Traditional Business Suffers Huge Losses According to Carrefour's quarterly report released today, the company recorded revenue of €21.5 billion (approximately RMB 154.867 billion) in the third quarter, with the French domestic market contributing €10.3 billion (approximately RMB 74.192 billion), up 1.6% year-on-year, and overseas markets contributing €11.3 billion (approximately RMB 81.395 billion), up 6.2% year-on-year. However, sales in the Chinese market plummeted by 11.2%. This decline is nearly double the 6.4% drop in sales revenue that the French company experienced in the Chinese market in 2014. In July this year, Carrefour announced its exit from the Indian market and closed underperforming stores in several markets, including Greece and Colombia. Carrefour, which entered China in 1995, was once a pioneer of China's retail industry, but its market position has significantly declined in recent years. In 2009, Carrefour's sales in the mainland market were surpassed by RT-Mart for the first time; in 2010, its store count was overtaken by Walmart. By 2014, Carrefour China's market share had fallen behind that of Sun Art Retail, Walmart, and China Resources Vanguard, ranking only fourth. Carrefour is not the only one facing problems. On October 14, the US retail giant Walmart (NYSE: WMT) released its latest earnings and profit forecast: the company expects profits for fiscal year 2017 (February 2016 to January 2017) to decline by 6% to 12% sequentially. As a result, Walmart's stock price fell sharply by 10.04% to $60.03 per share that day, marking the largest one-day drop in 15 years, with market value evaporating by approximately $22 billion (about RMB 139.6 billion) in a single day. Major shareholder "Stock God" Warren Buffett, who holds approximately 67.7 million shares of Walmart, suffered a paper loss of up to $450 million in one day. This was Walmart's largest single-day decline since 1988. For Walmart, the bigger challenge is the rise of Amazon and consumers' growing habit of shopping online. Amazon's annual online sales now exceed $80 billion. Since July this year, Amazon has surpassed Walmart to become the world's largest retailer by market capitalization. A more direct comparison: "Amazon's market value is now approximately $254.8 billion, exceeding Walmart's market value by 30%; Amazon's trading volume is 31 times its book value, while Walmart's trading volume is 3.5 times its book value." In addition, China Resources Vanguard, hailed as the number one in the domestic retail industry, is also struggling. In 2014, China Resources Vanguard suffered a loss of 1.359 billion yuan, shocking the market. Apart from being divested by China Resources Enterprise due to continuous performance declines, China Resources Group, in order to integrate its retail sector, is not only selling the Tesco stores it acquired through joint ventures but also selling its 35% stake in Beijing Walmart. The total listing price is 3.335 billion yuan. China Resources Group stated that this transfer is merely a commercial decision. Walmart China Investment Co., Ltd. responded that it fully respects the partner's decision and that the transfer of this stake will not affect Walmart's operations in China. Among these 21 equity projects, 9 Walmart 35% stakes in Guangdong, Hunan, Henan, Hubei and other regions were sold at a listing price of 1 yuan each. Among them, 8 joint ventures incurred losses last year.

Difficulties in E-commerce Transformation for Hypermarkets Walmart's Integration of Yihaodian Faces Challenges After Walmart took control of Yihaodian, subtle changes emerged. The major shareholder was eager to "Walmart-ize" Yihaodian, while Yihaodian placed more emphasis on its own brand image, and Walmart focused more on an open platform. The retail giant's offline retail mindset inevitably influenced Yihaodian's direction. As of September, internal sources counted that the number of departures from Yihaodian had exceeded 1,000, and this is only an incomplete count. After the two founders left, Yihaodian was in turmoil, with many employees below the middle management level packing up and leaving. The departing employees spanned various departments, including Yihaodian Mall, the 3C products department, the technology department, and the human resources department. Last year, Yihaodian also attempted to expand its categories and transform into a comprehensive e-commerce platform, but the results were unsatisfactory. Yihaodian's own category expansion did not receive support from Walmart, which firmly prevented the online Yihaodian from affecting its offline business. Walmart's requirements for Yihaodian's gross margin, turnover efficiency, and product safety also greatly hindered Yihaodian's efforts to make changes. As a multinational retail giant, Walmart's expansion in China has not been smooth. It previously acquired the offline supermarket chain Trust-Mart for $1 billion, but it took several years to fully integrate, and the development speed was not as fast as expected. Yihaodian can be considered a major bet placed by Walmart in China. Walmart spent four years proving that Yihaodian's direction was wrong, which led to Walmart acquiring the remaining shares from the founders and other shareholders, achieving 100% control of Yihaodian.

RT-Mart's Feiniu.com Suffers Huge Losses Feiniu.com, regarded by RT-Mart as a breakthrough for omni-channel retail, has been advancing aggressively since its launch last year, but its first report card showed a loss of 161.8 million yuan. If Feiniu.com is to achieve the goal set by its helmsman Huang Mingduan of "top three in the B2C industry," there is still a long and costly road ahead. According to insiders, in order to expand Feiniu.com's influence and increase sales, RT-Mart's internal employees are also assigned monthly purchase tasks, and some employees are required to promote Feiniu.com through WeChat public accounts, QQ groups, and other online channels. "I have to buy on Feiniu.com once a week," said one insider. Data shows that as of December 31 last year, Sun Art Retail's annual profit was 3.024 billion yuan, compared with 2.942 billion yuan in the same period last year, an increase of 3.4% year-on-year. However, if the losses from Feiniu.com were excluded, the annual profit would have increased by about 8.9% year-on-year. Based on this calculation, Feiniu.com, which was launched last year, lost approximately 161.8 million yuan. Due to changes in consumer habits, for planned purchases, the price advantage and category richness of e-commerce channels are unmatched by any hypermarket with high operating costs. For enterprises, wherever consumers' eyes are, consumption follows. The ratio of e-commerce to offline consumption is rapidly narrowing, making the transformation of hypermarkets to B2C inevitable. However, the competitive landscape of B2C e-commerce in China is already set, and whether the major hypermarkets can successfully transform remains uncertain.

Hypermarkets Are Dead, with a Two-Year Reprieve The global retail industry is deeply impacted by e-commerce. Hypermarkets are plagued by insufficient momentum, lack of robust distribution networks, and an inability to penetrate the emerging third- and fourth-tier cities in China, problems that are troubling the once-glorious hypermarket sector. Some even believe that, judging from the current operating conditions of major hypermarkets, the impact of e-commerce will become increasingly fierce, and the trend is inevitable. Hypermarkets are dead, just with a two-year reprieve, and a larger wave of store closures will come in the future. The once-glorious hypermarkets are facing unprecedented difficulties. Although major giants are striving to lay out online e-commerce, the feedback data shows that results are not ideal. E-commerce business naturally conflicts with existing retail operations and is difficult to integrate. However, it is certain that hypermarkets will continue to suffer losses on the e-commerce path for some time before they know the outcome. As the retail industry continues to undergo deep adjustment, can the reform and integration efforts of multiple retail giants help them quickly overcome the development crisis?

Breaking the Deadlock: There is no doubt that hypermarkets are on the decline. Market saturation, economic slowdown, diversion by e-commerce and specialty stores, anti-corruption measures causing a sharp decline in card sales, rising labor and rent costs, and upgrading consumer demands are all combined forces impacting the hypermarket format. The logic of hypermarkets is to use fresh produce and food to attract traffic, and non-food items to generate profits. In the hypermarket where the author once worked, non-food items accounted for only 30% of sales but 70% of gross profit. Now, non-food items with opaque prices have become transparent in the e-commerce era, forcing hypermarkets to lower gross margins and sales on non-food items. Consequently, they have to raise food prices. Now, the prices of many regular items in hypermarkets are no longer competitive compared to community supermarkets. Everyday low prices are limited to promotional items in DM flyers, leading to a vicious cycle and further customer loss. Although on the decline, hypermarkets remain the best channel for one-stop shopping. As long as the demand for one-stop shopping exists and no format emerges that is superior to hypermarkets in terms of cost and experience for one-stop shopping, hypermarkets will remain one of the mainstream retail formats. For hypermarket decision-makers, blindly pursuing O2O with grand plans may only increase costs and distract attention. Hypermarkets should focus more on their stores and supply chains, shifting from letting customers choose products to helping customers recommend products, using buyers' professional services to serve customers well, implementing targeted marketing, reducing costs through scale and standardization, learning from the spirit of Aldi and Costco, and building channel brands. As for O2O, don't force it; leave it to the young people, give them trust and support, let small teams quickly test and flexibly adjust, collect and analyze data, train the team, explore new internet models, stay sensitive to industry trends, and position for the next opportunity, moving with the times.

About the Author: Zhang Chenyong, focusing on supermarket O2O, online supermarkets, and the last-mile direction, building a professional viewpoint library. Welcome to follow the public account csdso2o.

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