accounted for 47.25%, and clothing shrank to 1.56%. Fresh food has always been Yonghui's strength; compared to Hema's 33% direct sourcing ratio for fresh food, Yonghui's direct sourcing ratio can reach 70%. After returning to its main business, performance naturally recovered. For online business, Yonghui uses third-party platforms like JD Daojia and also develops its own Yonghui Life App and mini-program, with 5.06 million monthly active users as of the end of 2019. However, although Yonghui's home delivery business achieved sales of 3.51 billion yuan last year, a year-on-year increase of 108%, it accounted for only 4.4% of total revenue. In the future, Yonghui's home delivery business needs further strengthening to truly promote online-offline integration. -03- Jiajiayue Jiajiayue and Yonghui are both leaders in the fresh food field, with similar overall business structures: fresh food accounts for about 45% of revenue, revenue growth is around 20%, and they each added 80 new stores. As a leading regional retail enterprise in Shandong, Jiajiayue accelerated expansion after listing, no longer content with one corner, moving from Shandong to the national market. In 2019, Jiajiayue successively acquired 67% of Zhangjiakou Fuyuexiang Supermarket, 51% of Qingdao Viker, 100% of Shandong China Resources Vanguard, and 75% of Huaibei Lexin Commercial Assets after restructuring, using a dual model of self-operated stores and acquisitions to further transform from regional retail to national scale layout. At the same time, Jiajiayue continued to promote the upgrade and renovation of existing stores, renovating more than 150 stores in 2019, and enhancing service functions and shopping experience by optimizing category mix and strengthening refined management. From the data, store upgrades led to impressive same-store sales growth, with overall same-store growth of 5.78% for the year. Jiajiayue has been operating fresh food for many years. Currently, fresh food accounts for 46.31% of revenue, with a gross margin of 15.87%, far higher than peers. In building fresh food supply chain barriers, Jiajiayue continuously strengthens its fresh supply chain capabilities through ultra-high direct sourcing (over 80%), fresh processing centers, central kitchens, and logistics warehousing bases. It is worth mentioning that in the Jiaodong region, due to Jiajiayue's strong fresh food operation capabilities, its products have obvious differentiation and price advantages. Coupled with dense store placement and multi-format full coverage, Jiajiayue enjoys higher member stickiness and loyalty compared to peers. In 2019, Jiajiayue had 7.4668 million members, with members contributing 75% of store sales, and member traffic of 187 million person-times, a year-on-year increase of 11.46%. In terms of online-offline exploration, unlike traditional supermarkets that retreated after failed new retail attempts, Jiajiayue bucked the trend by launching a new retail format, "Jiajiayue Life Harbor," initially connecting online and offline, store and home delivery, exploring omni-channel marketing models, further enhancing customer experience, and accumulating experience in online platform operations. -04- Hongqi Chain In 2019, Hongqi Chain entered the top 20 of the Supermarket Top 100 for the first time, with the highest ranking increase except for Hema, rising from 21st to 15th. Its operating revenue increased by 8.3% year-on-year, not very high; but according to financial reports, its net profit attributable to parent was 520 million yuan, a substantial year-on-year increase of 59.97%. Hongqi Chain currently has 3,070 stores, with various store formats, including standard supermarkets of 1,000-2,000 square meters, community stores of 300-500 square meters, and convenience stores of 100-300 square meters. At the end of 2017, Yonghui Superstores acquired a stake in Hongqi Chain, becoming the second largest shareholder with 21% ownership, and began renovating Hongqi Chain's standard supermarkets in fresh food and logistics, increasing the proportion of fresh food, strengthening supply chains, and ultimately enhancing customer stickiness. In 2019, Hongqi Chain completed fresh food renovations in 450 stores, with fresh food stores accounting for 15%. Due to the significant traffic-driving effect of fresh food, the performance of renovated stores improved significantly, with average sales growth of about 30%. Its top ten stores in annual sales are all fresh-food-renovated stores. In 2019, Hongqi Chain adhered to the strategic development policy of "centered on Sichuan, with Chengdu as the core", significantly increasing the pace of store expansion. Previously, Hongqi Chain's store formats leaned towards community supermarkets but lacked fresh food. In April last year, Hongqi Chain acquired the Chengdu stores of "9010 Supermarket." 9010 is more specialized in fast food, which can make up for Hongqi Chain's shortcomings in quick meals and dine-in services. In the future, if Hongqi Chain stores can complete large-scale fresh food renovations and add high-margin catering fresh food, revenue growth should be more considerable. On the other hand, in 2019 Hongqi Chain accelerated its online business layout, not only building its own "Hongqi Daoda" platform but also actively cooperating with third-party platforms such as Meituan and Ele.me. In November last year, Hongqi Chain joined hands with Ele.me and Koubei to reach a deep strategic cooperation. Both sides get what they need: Ele.me provides Hongqi Chain with instant delivery, precision marketing, and other services. The first batch of 200 Hongqi Chain stores landed on Ele.me and Koubei, providing consumers with more diverse and convenient shopping experiences and creating a new community retail model. In addition, Hongqi Chain also built its own big data platform, which was further optimized and improved in 2019, enhancing financial management and information management levels, as well as data accuracy and completeness. At the recent celebration of Hongqi Chain's 20th anniversary, Cao Shiru, Party Secretary and Chairman of Hongqi Chain, said: "Hongqi Chain has successfully built an 'Internet + modern technology chain enterprise' with 'big data + products + community services + finance'." Overall, in 2019 supermarket companies focused more on core businesses. "He who wins fresh food wins the world" is not empty talk; intensive cultivation in the fresh food field has become industry consensus. In the track of community commerce and small formats, smoke has already risen, and indeed more players have entered since 2020. Omni-channel, as the new normal of retail in the Internet era, is a common choice for all retail enterprises, and this choice will become more resolute after the pandemic. Source: New Retail Business Review (ID: xinlingshou1001) Author: He Yi