The integration challenges that Yonghui previously encountered were effectively avoided in the "new retail" model of Yiguo and Alibaba. Less than two years after acquiring a stake, Yonghui sold Lianhua Supermarket. On December 23, 2016, Yonghui announced that it would transfer its 21.17% stake in Lianhua Supermarket for HK$950 million (approximately RMB 850 million). The buyer was Yiguo, a fresh food e-commerce company invested by Alibaba. These shares were purchased by Yonghui in April 2015 for RMB 744 million. This "strategic investment" made the private retailer the second largest shareholder of the state-owned Lianhua Supermarket. Yonghui's move was also seen as an attempt to expand its market share in East China. Previously, it entered the Central China market by taking a stake in Zhongbai Supermarket. "Although Yonghui made integration efforts after taking over Lianhua Supermarket, the results were not obvious," said Yu Jian, General Manager of Kantar Worldpanel China. During the two years, Yonghui sent a general manager to Lianhua Supermarket and pushed it to increase direct procurement and expand fresh food operating area—management of fresh food supply chain has always been Yonghui's strength. But Lianhua Supermarket's scale was too large and too complex. As of the end of 2015, it had 3,883 stores, including 157 hypermarkets, 2,123 smaller Lianhua supermarkets, and 1,603 Quik convenience stores. In contrast, Yonghui had only over 300 stores nationwide. Unlike Yonghui's direct operation model, about 70% of Lianhua Supermarket's stores were franchised, making integration difficult. In 2015, Lianhua Supermarket's loss reached RMB 497 million. This challenge did not exist for Yiguo and Alibaba. Yu Jian believes that taking over Lianhua Supermarket is part of Alibaba's "new retail" strategy. "The space for online business is limited; occupying offline is the way to capture the largest commercial territory." On December 21, 2016, Alibaba also invested in a Zhejiang-based chain supermarket called Sanjiang Shopping. Alibaba's "new retail" concept refers to breaking the boundary between online and offline retail, achieving O2O integration of logistics and payment. This approach utilizes existing commercial outlets: when a user places an order, a courier picks up the goods from a nearby store, eliminating the need for sorting in remote warehouses and long-distance logistics, so an order can be delivered within tens of minutes. The whole process is like food delivery, faster than e-commerce's own centralized delivery and at lower cost. "JD Daojia" is such a crowdsourced operation. JD has already partnered with offline retailers like Yonghui, Walmart, and FamilyMart to join its O2O business. Alibaba, which was slower to act, clearly wants to catch up. According to Kantar's research, the frequency of Chinese consumers' visits to physical stores has been declining year by year. In 2014, the average number was 86 times; by 2016, it dropped to 80. As the younger generation becomes the main consumer force, staying at home and ordering via mobile phones will become increasingly common. After Yiguo and Alibaba bring the large-scale Lianhua Supermarket on board, they only need to utilize its existing stores and goods, and the integration steps can be skipped. As for how Lianhua Supermarket can reverse its loss-making fate, it will have to rely on itself. Source: Yuanyuan Review -END- **Click the image to read directly FMCG industry's most professional and practical knowledge base [ Reply with yellow numbers in the background to view the following keywords ] | 001 Excellent article selection | 002 Dealer market operations | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales volume improvement techniques | 006 Channel expansion | 007 Managing dealers | 008 Dealer development | 009 Dealer internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brands | 016 Dealer B2B transformation |