With Lin Xiaohai's resignation as CEO of Sun Art Retail, an era has ended, and against this backdrop, RT-Mart's future is largely predetermined. In 2017, after Alibaba acquired a 36.16% stake in RT-Mart, the latter became deeply tied to Alibaba and was labeled a 'new retail test field.' Over three years, Alibaba invested over HK$50 billion to help RT-Mart establish a firm foothold in the industry. RT-Mart also lived up to expectations: in 2020, its parent company Sun Art Retail's market value exceeded HK$100 billion, ranking first among China's top 100 supermarkets, with annual sales surpassing 100 billion yuan, making it a leader among offline supermarkets. However, four years later, Sun Art Retail's market value plummeted to one-tenth of its peak, and RT-Mart faced a wave of store closures and rumors of potential sale, with reports suggesting that China Resources or COFCO might take over. Despite repeated denials, speculation that Alibaba might 'abandon' RT-Mart persisted. On February 7 this year, during Alibaba's Q3 FY2024 earnings call, Chairman Joe Tsai stated that the company was considering gradually exiting traditional retail, directly addressing market speculation. Shortly after, Sun Art Retail announced a personnel change, revealing that Alibaba-appointed executive Lin Xiaohai had resigned as CEO, with Shen Hui from Auchan succeeding him. These signals intensified speculation that Alibaba would sell Sun Art Retail. Previously, Alibaba's involvement had placed RT-Mart at the forefront of hypermarket transformation, offering a 'rebirth' opportunity amid the decline of the hypermarket format. RT-Mart not only closed traditional hypermarkets but also explored new formats. Unfortunately, the transformation path has been fraught with difficulties. If Alibaba exits completely, whether RT-Mart can continue to bear losses and sustain reforms remains an open question.
RT-Mart's Self-Rescue Under Lin Xiaohai's leadership, RT-Mart embarked on a transformation of physical retail. The first move was to overhaul its core retail model, abandoning large hypermarkets in favor of smaller, more convenient, community-oriented multi-format stores. Previously, traditional hypermarkets like RT-Mart competed on being 'large and comprehensive,' with single stores reaching up to 25,000 square meters. Since 2010, this advantage has been challenged by both online e-commerce and offline niche markets. Especially in the face of e-commerce's low-price competition, hypermarkets lost their price advantage. RT-Mart's strengths in standard goods and FMCG became targets for e-commerce competitors. Meanwhile, small chain stores near consumers, such as fruit, fresh produce, and milk specialty stores, eroded the product diversity advantage of hypermarkets, even surpassing them in specialization. Therefore, to better counter competitors or simply to survive, Lin Xiaohai innovated and adjusted RT-Mart's formats, launching diverse store types such as RT-Mart Super, Little RT-Mart, and M Membership Store. Unfortunately, by the time Lin Xiaohai stepped down, RT-Mart's transformation had not achieved the expected success. According to relevant data, in 2021, RT-Mart planned to open 30-50 medium-sized stores and 200-300 small stores. But by September 2023, only 19 medium-sized stores had been opened, and the number of Little RT-Mart stores, which once reached 103, had almost disappeared in the subsequent wave of closures. RT-Mart chased various retail trends, implementing non-business-model reforms, but none yielded significant results. Such practices are common in the retail industry, as there is a firm belief that only by exploring new formats, such as community stores and membership stores, can long-term growth and advancement be achieved. However, the difficulty is immense; each format transformation requires rethinking products, supply chains, and even talent. Blindly applying past successes may become an obstacle. The progress of new formats has not been smooth. In 2024 alone, multiple stores closed, including the Zhenjiang Xuefu Road store in Jiangsu (operating for 13 years), the Deyang store in Sichuan, the Huanggang store in Hubei, and the Zhuzhou store in Hunan. Looking back at last year, RT-Mart's Daxue Road store in Zhengzhou and the only RT-Mart supermarket in Yichang, Hubei, also announced closures. According to statistics from relevant institutions, since 2023, at least 13 RT-Mart stores have announced closure or have closed. Notably, some closed stores had only recently opened, such as the Panzhihua store, which opened in December 2018 and closed last year after just about four years of operation. Undoubtedly, traditional supermarkets often weigh new store openings against closures to stop losses promptly. RT-Mart's series of closures reflects its performance pressure; by closing underperforming stores, it aims to reduce losses and achieve profitability. The closure of stores in multiple regions casts a shadow over RT-Mart's future prospects. When asked about the reasons, RT-Mart provided a thought-provoking response. Its parent company Sun Art Retail stated that operations are normal, and store closures are part of normal operational adjustments: 'Some stores are transitioning to 2.0 versions or M Membership Stores, while others are due to property lease expirations.' Even if these explanations are reasonable, they cannot hide the operational challenges behind the frequent store adjustments. According to Sun Art Retail's interim report for 2023, for the six months ended September 30, 2023, revenue was 35.768 billion yuan, down 11.9% year-on-year; net loss was 378 million yuan, expanding by 334.5% compared to 89 million yuan in the same period last year. Although RT-Mart has continuously experimented with formats, recognizing that the traditional hypermarket model is fading, its transformation into new formats has not effectively improved its financial difficulties. Facing the necessity of industry transformation, RT-Mart once again stands at a crossroads. Many industry insiders say that if RT-Mart is 'abandoned' by Alibaba, its actions would likely involve finding new partners or independently developing e-commerce business.
Alibaba's Test Field? Alibaba's Q3 FY2024 earnings report showed that revenue from 'all others,' including Sun Art Retail, Intime, and Hema, was 47.023 billion yuan, down 7% year-on-year, with adjusted EBITA down 87% year-on-year. The report specifically noted that Sun Art Retail's revenue decline was mainly due to a reduction in supply chain business scale and a decrease in average order value. In the early years, the year after Alibaba proposed 'New Retail,' it set its sights on RT-Mart. Then-Alibaba CEO Daniel Zhang once said that RT-Mart and Alibaba had become different because of each other. Now, RT-Mart has become a 'drag' on Alibaba's earnings, which is regrettable. Looking back at their honeymoon period, Alibaba, leveraging Hema's success at the time, guided RT-Mart's store renovations. The two teams even spent over half a year creating a single store, addressing the biggest pain point: how to operate online and offline stores simultaneously, handling online business while solving delivery issues. For example, if online customers place orders and the store cannot pick goods in time, the items might be bought by in-store customers; additionally, fresh produce in supermarkets is often bulk, requiring weighing and repacking for online sales; during peak times, warehouse and store busyness increases significantly. Of course, unlike Yonghui's from-zero-to-one home delivery business, Alibaba had a solution in mind before taking over RT-Mart: replicate Hema. They introduced Hema's hanging chain system into RT-Mart stores, and data showed that the store's order processing capacity increased from 300 to 5,000 orders. Additionally, Alibaba spared no effort in supporting RT-Mart by introducing mature logistics support. By integrating orders from various platforms and consolidating orders from neighboring communities for unified delivery, delivery efficiency was significantly improved. In addition to using Ele.me's Fengniao delivery service, RT-Mart also utilized Hema's delivery network in some areas, providing a subsidy of 7 yuan per order for delivery personnel. In the first year of transformation, RT-Mart successfully processed 48 million online orders. By 2020, its online sales exceeded 10 billion yuan, and thanks to the home delivery service, same-store sales turned from negative to positive growth. At that point, Alibaba completed its controlling stake in Sun Art Retail, declaring that its initial vision had been realized. However, from an external perspective, the deep cooperation between Sun Art Retail and Alibaba based on business logic did not achieve the expected huge results. Their cooperation in shared inventory, including with Alibaba's Ele.me, Taoxianda, and Tmall Supermarket, consumed significant energy. More direct data shows that after three years of new retail reform, RT-Mart's growth problem remained unresolved. In 2020, despite online revenue growth of 80%, Sun Art Retail's annual revenue growth was only 0.1%; excluding rental income, its merchandise sales revenue grew only 0.8% year-on-year. But this story excited the secondary market. Within four months of being 'acquired' by Alibaba, Sun Art Retail's stock price rose overall, from HK$7 per share in early November 2017 to HK$10 per share in early March, with a market value exceeding HK$30 billion. Three years later, to strengthen their alliance, Alibaba invested another HK$28 billion. At that time, Sun Art Retail's demand from Alibaba was to benefit from Alibaba's electronic ecosystem, bringing more traffic, synchronizing inventory management, and improving delivery capabilities. Unexpectedly, Sun Art Retail's stock price continued to weaken. On October 19, 2020, the day Alibaba increased its stake, Sun Art Retail's stock rose 19.17%, closing at HK$9.2 per share. Since then, the stock has generally declined, now trading at less than HK$2. In theory, with Alibaba's support, Sun Art Retail could transfer its offline hypermarket traffic advantages online, opening up the home delivery market. If Sun Art Retail could master both online and offline traffic, it would likely secure the top position in hypermarkets. But reality is harsh; Sun Art Retail's stock price continues to fall. The main reason may be capital market concerns about its business, and its current performance in the capital market further exacerbates doubts about its long-term profitability and growth potential.
Betting on New Formats RT-Mart may be 'sold,' but the possibility of privatization cannot be ruled out. Sun Art Retail's price is at a low point, and any movement in the capital market causes significant fluctuations. Its stock has been depressed for a long time, and its market value cannot be reversed. On the other hand, for Alibaba, privatization would remove the pressure of public company performance, allowing more efficient implementation of RT-Mart's transformation plans. Additionally, there is a view that RT-Mart might choose to close loss-making stores and sell off well-performing ones in batches. Judging from Sun Art Retail's recent actions, this prediction is not unfounded. While RT-Mart stores are closing in some regions, it is also actively expanding. In February, Sun Art Retail announced plans to open 21 new stores nationwide, including RT-Mart, RT-Mart Super, and M Membership Store, and to upgrade stores operating for over 10 years to 2.0 versions, with plans to complete renovations of 90 stores. Currently, RT-Mart Super and M Membership Store are becoming new growth points for Sun Art Retail. According to Sun Art Retail's latest financial report, in addition to the existing 19 RT-Mart Super stores and 1 membership store, it plans to add 7 more RT-Mart Super stores and 3 M Membership Stores by the end of FY2024. However, this exploration is also fraught with thorns. Especially membership stores, as an emerging model, domestic supermarkets are still in the learning and exploration stage. With the development of emerging formats such as fresh e-commerce, membership stores, and discount stores, RT-Mart faces increasingly fierce market competition in the membership store sector. Most importantly, even imitating the Sam's Club model, M Membership Store faces two major challenges: first, the purchasing power of the target market. Unlike Sam's Club and Hema, which focus on the middle class in first-tier cities, M Membership Store serves more second- and third-tier cities. Its business leader explained that in cities where giants have not yet penetrated, M Membership Store has greater opportunities. However, this also means that M Membership Store must face consumers with higher price sensitivity and lower per capita disposable income. Hema's past challenges in second- and third-tier markets have proven that although consumers in these areas may be more likely to buy homes, they may be unwilling to spend more on daily necessities like vegetables. Second, the operational logic differs. Unlike traditional hypermarkets, membership stores focus more on inventory turnover speed, supply chain efficiency, and product selection, meaning the original supply chain system of hypermarkets cannot be directly reused. Of course, not only membership stores, but also the exploration logic of RT-Mart Super is equally challenging. It seems Sun Art Retail has also realized the difficulty of transitioning to new formats. When the first M Membership Store opened, Lin Xiaohai stated that he did not set specific performance targets for the first year, focusing instead on membership numbers and renewal rates, and proposed a strategy of 'no profit within three years' for the first store. At the same time, RT-Mart has less and less time for trial and error. For example, shortly after the first M Membership Store opened in Yangzhou, Sam's Club announced the launch of fresh direct delivery services in Yangzhou and began construction of a physical store a year later. After years of struggle, the opportunities, time, and even funds left for RT-Mart are dwindling. Perhaps from another perspective, if RT-Mart were not constrained by the new retail home delivery model or format exploration, but instead focused on the fundamental work of improving quality and efficiency, including streamlining SKUs, clearing slow-moving inventory, strengthening private labels, and accelerating digital management, there might be another possibility. But there is no doubt that the hypermarket format is beyond saving, and no one can reverse it.