Click to read the original text for details Cold is the collective feeling of physical retailers this summer. National Bureau of Statistics data shows that from January to May 2022, total retail sales of consumer goods were 17,168.9 billion yuan, down 1.5% year-on-year. Among them, online retail sales nationwide were 4,960.4 billion yuan, up 2.9% year-on-year, while offline retail sales declined even more severely. According to incomplete statistics from Yilan Business, in the first half of 2022, nearly 2,500 offline stores across multiple physical retail formats announced closures, including 67 supermarkets. Clearly, facing severe conditions, transformation, adjustment, and contraction have become common choices for physical retailers. Notably, at this moment, the top three domestic supermarket chains—RT-Mart (Gaoxin Retail, hereinafter RT-Mart), Walmart China, and Yonghui—while competing with each other, have taken different paths. Overall, strengthening digitalization and integrating online and offline channels have become common needs for the three. On this basis, a pattern has formed: Yonghui goes left, Walmart goes right, and RT-Mart wants both. And all this started two years ago when the three supermarket giants almost simultaneously changed their leaders. 01 Three Supermarkets Change Leaders Simultaneously 2020 was the first year of the pandemic and a year of change for the three major supermarkets. Facing the sudden pandemic, supermarket performance plummeted, and they felt the power of digitalization deeply for the first time. Transformation was inevitable. Enterprises are ultimately operated by people, and timely placing the right person during a transformation is half the success. On May 7, 2020, Walmart China appointed Zhu Xiaojing as President and CEO; shortly after, on December 1, Lin Xiaohai officially succeeded Huang Mingduan as CEO of RT-Mart; Yonghui also officially appointed Li Songfeng as CEO of Yonghui Superstores in August 2021. First, let's talk about why Walmart chose Zhu Xiaojing. It was probably because of her experience in multinational corporations. According to relevant information, Zhu Xiaojing's career has been in large multinational companies, having served in McKinsey's New York office and Honeywell's Greater China region. Especially her work experience at Fonterra aligns perfectly with Walmart's current transformation needs. Zhu Xiaojing joined Fonterra in 2011, serving as Vice President of the Ingredients Division in Greater China, then President of Greater China, and from 2016, she was responsible for the dairy farm business. She upgraded the company's business model in China to a composite commercial operation model integrating the entire industry chain from farm to table. Compared to local Chinese companies, multinational corporations face greater management and operational challenges. Since entering the Chinese market in 1996, Walmart has insisted on local procurement and cooperated with more than 20,000 Chinese suppliers. However, against the backdrop of Sino-US tensions, in October 2021, Walmart moved its supplier business department from China to India, bringing significant challenges to Walmart's industrial chain transformation and upgrading. How to complete the digital transformation and upgrading of Walmart China's industrial chain under complex international situations and policies depends on Zhu Xiaojing's rich experience to leverage advantages. Now let's talk about RT-Mart. As the former General Manager of Alibaba's Retail Link division, Lin Xiaohai has rich experience in the FMCG industry. He led Retail Link from being blocked by brand owners to becoming the largest B2B platform in the entire FMCG sector. It can be said that taking over as CEO of RT-Mart is just a change of battlefield for Lin Xiaohai. This time, taking over RT-Mart, Lin Xiaohai's main goal is to integrate online and offline between Alibaba and RT-Mart. Linking Tmall and RT-Mart for mutual online and offline traffic is the deep-seated goal of RT-Mart's digital transformation. In 2017, Alibaba acquired 36% of RT-Mart's shares for 22.4 billion yuan. In subsequent years, Alibaba continued to acquire RT-Mart shares, reaching 72% in 2020, making Jack Ma the behind-the-scenes boss of RT-Mart. Relevant industry insiders believe that RT-Mart's digital transformation is of great value for further exploration of Tmall New Retail. "We will find that in the same online delivery process, RT-Mart has advantages in many operational indicators, even better than Hema. This shows that traditional offline retail is also profound, and RT-Mart's brand effect accumulated in FMCG and fresh food can also activate Taobao users, feeding back into Tmall New Retail's online-offline integration process." Finally, let's focus on Yonghui Superstores. As a retail supermarket that entered the market with fresh food, fresh food remains Yonghui's biggest feature. In terms of operating area, Yonghui's fresh food area accounts for more than 40% of the total supermarket area, much higher than other supermarkets' 20-30%; in terms of sales, fresh agricultural products account for more than 50% of total sales. But fresh food supermarkets also have a biggest pain point: the procurement side has a large gray area. Fresh food procurement is the most important link in supermarket operations. Due to the special attributes of fresh food—short life cycle, large price fluctuation space, many quality grades, and rapidly changing market conditions—a slight mishandling can directly affect the store's later operating sales profit. Yonghui's current decline in fresh food operation capability, rising costs, falling profits, and reduced customer attraction ultimately stem from procurement issues. To effectively solve this problem and achieve cost reduction and efficiency improvement, technology must be introduced in procurement. Therefore, the shared technology architecture of the supply chain middle platform is crucial here. Yonghui Superstores Chairman Zhang Xuansong once commented on Yonghui's technology transformation: "In the history of fresh food, there has been a large gray area in the supply chain. How to solve the efficient and clean team organization? We think technology is indispensable. Digitalization, technology, plus organizational structure and performance design—Yonghui also needs to explore new paths." Li Songfeng's experience as head of the middle platform shared technology department exactly matches Yonghui's current needs. Yonghui's fresh food procurement organization needs integrity, standardization, transparency, automation, and efficiency, all of which require the support of the middle platform shared technology architecture. Finally, from the new ideas of these three supermarkets' personnel changes, we can see that although the fields, strategic goals, and forms of enterprises may differ, the logic and rules of employing people are generally consistent. They all deploy personnel based on corporate genes and current conditions, with the leader's past experience being the most important factor. 02 All Favor Digitalization As the transformation and upgrading progress bar unfolds, the digital achievements of the three supermarkets are beginning to show. Walmart, on the front line, began its digital transformation in 2017 and has delivered a good report card. Omni-channel online and offline sales maintain triple-digit growth, with over 50 million digital customers. Walmart Community Store traffic and sales both show double-digit growth. The "Walmart to Home" O2O business average monthly sales growth exceeded 60%, and Sam's Club's premium membership achieved a 20% penetration rate in some cities upon launch. RT-Mart's digital transformation has been bumpy, having gone through Feiniu.com and Taoxianda transformation explorations. Digitalization has allowed RT-Mart to optimize its cost structure. According to its financial report, in the first half of fiscal year 2022, Gaoxin Retail's operating costs were 30.601 billion yuan, down 4.2% year-on-year. After digitalization is connected, every link in the store can be driven by data. Before digitalization, online orders used a single-pick, single-pack, single-delivery model, hitting bottlenecks at around 200 orders. When orders were numerous, the scene was chaotic. But after digitalization, employees' actions are based on system instructions. Through the order consolidation system, multiple orders are picked, packed, and delivered together. Best-selling items are placed in fast-pick zones for centralized picking. In the front area, hanging chains replace walking, and these digital measures greatly improve store order efficiency. Yonghui Superstores, according to current public information, since proposing the "Technology Yonghui" strategy last September, has gradually promoted the implementation of "three 30%" In a few months, through digital means, it has improved efficiency by 30% in terms of area efficiency, personnel efficiency, and product efficiency—increasing traffic, improving conversion and repurchase, achieving 30% improvement in area efficiency; through store-warehouse integration, intelligent procurement, and transaction fulfillment, achieving 30% improvement in personnel efficiency; optimizing category structure, reducing stockout rates, and reducing inventory turnover days, achieving 30% improvement in product efficiency. 03 Yonghui Goes Left, Walmart Goes Right Although all are doing digitalization, the three ultimately take different paths. With the continuous closure of Walmart hypermarkets, Sam's Club membership stores are growing at a single-digit rate annually. As of the end of 2021, Sam's Club operated 36 stores in 23 cities, serving over 4 million members. It is expected that by the end of 2022, Sam's Club will reach 40-45 stores. Sam's Club is currently Walmart's only major expansion format, showing that Zhu Xiaojing is quite all-in. In Zhu Xiaojing's view: First, compared to hypermarkets, Sam's Club sets a threshold through membership fees, filtering out quality consumers and capturing core users. Sam's Club targets consumers who are generally middle-class families with spending power, belonging to the market's quality users. The membership fee encloses these users, making them think of Sam's the moment they want to consume. Although this narrows the consumer base, it significantly increases the average transaction value, offsetting losses. Second, Sam's Club has low operating costs, reflected in all aspects. Sam's SKU is around 4,000, more streamlined than ordinary supermarkets, so product operating costs are low; marketing costs are low. Ordinary supermarkets need various holiday and quarterly discount promotions to expand customers, while Sam's has a fixed customer base, only needing to manage products well to retain customers. Moreover, each customer's annual membership fee of 260 yuan is also a considerable income. In Zhu Xiaojing's view, Sam's still has about 70 million potential users in the Chinese market to tap, and their journey has just begun. Lin Xiaohai, on the other hand, focuses on restructuring hypermarkets, format transformation, and product capability improvement. In RT-Mart's 2021 financial report, Lin Xiaohai wrote: This year, Gaoxin Retail plans to launch the 2.0 plan for more than 50 RT-Mart stores, considering the actual local conditions of different stores. Redefining the hypermarket is the top priority of RT-Mart's transformation, changing the hypermarket from a single shopping scenario to a diversified consumption scenario of "shopping, experience, service, and social." In terms of experience, RT-Mart added dine-in areas for customers to taste and purchase; in services, it added neighborhood services, bundling services like key cutting, laundry, and clothing repair within 3-5 kilometers, so customers can come to RT-Mart when needed, increasing foot traffic. RT-Mart's financial report states that small and medium formats are low-cost extensions of RT-Mart. In medium and small RT-Mart stores, they can better focus on core categories and product upgrades, improve product efficiency, and reduce operating and investment costs. Therefore, the format is transforming from RT-Mart to medium and small RT-Mart. As of the first quarter of 2022, medium RT-Mart has opened 9 stores, and small RT-Mart has opened 103 stores. The trend of transforming from large to small and medium will continue. Restructuring hypermarkets and formats is the transformation of "place," but Lin Xiaohai said: "Facing the new competitive environment, I think hypermarkets need to be redefined. In the future, hypermarkets must attract customers with products." RT-Mart is currently actively developing private brands, planning 1-2 shelves in each category to sell self-developed brands, connecting the entire process from R&D to sales, reducing costs for all parties; launching seasonal products is also within Lin Xiaohai's consideration, allowing customers to discover new changes with each shopping trip, enhancing customer stickiness. For Lin Xiaohai, not "abandoning" the hypermarket is based on the reality that 76% of its performance comes from hypermarkets, so it cannot change aggressively. Yonghui Superstores focuses more on supply chain innovation. In this transformation, Yonghui firmly adheres to its technology strategy, moving toward becoming a customer-centric, fresh-food-based omni-channel technology retail enterprise. A bigger feature is the use of YHDOS, a full-chain retail digital system independently developed by Yonghui's technology team for the digital supply chain. The YHDOS digital system is centered on the source supply chain, integrating one-stop from seed selection and soil testing, planting supervision, standard setting, dedicated warehouse storage, dedicated order processing, brand promotion, to terminal services, achieving a supply chain connection for fresh food categories from seed selection to cultivation, planting to processing, and finally to logistics and sales. Li Songfeng said in an interview: "Relying on digital transformation, from source procurement to transportation, grading, to subsequent terminal product selection, display, and ordering, all links have embarked on the digital track, greatly improving efficiency." In addition to the digital full chain, Yonghui also has its own characteristics, what it is good at and different from other supermarkets, which is the "fresh food" that Yonghui has always insisted on. It can be said that Yonghui's retail has always been built on fresh food. For Yonghui, maintaining its characteristics and becoming a technology-driven retail enterprise is its transformation direction. Three leaders, three different transformation routes, fully demonstrating their different experiences and personalities. Each is deploying based on their supermarket's genes and current conditions, but this transformation journey has just begun, and the market will judge who is better or worse. Source: Yilan Business (ID: yilanshangye) Author: Liu Ding is -END-