In 2021, physical supermarkets faced a tough environment. Recently, major listed supermarket companies released their 2021 annual reports, showing grim data: nearly 90% saw revenue declines, and all saw net profit drops, with some suffering significant losses. In 2021, facing repeated COVID-19 outbreaks, weak consumer spending, intensified competition, community group buying impact, rising fixed costs, and the impact of new leasing standards, domestic physical supermarkets faced enormous pressure, and the industry showed a bleak atmosphere. However, despite the unfavorable external factors, the physical supermarket giants did not sit idly by; they have been actively seeking change and continuously strengthening their internal capabilities to achieve an "elephant turn" and dance against the wind. As a leading brand in physical supermarkets, Yonghui's strategic transformation has been quite effective, and it has returned to the path of profitability. On April 29, Yonghui released its Q1 2022 financial report, with impressive operating data: revenue of 27.243 billion yuan, up 3.45% year-on-year, and up 28.34% from Q4 2021; net profit attributable to shareholders of 502 million yuan, up 2053.54% year-on-year; net profit attributable to shareholders after deducting non-recurring gains and losses of 628 million yuan, up 263.07% year-on-year; operating cash flow of 2.589 billion yuan, up 80.02% year-on-year; online sales of 4.04 billion yuan, up 9.9% year-on-year, accounting for 14.1%... An elephant turning is never easy. How did Yonghui break through? Optimizing Structure and Adjustments From Organizational Change to Efficiency Advancement On August 5, 2021, Li Songfeng officially became CEO of Yonghui, strengthening the "Technology Yonghui" strategy and comprehensively advancing digital transformation. As corporate digital transformation moves into deeper waters, organizational change is the most critical. As Li Songfeng said, digitalization for a retail enterprise is not just a technical issue but a process of integrating organization and business. The deeper you go, the more you see how organization and business constrain digital transformation. After taking office, Li Songfeng prioritized organizational change, focusing on enhancing platform capabilities and regional autonomy. Especially in regional autonomy, the headquarters gives provincial regions more autonomy, giving frontline personnel stronger initiative and making frontline stores more flexible. Based on platform capabilities, they are developing omni-channel capabilities, gradually establishing the ability for "one province, one discussion" and "one store, one discussion." This allows Yonghui's young frontline teams to fully leverage their initiative, accurately judge local market differentiation, and quickly respond to competition and challenges. At the same time, Yonghui continues to undergo changes toward youthfulness, flattening, and flexibility, and has initially achieved an organizational system of "agile front office, strong middle office, and efficient back office." Financial data shows that in 2021, Yonghui's management expenses decreased by 6% year-on-year, and in Q1 2022, the decline was even more pronounced, down 29.10% year-on-year, significantly improving operational management efficiency. Speaking of efficiency, for supermarkets and hypermarkets, there is a key indicator to measure store strength: store-warehouse turnover efficiency. As we all know, the fewer inventory days, the higher the store's turnover efficiency. Yonghui uses digital technology to achieve plan interconnection across all supply chain links, from procurement, delivery to marketing, improving visibility and coordination across all links. It is reported that Yonghui's technical team has digitally reorganized modules such as direct sourcing, forecast ordering, and product lifecycle calculation, connecting the complex upstream links of the retail industry. On this basis, Yonghui has overturned previous experience-based ordering, using data as support for ordering, setting category safety factor strategies, ensuring that ordering needs are supported by data, and out-of-stock root causes are clearly visible, ultimately improving store turnover efficiency. Since advancing supply chain digitalization, in benchmark stores in Fuzhou and other places, store-warehouse turnover time has decreased by 30%, and inventory time has been reduced to about 16 days. Compared with the industry's 20-24 day turnover for similar supermarkets, Yonghui has achieved industry leadership in this regard. From the beginning of 2022 to the end of Q1, Yonghui's total inventory amount decreased by 27.87%, ensuring effective operation and steady growth of operating cash flow. Whether in organizational change or supply chain structure adjustment, Yonghui continues to practice its technology strategy and digital empowerment, gradually becoming a data-driven retail enterprise. In the next decade, Yonghui's vision is to fully create an omni-channel technology retail enterprise centered on fresh produce and customer focus. Omni-channel Digital Breakthrough Comprehensive Improvement in Store Efficiency, Labor Efficiency, and Product Efficiency Organizational change is related to operational efficiency. But improving operational efficiency ultimately depends on digital construction. As one of the important implementation measures of the Technology Yonghui strategy, Yonghui's technical team independently developed the full-chain retail digital system "YHDOS," which integrates omni-channel procurement and sales collaboration, operations, finance, and connects online and offline businesses from the employee operating system end. It is the cornerstone of Yonghui's omni-channel digital capabilities. The system deeply explores digitalization in areas such as labor, ordering, membership, and fulfillment, gradually achieving the goals of process informatization, analysis visualization, and comprehensive intelligence. To date, the YHDOS system has been deployed on a large scale in Fujian, Sichuan, Beijing, Shanghai, Chongqing, and other places. Based on the self-developed YHDOS system, Yonghui's technical team has also developed functions such as digital labor management, intelligent ordering, and fine-grained inventory management, significantly improving operational efficiency. It is reported that after implementing the digital labor system in stores, Yonghui's digital benchmark stores such as Fuzhou Aoti Store and Taihe Store have improved labor efficiency by over 20%; Chengdu Qinglong Plaza Store has seen labor efficiency increase by nearly 50%, reducing total daily working hours of store employees by 10 hours. It is reported that the YHDOS system is expected to cover all stores nationwide within 2022 and has entered the large-scale promotion stage. In 2022, Yonghui will also promote the digital labor system in stores nationwide. After the system is fully connected and all stores nationwide are running, Yonghui's over 1,000 stores nationwide are expected to achieve a 30% labor efficiency improvement within this year. According to earlier disclosures, Yonghui's same-store sales growth was about 1.6% in January-February 2022. Through data governance combined with business governance, Yonghui provides users with more streamlined, more matching, and more affordable SKUs, and better services, attracting and accumulating traffic, improving conversion and repurchase, thereby achieving store efficiency improvement. Of course, the improvement in store efficiency also cannot be separated from the advancement of product efficiency. It is understood that with the boost of digital strategy, Yonghui's core product monthly product efficiency has improved by 28%, and store-warehouse turnover time and inventory time have reached industry-leading levels. In addition, Yonghui's online business has become a new growth engine. In 2021, Yonghui's online sales reached 13.13 billion yuan, up 25.6% year-on-year, accounting for 14.42% of total revenue. In Q1 2022, Yonghui's online business continued to maintain high-quality growth, with sales reaching 4.04 billion yuan, up 9.9% year-on-year. In terms of warehousing and distribution operations, Yonghui significantly improved fulfillment punctuality to over 95.6%, and in core regions such as Fujian, Sichuan, and Chongqing, fulfillment punctuality was as high as 96.0%, leading the industry, while fulfillment costs also steadily decreased. In the future, with continued technology investment, Yonghui's "to-store + to-home" businesses are expected to form a positive complement, achieving a synergistic rise of dual growth curves and opening up greater growth space. Strengthening Competitive Barriers Building an Ultimate Supply Chain from the Source The competition among physical retailers is essentially a supply chain competition. For any physical retail enterprise, to reduce costs and build competitive barriers, building an ultimate supply chain from the source has always been the most effective approach. As a big winner in the "agriculture-to-supermarket" reform, the fresh produce supply chain has always been Yonghui's core barrier and its strongest moat. Yonghui has built a national fresh produce operation system by deepening, thoroughly penetrating, and refining source procurement, continuously improving operational coordination capabilities and optimizing overall operation capabilities. Yonghui's fresh produce segment promotes vertical management of the organization, adopting a long-short radius mechanism, with a total of 600 direct procurement bases nationwide, including source warehouses for Fujian cucumber fish, Yunnan leafy vegetables, Shandong warehouse, Hebei egg warehouse (Guantao/Xinji), banana processing/mango processing warehouses, and the Northeast Panjin rice base. Through direct source procurement, Yonghui goes deep into the fields, achieving full control over product planting, production, purchase, and transportation. Taking fresh produce as an example, Yonghui has effectively improved the penetration rate of direct source procurement by strengthening the localized operation of long-radius products and building a self-operated fresh produce platform "Fuping Supply Chain," promoting the standardized development of agricultural and sideline product sources, and effectively improving control over product quality and safety. In addition, after the organizational structure reform, Yonghui has elevated the importance of supplier services. The procurement team actively transforms its role, internally as brand recommendation officers, actively serving stores, and externally as brand agents, strengthening cooperation with brand owners, joint office work, and deep collaboration. Since 2021, Yonghui has deepened cooperation with many well-known brands such as Coca-Cola, P&G, Yili, PepsiCo Foods, Yihai Kerry, Chahua, Hengan, and Nice, comprehensively building an efficient, flexible, and digital supply chain. At the same time, as an important part of the supply chain system, Yonghui continues to strengthen the construction of national logistics capabilities. To date, Yonghui has 31 logistics centers nationwide, covering 29 provinces and cities, with warehouse space exceeding 1.2 million square meters. Among them, Yonghui's self-built 6 comprehensive logistics parks are located in Fujian, Chongqing, Guizhou, Sichuan, Anhui, and the Northeast region. Financial reports show that in 2021, Yonghui's total logistics operations reached 58.1 billion yuan, with daily throughput exceeding 35,000 tons. It is reported that in 2022, Yonghui plans to invest about 1.5 billion yuan in logistics business, mainly for self-built logistics parks and automation equipment introduction. Currently, Yonghui is orderly building supply chain industrial parks in Guizhou, Sichuan, Fujian, and Liaoning. In terms of private label products, Yonghui is building differentiated advantages by creating private labels. Financial reports show that in 2021, Yonghui's private label sales reached 2.65 billion yuan. To date, Yonghui has built a private label matrix covering the full range from mid-range to high-end, including Tianqu, Yonghui Farm, Huixiangsui, Chan Master, Yousong, Huima Daojia, Ofresh, etc., covering fresh produce, dry goods and daily necessities, cleaning and home, beverages and snacks, quick-frozen dishes, and other categories. In the future, the competitive gap between physical supermarkets will mainly be reflected in the depth and efficiency of the supply chain. Yonghui's supply chain system, after digital upgrade and strengthening, is expected to become its most core competitiveness and strongest moat in the next decade. Conclusion: Only in the cold does the pine's strength show. Facing industry changes, retail enterprises must respond with change, accumulate strength, and innovate. As an enterprising "elephant," Yonghui is stepping to the rhythm of digitalization, moving forward against the industry's cold wind. Source: Lianshang.com Information (ID: lingshouzixun) Author: Muzhi Are you "watching" me?