---
title: "Yonghui Surpasses Walmart, Set for a Billion-Yuan Showdown with RT-Mart"
description: "Before the May Day holiday, Yonghui Superstores finally released its long-awaited 2019 annual report. As one of the leading players in China's supermarket industry, Yonghui's performance has always attracted industry attention. The impact of the pandemic and the surge in fresh food formats have also made investors curious about the next steps in the fresh food retail track. This report not only explains Yonghui's development over the past year but also provides insights into the overall development of the fresh food industry. After reading the report and combining it with the 2019 annual report of another industry leader, Sun Art Retail (RT-Mart), several basic conclusions can be drawn."
author: "房煜"
publisher: "New Distribution"
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published: "2020-04-29"
language: "en"
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# Yonghui Surpasses Walmart, Set for a Billion-Yuan Showdown with RT-Mart

> Before the May Day holiday, Yonghui Superstores finally released its long-awaited 2019 annual report. As one of the leading players in China's supermarket industry, Yonghui's performance has always attracted industry attention. The impact of the pandemic and the surge in fresh food formats have also made investors curious about the next steps in the fresh food retail track. This report not only explains Yonghui's development over the past year but also provides insights into the overall development of the fresh food industry. After reading the report and combining it with the 2019 annual report of another industry leader, Sun Art Retail (RT-Mart), several basic conclusions can be drawn.

Before the May Day holiday, Yonghui Superstores finally released its long-awaited 2019 annual report. As one of the leading players in China's supermarket industry, Yonghui's performance has always attracted industry attention. The impact of the pandemic and the surge in fresh food formats have also made investors curious about the next steps in the fresh food retail track.
This report not only explains Yonghui's development over the past year but also provides insights into the overall development of the fresh food industry.
After reading the report and combining it with the 2019 annual report of another industry leader, Sun Art Retail (RT-Mart), several basic conclusions can be drawn.
First, the overall transformation direction of China's supermarket leaders is towards fresh food supermarkets. The so-called "comprehensive" positioning of hypermarkets in the past has completed its historical mission and will gradually fade from the stage.
Second, the main battlefield for China's supermarket leaders is not in Beijing, Shanghai, Guangzhou, or Shenzhen; those who win the lower-tier markets will win the world.
Third, RT-Mart (here referring to the supermarket brand, not just the listed company), controlled by Alibaba, will face a billion-yuan showdown with Yonghui Superstores, backed by Tencent, around 2021 for the title of China's retail leader (note: referring to a single brand, so China Resources Vanguard is not considered).
**-01-**
**Scale and Innovation, Both Required**
Overall, Yonghui Superstores delivered a decent report card. Yonghui Superstores (601933.SH) released its 2019 annual report and 2020 first-quarter report. According to the financial report, in 2019, Yonghui Superstores achieved operating revenue of 84.877 billion yuan, a year-on-year increase of 20.36%; net profit attributable to shareholders of the listed company was 1.564 billion yuan, a year-on-year increase of 5.63%. While core financial data achieved high growth, Yonghui Superstores maintained a steady expansion trend.
In 2019, Yonghui Superstores opened 205 new supermarket stores and had 244 supermarket stores in reserve. As of the end of 2019, Yonghui Superstores' supermarket business had entered 24 provinces and cities, with a total of 911 stores in the supermarket format.
Data in this chart from Yonghui Superstores' 2019 financial report.
It is worth noting that the 205 new stores mentioned here are only for the supermarket format. In terms of the new MINI format, during the reporting period in 2019, 573 MINI stores were opened and 44 closed, covering 19 provinces, with Chongqing, Sichuan, and Fujian each having over 100 MINI stores.
At the same time, store closure information is also an important indicator. Previously, some self-media claimed that from 2019 to April 2020, Yonghui Superstores closed 349 stores. This number, with unclear sources, is surprising. According to the "Announcement on the Resolution of the 18th Meeting of the Fourth Board of Directors of Yonghui Superstores," Yonghui Superstores actually closed only one store (Jiamusi Jiefang Road store in Heilongjiang).
However, the MINI stores, which were quickly opened and quickly tested, underwent significant adjustments in 2020, with 74 stores closed in the first quarter alone. However, for the 2019 fiscal year, even if supermarkets and MINI stores are combined, the number of openings far exceeds closures.
**If anyone has read Sun Art Retail's 2019 annual report, they would also be impressed by one number. In 2019, RT-Mart opened 7 new stores and closed 5, equivalent to a net increase of only 2 stores.**
However, this does not mean that the performance of RT-Mart or Sun Art Retail was unsatisfactory. We will discuss the comparison later. At least it shows that Yonghui Superstores still values the basic action of "opening stores" in offline physical retail to drive growth.
There may be two reasons for this:
**First, targeting the vast mainland China market, Yonghui Superstores hopes to achieve comprehensive coverage with depth.** As early as the 2018 financial report, Yonghui mentioned "achieving full coverage from first-tier to sixth-tier cities." By war zone, Yonghui Superstores' three main battlefields are Fujian, Chongqing, and Sichuan. In these three regions, both Bravo stores and MINI stores have exceeded 100. Among them, Sichuan surpassed Beijing in 2018 and ranked among the top three internally.
**Coverage is one thing; density is another.** This season's 2019 retail financial reports still show mixed results. However, it is worth noting that two regional retail businesses performed remarkably well. One is Hongqi Chain in Sichuan, and the other is Jiajiayue in Shandong.
Hongqi Chain achieved operating revenue of 7.82 billion yuan in 2019, a year-on-year increase of 8.3%; net profit attributable to the parent company was 520 million yuan, a sharp year-on-year increase of 59.97%. Jiajiayue achieved operating revenue of 15.3 billion yuan in 2019, a year-on-year increase of 19.9%. Net profit attributable to shareholders of the listed company was 458 million yuan, a year-on-year increase of 6.43%. One saw a sharp increase in net profit, the other a sharp increase in revenue, both making peers envious.
**What does this show? Second, deeply cultivating key markets is far better than spreading resources thinly across the market.** In 2020, Yonghui Superstores merged its previous ten war zones into seven war zones. This is also to concentrate superior forces and increase penetration in key regional markets.
Sorry, but Beijing, Shanghai, Guangzhou, and Shenzhen are not here. In this regard, RT-Mart and Yonghui are consistent in their overall strategy. According to Sun Art Retail's financial report, RT-Mart's third- and fourth-tier stores account for over 60% of its total.
Yonghui's seven war zones may remind people of Walmart's seven divisions. Speaking of Walmart, according to Yonghui's 2018 financial report, "According to Euromonitor's ranking of market share in mainland China, the company currently ranks fourth after Sun Art Retail, China Resources, and Walmart, but its growth rate is the fastest among all listed companies." By 2019, "It is expected that in 2019, the company will rank third in the FMCG chain after China Resources and Sun Art Retail, with growth still among the fastest."
This means that Yonghui Superstores has surpassed Walmart in market share in the supermarket format and ranks among the top three in FMCG retail. As is well known, China Resources Retail also includes China Resources Suguo. Therefore, in terms of a single brand, the future duopoly in China's supermarket retail will be between Yonghui and RT-Mart.
There are other noteworthy points in the financial report, but the outside world cannot know the details. For example, as of February 2, 2019, Yonghui Caishixian had received capital contributions of RMB 750 million from shareholders including the company, Zhuhai Hillhouse, and Ningbo Hongshan. After the capital increase, the cumulative paid-in capital was RMB 800 million, with the company's contribution accounting for 43.75% of total paid-in capital, losing control of the former subsidiary Yonghui Caishixian. **Since February 1, 2019, Yonghui Caishixian has no longer been included in the consolidated financial statements.** (Note: Yonghui Investment Co., Ltd. has been renamed Yonghui Caishixian Development Co., Ltd.)
Does this mean that Caishixian, like the previous Yonghui Cloud Creation, has started to fly solo?
From an innovation perspective, Yonghui Superstores has actively laid out both the offline MINI format and the online home delivery business. However, compared with peers, there are still differences.
**-02-**
**Billion-Yuan Showdown**
According to Sun Art Retail's 2019 financial report, as of December 31, 2019, the group's total sales revenue was 101.868 billion yuan, an increase of 553 million yuan from 101.315 billion yuan in 2018, an increase of 0.5%. Among them, revenue from sales of goods was 91.279 billion yuan, a year-on-year decrease of 4.5%; rental income was 4.078 billion yuan, a year-on-year increase of 7.1%. In addition, the group's operating profit was 4.890 billion yuan, a year-on-year increase of 4.1%; profit attributable to equity shareholders was 2.834 billion yuan, a year-on-year increase of 14.4%.
It can be seen that since the 2018 financial report, Sun Art Retail has continued to hover around the billion-yuan threshold with limited growth. If Auchan is excluded and only RT-Mart's performance is considered, it confirms what was said earlier: RT-Mart and Yonghui are still in the billion-yuan scale race, with RT-Mart perhaps leading by two positions but not yet crossing the finish line.
Although sales revenue from goods declined significantly in this financial report, the outside world still gave Sun Art Retail much praise, especially after the return of veteran Huang Mingduan (CEO of Sun Art Retail and Chairman of Kangcheng Investment (RT-Mart)). The "King of Land Warfare" is not just a name, and this time he also proved himself in "air warfare."
According to reports from the China Chain Store & Franchise Association, at the closed-door meeting of the 2019 All-Retail Conference Leaders Summit, Huang Mingduan stated that after the 2018 transformation, the "fresh food one-hour delivery" model had been successfully implemented in RT-Mart in the first half of 2019. According to Sun Art Retail's 2019 annual report, in 2019, Sun Art Retail's fresh food e-commerce business achieved overall profitability.
Yonghui also attaches great importance to online business. President Li Guo of Yonghui Superstores, in an interview with Huxiu, emphasized that Yonghui aims to become the Yonghui in the phones of a new generation of consumers.
According to the financial report, Yonghui Superstores' online business achieved sales of 3.51 billion yuan, a year-on-year increase of 108%, accounting for 4.4%, up 2 percentage points year-on-year. Among them, JD Daojia connected 485 company supermarket stores, a net increase of 155. The Yonghui Life APP and mini-program covered 24 provinces, providing 51.58 million online services to Yonghui users, with 5.06 million monthly active users at the end of the year.
This shows that while Yonghui's supermarket home delivery is growing rapidly, its contribution to overall revenue is still relatively small, providing limited incremental performance. In terms of model, unlike RT-Mart's full integration with Alibaba's system, Yonghui relies on third-party platforms like JD Daojia on one hand, and also develops its own Yonghui Life APP on the other. From the perspective of "Technology Yonghui," Yonghui's omni-channel and retail intelligence are more about self-reliance. Reading through this financial report, you can hardly see Tencent's presence.
**On the other hand, in terms of category adjustment and combination for hypermarkets or supermarkets, both sides have similar views. That is to highlight fresh food.**
In 2019, one of Yonghui's major moves was to reduce the proportion of high-margin apparel products. For example, according to Yonghui's financial report, "The company's comprehensive gross margin in 2019 was 21.56%, down 0.58 percentage points from 2018. This was mainly due to the continued reduction in the proportion of high-margin apparel, from 2.06% to 1.56%."
RT-Mart has also long been making major adjustments to categories other than fresh food, reshaping the category structure, with the ultimate goal of reshaping user perception. The biggest move was handing over the home appliance sector to Suning. Huang Mingduan stated, "As a hypermarket, we should spend more time on fresh food. We hope to become experts in the fresh food field." In other words, the original one-stop hypermarket positioning, which focused on home appliances, textiles, branded department stores, fresh food, and FMCG, has transformed into a hypermarket more focused on fresh food and groceries.
Yonghui should agree with this statement. Moreover, the fresh food supply chain has always been Yonghui's strongest point.
At this point, the overall landscape of China's supermarket retail in the next three to five years is already clear.
**First, there are only a few chain brands capable of national layout and truly covering markets from first-tier to sixth-tier cities (will Hema be one?), and the first group is emerging.**
**Second, omni-channel development remains the focus for the next three to five years, but each company has different approaches.**
**Third, overall, supermarkets with a broad fresh food concept are the future mainstream, and the main task for the hypermarket format will be stock transformation.**
Considering the impact of the pandemic, 2021 may be the decisive year for Yonghui and RT-Mart to compete for the billion-yuan throne.
Source: Ten Billion Consumers (ID: gjgc168), Author: Fang Yu
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