Soviet film still from "The Secret of the Department Store"
01
A city, ten million people, a hundred worldly affairs.
On September 30, 2016, the Guangzhou Thirteen Hongs Museum officially opened.
Industry insiders say: understand the Thirteen Hongs, and you understand Guangzhou, the millennium-old commercial capital. Visitors flocked to the museum.
The museum's collection was entirely donated by enthusiastic individuals. One priceless jade bowl came from Ye Guofu, who made the donation both out of gratitude to Guangzhou, which had enabled his success, and as a hope to leave a lasting mark on this ancient commercial city.
That year, Ye Guofu's Miniso, which he had painstakingly built over three years, opened over 2,000 stores with revenue exceeding 10 billion yuan, rising against the tide of traditional retail store closures.
Thirteen days later, Jack Ma first proposed "New Retail" at the Yunqi Conference. The battle between online and offline intensified.
Ten days after that, a mysterious person named "Guangzhou Afu" spent a large sum to take out a full front-page ad in the 21st Century Business Herald, offering to pay off the billion-yuan bet between "Hangzhou Old Ma" and "Beijing Old Wang."
Four years earlier, at the CCTV Economic Person of the Year Awards, Wang Jianlin and Jack Ma both attended. Ma bluntly stated that by 2020, e-commerce would account for more than 50% of China's retail market share. Wang Jianlin retorted that if that were true, he would lose a billion yuan to Ma, and vice versa. This was the famous "Ma-Wang billion-yuan bet."
Wang and Ma represented traditional retail and e-commerce respectively, and the bet was seen as the battle for the future of retail.
In 2014, Wanda, together with Tencent and Baidu, invested 5 billion yuan to establish Feifan.com, a new e-commerce platform to challenge Taobao. But two years later, Tencent and Baidu withdrew from Feifan.com.
It seemed Wang Jianlin's chances were slim.
Was offline retail really sentenced to death? Ye Guofu was unconvinced and spoke out under the name "Guangzhou Afu."
Physical retail has always been vital to the national economy and people's livelihoods.
At the beginning of reform and opening up, commodity markets became active, supplies gradually enriched, and the long-standing ration ticket system began to loosen.
In 1979, the State Council forwarded "Several Opinions on Further Running Friendship Stores" to provinces, municipalities, and autonomous regions via Document No. 98.
On April 12, 1981, the first supermarket in mainland China—Guangzhou Friendship Store—opened. For several consecutive days, the media gathered to report in detail on this shopping format with no counters, no salesclerks, where customers selected goods themselves and paid at computerized checkout counters.
The opening of Guangzhou Friendship Store was thus recorded in the "Major Events in the Circulation Field Since the Founding of the PRC" and the "Centennial History of Retail."
However, the store required foreign exchange certificates for payment, and the popular items were export foods such as Shanghai-made Panda brand condensed milk, Jindao brand silk rice, and Meilin brand canned luncheon meat, far beyond the reach of ordinary citizens.
Such new-style stores were more symbolic windows, scattered and not universal. Nationwide, state-owned stores and supply and marketing cooperatives dominated.
In 1983, only grain and edible oil were still under unified state rationing. A year later, Shenzhen took the lead in abolishing all ration tickets, with goods like grain, pork, cotton cloth, and edible oil freely available and prices liberalized.
It wasn't until the opening of China's first civilian supermarket that the door to modern retail was truly knocked open.
Supermarkets originated during the Great Depression in the United States. After entering China, they were called self-service stores. On September 28, 1984, Beijing Jinghua Self-Service Store opened, causing a sensation.
After a brief period of "acclimatization," supermarkets sprang up like mushrooms across the country.
The iron plate was finally chiseled open, and sunlight streamed in.
02
For China's retail industry, 1998 was a pivotal year, with key figures all making their appearances.
Huang Mingduan was entrusted with a critical mission, sent by his boss Yin Yen-liang to the mainland to take over RT-Mart's Shanghai company. Yin Yen-liang, the young master of Taiwan's Ruentex Group, founded RT-Mart in 1996 as the textile industry was declining. The following year, he sent people to Shanghai to apply for business.
Around the same time, another Taiwanese businessman also eyed the mainland market. Yu Yuejiang, chairman of Taiwan's Chengda Group, opened the first Trust-Mart supermarket in Guangzhou.
RT-Mart's Shanghai store initially imitated Makro's warehouse-style sales, but the response was poor. Huang Mingduan decisively halted it and switched to a business model benchmarked against Carrefour.
In 1995, the state allowed foreign investment in food and chain operations, thus, after opening up clothing and department stores in 1992, the retail industry was fully opened to foreign investment. Carrefour opened its first store in Beijing.
In Fujian, across the strait from Taiwan, Zhang Xuansong borrowed 2 million yuan from his second cousin who was doing business overseas, paid off his debts, and used the remaining money to open a supermarket under the Yonghui Building near Fuzhou Railway Station, named Yonghui Superstores.
Eight years earlier, he had been "fooled" by a fellow townsman into dropping out of high school and going to Fuzhou to work. After three months of carrying bricks, he couldn't stand it, pooled money to take over a shop, and started a beer wholesale business with home delivery. The business was excellent, but then, blinded by greed, he contracted a brewery and lost everything. After painful reflection, he decided that opening a store was his forte.
Liu Qiangdong also paid off his debts and started anew. After working for two years, he finally quit his job and, with savings of less than 20,000 yuan, founded JD Multimedia, renting a 3-square-meter counter in Beijing's Zhongguancun to sell CD burners.
Who could have imagined that JD and Yonghui, 2,000 kilometers apart, would later become connected?
Zhang Wenzhong never expected to be involved in a "big incident." When he learned that the Shijingshan Gucheng vegetable market was to be "managed" by Wumart, more than 180 employees climbed onto the rooftop, holding up a banner reading "Resolutely refuse to go to Wumart," and some even threatened to jump.
Zhang Wenzhong promised that wages would not be lower than before, and the crisis was resolved. He was leading Wumart to weave a vast retail network in Beijing with overwhelming force.
In 1992, after the chief architect's southern tour, an entrepreneurial wave surged, with about 100,000 party and government cadres "plunging into business." This group later became the backbone of China's economy.
Zhang Wenzhong, studying in the United States, was deeply inspired. He believed that "entrepreneurs are the heroes of this era," so he returned to China and founded Wumart in Beijing. Through leasing, management, and joint ventures, he cooperated with impacted state-owned commercial enterprises, with both sides sharing dividends according to equity.
A month later, Walmart opened its first store in China in Shenzhen. Subsequently, Carrefour also entered the special economic zone.
Huang Guangyu and Zhang Jindong had not yet clashed, each expanding on opposite sides of the Yellow River.
Gome adjusted its store layout, closing small downtown stores and opening large outlets of over 2,000 square meters near Beijing's Third Ring Road. Huang Guangyu, this "wolf from the south," turned the northern home appliance retail market upside down and was known as the "price killer."
Suning initiated a second venture, transforming into a comprehensive appliance chain. Zhang Jindong was a tough fighter. After three years of fierce battle, he finally defeated the "alliance" of eight state-owned department stores in Nanjing. Before he could recover, he faced a boycott from manufacturers, forcing him to shift his business focus from wholesale to retail.
For commercial adventurers, the Yellow River is not an insurmountable barrier; when the time comes, they will surely descend in force.
China Resources Vanguard had already crossed the Yellow River to enter North China. This Hong Kong supermarket had been conquering cities since entering Shenzhen in 1991.
Vanke's stake in Vanguard (Wanjia) Department Store firmly "guarded" the local Shenzhen market. Wanjia, a homophone for the English "Vanguard," means "pioneer, avant-garde."
Wang Tian from Xiangtan, Hunan, finally obtained the registered trademark for "Bu Bu Gao," renaming his Bu Bu Gao Food Company to Bu Bu Gao Chain Supermarket Co., Ltd. Three years earlier, he had been the business section chief of a local food factory. Feeling he could do better on his own, he and his wife voluntarily left their jobs and opened a mom-and-pop store.
Jack Ma's "honeymoon" with the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) finally came to an end. He and his loyal followers from Hangzhou set up a technology company. MOFTEC wanted the company to serve state-owned enterprises, but Ma believed it should support small and medium-sized private enterprises. With differing philosophies, they parted ways.
Ye Guofu also bid farewell to the past. This farm boy wanted to leave the mountains and see the world. On a summer evening, he boarded a train from Shiyan, Hubei, to Guangdong, joining fellow villagers working in Foshan.
03
Within less than a year, the number of hypermarkets in Fuzhou exceeded 10, with Trust-Mart, Metro, and Walmart entering one after another. Zhang Xuansong was anxious—how could the fragile Yonghui Superstores cope?
Ye Guofu, now in Fuzhou, was equally anxious. After arriving in Foshan, he first worked in hardware sales, performing well and earning good commissions. After saving some money, he partnered with others to go to Fujian to do ceramics business. In fact, it was a failed venture. After more than a year, he decisively gave up and returned to Guangdong to seek new opportunities.
Zhang Xuansong's opportunity came. In 2000, Fujian made a decision to "eliminate table contamination, improve community life, and build a safe market." Yonghui opened its first fresh food supermarket, abandoning mainstream businesses like clothing, daily necessities, and home appliances. It sold fresh produce like FMCG, but at prices lower than those at wet markets. Yonghui's innovative "fresh food supermarket" model filled a gap left by foreign supermarkets.
Huang Mingduan believed the gap in China's retail industry lay in second- and third-tier cities. RT-Mart aimed to occupy those places with huge consumption potential but unnoticed by giants. The results proved him right: RT-Mart's famous national store champion came from Kunshan.
In 2001, China formally joined the WTO and committed to opening its domestic retail market within three years, without restrictions on geography, equity, or quantity.
The wolf was truly coming.
Vanke held a shareholders' meeting and transferred all its shares in Vanguard Department Store to China Resources. When the resolution passed, Wang Shi breathed a sigh of relief, saying, "Finally sold Vanguard." A year later, China Resources Vanguard and Vanguard Supermarket merged.
2003 was a watershed year, marking the beginning of the e-commerce era.
After Alibaba's B2B model proved successful, Jack Ma decided to build C2C Taobao. Many old employees opposed or hesitated, but Sun Tongyu stepped forward and became Taobao's first CEO.
JD Multimedia already had six stores and was looking promising. Liu Qiangdong was about to make big moves when SARS broke out. With no one shopping on the streets, JD lost 8 million yuan in 12 days. Liu had no choice but to move online, renaming JD Multimedia to JD Mall.
In comparison, another event was more significant: starting in 2003, China's GDP grew at double-digit rates for five consecutive years, greatly unleashing domestic demand.
In November 2003, Wumart listed in Hong Kong, becoming the first mainland private retail enterprise to list there.
After listing, Wumart began capital operations. Zhang Wenzhong and Huang Guangyu were both named Beijing's two "M&A maniacs." Within a few years, Wumart controlled or held stakes in over 400 outlets of more than 20 companies, including Beijing Supermarket Fa, Jingbei World, and Tianjin Darong, capturing one-third of Beijing's retail market share.
After WTO rules took effect, multinational retail giants accelerated expansion into central and western regions and second- and third-tier cities in China. Carrefour and Walmart each added new stores at double-digit rates annually.
Chinese retail enterprises were also racing for speed, staking out territory. Suning had nearly 100 stores, while Gome had over 200. In June 2004, Gome listed via a backdoor in Hong Kong, and a month later, Suning listed on the A-share market.
The two home appliance retail giants faced off head-on. In 2005, Gome successively acquired Shenzhen Yihaojia, Changzhou Golden Sun, Harbin Black Swan, and Wuhan Zhongshang. In 2006, it spent a whopping HK$5.27 billion to acquire 90% of Hong Kong-listed Yongle Electronics, showing fierce momentum. Then Huang Guangyu approached Zhang Jindong to acquire Suning, but was flatly refused.
Zhang Jindong said, "Suning may be low-key, but it's not incompetent. Even if he wanted to buy, he couldn't afford it."
However, had it not been for Huang Guangyu's imprisonment two years later, the outcome would have been hard to predict.
From 2004 to 2008, Huang Guangyu topped the mainland rich list three times. At the unprecedented "Gome Global Strategic Cooperation Summit," over 200 top brand suppliers attended to show support. Huang Guangyu declared that by 2008, Gome would achieve annual sales of 120 billion yuan and become a Fortune 500 company.
He achieved half of that goal. In 2008, Gome's sales indeed reached 120 billion yuan, but after the Olympics, he was arrested and sentenced to 14 years for insider trading, illegal business operations, and corporate bribery. Gome thus stopped short of the Fortune 500.
However glorious, the fall is equally humiliating. Zhang Wenzhong learned this lesson earlier than Huang Guangyu.
In 2005, Wumart's revenue reached 3.9 billion yuan, making it one of the largest private circulation enterprises in the country. On the Forbes mainland rich list, Zhang Wenzhong was more prominent than Jack Ma. Many government departments sought cooperation with him, and leaders visiting Wumart were endless. Close ties between business and politics inevitably plant hidden dangers.
Wumart was hailed as the "Walmart of tomorrow." In 2006, Fortune magazine recommended Wumart like this: "If you want to see the future of retail, save yourself a trip to Walmart and buy a ticket to Beijing to see Wumart."
Unfortunately, before curious visitors could book tickets, Wumart fell from its peak. In November 2006, Zhang Wenzhong was taken away by the Central Commission for Discipline Inspection to assist in investigating the corruption case of former Beijing vice mayor Liu Zhihua. Although there was no transfer of benefits between them, two years later, Zhang Wenzhong was sentenced to 18 years.
On the day he was taken away, Zhang Wenzhong and Wumart ceded the center stage of China's retail industry, replaced by Huang Mingduan and RT-Mart.
Within RT-Mart, there is a so-called "Sunflower Manual"—the SOP (Standard Operating Procedure), i.e., the "Operations Personnel Manual," which is thicker than a dictionary and revised annually.
Strictly adhering to standard procedures, RT-Mart dominated China's physical retail with just over 100 stores, winning the industry's top three titles: "Most Popular with Customers, Most Popular with Suppliers, and Highest Average Sales per Store (240 million yuan annually)."
Following closely was Yonghui Superstores. In 2010, Zhang Xuansong led Yonghui, which had over 140 stores, to listing, earning it the title of "First Fresh Food Stock."
China Resources continued its "buy, buy, buy" spree: acquiring Suguo Supermarket in 2004, 28 stores of Tianjin Yuetan Group in 2005, Tianjin Jiashijie Supermarket in 2007, and Jiangxi Hongkelong in 2011.
Ye Guofu, on the other hand, was "selling, selling, selling." He became the pioneer of accessory chains in China. After his failure in Fujian, he entered physical retail, founding the "Aiyaya" chain brand in Guangzhou in 2005. He firmly believed that small accessories were a big business, and within a few years, he had 3,000 franchise stores.
This experience honed his ability to "make a big show in a snail's shell," with keen instincts and a talent for leveraging small investments for big gains in retail.
Everything seemed rosy, but a breeze rises at the end of duckweed, and the bell of disruption was faintly audible.
04
In 2008, when Gome's sales reached an astonishing 120 billion yuan, Alibaba's sales were only 3 billion yuan, while Liu Qiangdong was shedding tears of joy for JD's breakthrough of 1 billion yuan in sales.
That was the last glory of traditional retail.
On November 11, 2009, Taobao Mall (later Tmall) held a promotion. Although the number of participating merchants and the intensity of promotions were limited, the day's turnover exceeded 50 million yuan, heralding the arrival of a new era.
However, due to inertia, traditional retail continued to glide at high speed. It wasn't until two years later that they realized the onslaught of e-commerce.
In 2011, Ruentex Group, behind RT-Mart, and its shareholder French Auchan, through a series of complex cross-shareholding arrangements, established Sun Art Retail and listed it in Hong Kong.
Slightly earlier, JD had just received $1.5 billion in investment and formally declared war on Alibaba.
The dimensionality reduction attack began.
Suddenly, Huang Mingduan discovered that even his own assistant was shopping on Taobao and JD. He realized that e-commerce had become a tsunami, but at that time, his understanding of e-commerce was still in the state of "can't see, can't understand, look down on, too late."
Huang Mingduan was not alone in being in the dark. In 2012, foreign retail giants such as Carrefour, Walmart, Tesco, and Metro all replaced their China heads in a collective effort to reverse the decline.
But the changes were real. From 2011 to 2015, China's online shopping scale grew by more than 30% year-on-year, and in 2012 it even reached 80%.
Change to survive, or wait to die—traditional retail had to make a choice.
Yu Yuejiang chose to "sell out," selling Trust-Mart to Walmart. Besides him, Pacific Department Store, Tesco, Lokado, and Tsannkuen, Taiwanese retail enterprises that had come to the mainland to make money, also changed hands.
Yin Yen-liang chose to take a gamble. In 2013, he strongly supported Huang Mingduan in launching an independent e-commerce platform—Feiniu.com. On the day of announcing entry into e-commerce, Huang Mingduan declared, "If we play, we play big; small play is not my style."
Huang Mingduan had almost joined a gang in his youth and was bold. Ye Guofu was more cautious. After the rise of e-commerce and the closure of many offline stores, he didn't act blindly. He decided to first go out and see what "internet thinking" really meant.
Surprisingly, physical retail in Europe, America, Japan, and South Korea was thriving. Prices were generally low, but quality was very good, and most products were made in China. Ye Guofu saw an opportunity and wanted to bring this good-and-cheap model to China.
While traditional retail was following the trend to layout e-commerce, Ye Guofu went against the grain, focusing on offline stores and founding Miniso in 2013. How far this model of "quality at low prices" could go was unclear, as larger giants were dying in droves.
In 2015, Shanghai's old upscale department store Pacific Department Store Huaihai Road branch closed, sounding the alarm for physical store closures. That year, a wave of department store closures swept across 17 provinces, municipalities, and autonomous regions, involving 14 brands and 63 stores, including Wanda Department Store, Wangfujing Department Store, Parkson, Ito Yokado, and Marks & Spencer.
At the beginning of 2016, Walmart announced the closure of 269 physical stores globally; Wanda Department Store closed nearly 40 stores in Ningbo, Qingdao, Shenyang, Wuhu, etc.; Tesco closed all 6 stores in Shandong; Rainbow Department Store, Sunshine Department Store, etc., also fell.
Renrenle, Xin Yijia, and China Resources Vanguard, known as the three giants of Guangdong supermarkets, had once competed closely with Walmart and Carrefour, but they couldn't escape misfortune. Due to too many store closures, Renrenle was once labeled ST (special treatment), barely removing the label in 2016. In the same year, China Resources Vanguard's self-operated stores decreased by more than 800. Xin Yijia was worse off, entering overall bankruptcy liquidation.
Yonghui Superstores had to "submit" to JD. In 2017, JD invested 4.31 billion yuan in Yonghui for a 10% stake. They jointly procured, strengthened supply chain management, and explored opportunities in O2O and other areas.
Gome was also exploring opportunities. In 2017, on its 30th anniversary, Gome announced plans to change its Chinese name from "Gome Electrical Appliances" to "Gome Retail." Under the impact of the internet, Gome was transforming from a pure appliance retailer to a provider of overall home life solutions.
Du Juan said, "When my husband (Huang Guangyu) comes out, I want to give him a better Gome."
Similarly, as early as 2013, "Suning Appliance" changed its name to "Suning Cloud Commerce."
But the world was no longer what it used to be.
After three and a half years of operation, Feiniu.com was still losing money. RT-Mart's era was over. At the end of 2017, Sun Art Retail announced the sale of shares worth HK$22.4 billion to Alibaba.
RT-Mart took 20 years to become the number one in China's retail industry, with annual turnover exceeding 100 billion yuan, but in the end, it was all in vain.
When Huang Mingduan left, he said:
I defeated all my opponents, but lost to the times.
05
The survival rule of cross-border "robbery" is: I destroy you, but it has nothing to do with you.
Foreign capital weakened, Taiwanese capital withdrew, domestic capital rose, and internet giants began to reshape traditional retail with new retail. Retail entered a new era.
Supermarket chains had to choose sides: Walmart, Carrefour, and Bu Bu Gao joined the Tencent camp, while Auchan, RT-Mart, Intime, Bailian, and New Huadu joined the Alibaba camp. They would integrate into the new retail landscape of internet giants.
Of course, there were those who refused to give up.
In February 2018, at the Yabuli Forum, Zhang Wenzhong read "A Letter to 40 Years." This was his first public statement after being released from prison. On May 31, the Supreme People's Court acquitted him.
Zhang Wenzhong said that justice may be late, but it never fails to arrive, and belated justice is still precious. But in the journey of new retail, he and Wumart had already been late for many years.
Whether they can "make up for lost time" remains to be seen. Not all transformations succeed.
In June 2018, Zhang Jindong joined hands with Xu Jiayin to invest 20 billion yuan to expand Suning.com Plaza. In August, Gome Retail issued a profit warning, saying it had lost 380 million yuan in the first half of the year, indicating that the new retail path was still arduous.
But bigger changes came from e-commerce, with the landscape suddenly shifting: Pinduoduo listed, Jack Ma announced his retirement, and JD's stock price halved.
The discourse of consumption downgrade and consumption stratification filled cyberspace.
The consumer goods sector that Ye Guofu had leveraged became a hotbed for new retail. More and more followers joined the quality lifestyle e-commerce trend. Driven by Miniso and NetEase Yanxuan, Lei Jun, who is adept at seizing "windfalls," launched Xiaomi Youpin.
The cost of online traffic is getting higher, and the value of offline store scenarios is being amplified.
On September 30, 2018, Miniso announced that it had received a strategic investment of 1 billion yuan from Tencent and Hillhouse Capital. With this, Tencent directly incorporated Miniso's retail brand into its "smart retail" system.
Miniso's sales in 2018 were expected to reach 18 billion yuan. Ye Guofu's goal is to enter 100 countries, open 10,000 stores, and achieve sales of 100 billion yuan by 2022.
"Queen of the Internet," Silicon Valley investor Mary Meeker, in her annual "Internet Trends" report, specifically used "creators" and "leaders" to describe new retail, saying it is rapidly becoming the infrastructure of China's retail industry and being exported globally.
06
Everything in the past is a prologue.
The Guangzhou Thirteen Hongs Museum is located on Xidi Road, not far from the famous Changdi Road.
In the TV drama "The Great Revival," revolutionary youth mentor Qu En has a line: "On this earth, there is China, China has Guangzhou, and Guangzhou has the Whampoa Military Academy."
A hundred years ago, Guangzhou was at the forefront of new trends, not only in military and politics but also in commerce.
After the Xinhai Revolution, Sun Yat-sen called for industrial salvation, and overseas Chinese responded enthusiastically, setting up factories, building roads, and opening banks. Guangzhou was the epitome, especially famous for its department stores.
From 1907 to 1918, the four major department stores in Guangzhou (Guangshi, Zhenguang, Sincere, and Dah Sun) opened successively around Changdi Road, introducing the concept of "global department stores," and were pioneers of modern retail in China.
After 1949, with public-private partnership, department stores were transformed into state-owned stores. People's daily necessities depended on ration tickets, and all kinds of goods relied on planned purchase and marketing by planning departments. So-called retail was out of the question. Especially in 1976, the original five-story building of Guangzhou Sincere Company mysteriously caught fire and was reduced to ashes, heralding the end of an era.
The tide of the Xiangjiang River surges, and time is long.
Now, Miniso represents Guangzhou's retail industry, expanding its territory, but whether its brilliance can continue remains to be tested by time.
In "The Great Revival," Qu En also has a thought-provoking line: "There are two kinds of ideals in this world: one is that I realize my ideal, the other is that the ideal is realized through me, even if I lose my life."
In the blink of an eye, twenty years have passed. Reviewing China's retail history, Chinese and foreign capital have repeatedly competed, business models have been innovated, and the industry has gone from backwardness, learning, catching up, to now leading, improving the quality of life of 1.4 billion Chinese people. This is a great achievement.
During this period, many talented people emerged. When they first took the stage, they all shouted their ideals. After several ups and downs, the song ends and the figure disappears, leaving only the green peaks by the river. Reflecting again, who is the first kind of person, and who is the second?
References:
"Retail Revolution," Li Fei, Economic Management Press
"The Third Retail Revolution: Embracing the Era of Consumer Sovereignty," Yan Yanchun, China Machine Press
"The Fourth Retail Revolution: Circulation Change and Reconstruction," Wang Chengrong et al., China Economic Press
Source: Meng Ge Fen Hao (ID: wm221x)
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