Yonghui Su­per­stores dishes up new brands to sat­isfy cus­tomers

China Daily (Hong Kong) - - BUSINESS - By SHI JING in Shang­hai

Yonghui Su­per­stores has proved adept at rolling out new busi­ness mod­els to re­tain mar­ket share and com­bat the chal­lenges thrown up by on­line ri­vals.

The tra­di­tional re­tail chain has nearly 500 stores, with another 200 due to be opened later this year, and em­ploys more than 70,000 staff.

Sales topped about $7.3 bil­lion, ac­cord­ing to Forbes mag­a­zine, while the com­pany’s mar­ket cap came in at $8 bil­lion. It also made Forbes’ Asia’s Fab 50 List of Com­pa­nies in 2015.

But even Yonghui Su­per­stores has been forced to change its ap­proach in the face of fierce on­line com­pe­ti­tion.

“Con­sumers now have higher ex­pec­ta­tions for on­line-to-off­line busi­ness,” said Bruno Lannes, a part­ner at Bain & Co, the global man­age­ment con­sult­ing firm, in China. “Re­tail­ers must come up with new mod­els.”

Yonghui Su­per­stores has done just that.

Known for its mas­sive 5,000-square-meter hy­per­mar­kets, the com­pany launched Su­per Species, a smaller-sized su­per­mar­ket brand, in its home city of Fuzhou in Fu­jian prov­ince.

The 500-square-meter stores tar­get mid­dle class con­sumers that like to com­bine shop­ping with din­ing.

Cus­tomers choose their fa­vorite foods, such as salmon or prime beef, which are cooked in store. Wine is also avail­able at the store.

With a wide range of pro­duce, the com­pany’s plan ap­pears to be work­ing.

“Up to 50 Su­per Species stores are sched­uled to be opened this year,” said Lin Chuangyan, a part­ner at Su­per Species. “The ul­ti­mate goal is to in­tro­duce the con­sumers, who come into the store, to our on­line plat­form.”

Still, these niche out­lets are just the lat­est at­tempt Yonghui Su­per­stores has made in re­cent years.

Back in 2015, the re­tailer launched its first YH Mem­ber Ex­pe­ri­ence brand out­let in Shang­hai. So far, they have opened more than 30. But the aim was to roll out 800 out­lets in the city by 2018.

De­fined as a mid- to high­level com­mu­nity su­per­mar­ket, the branded stores cov­ered just 200 me­ters, and fea­tured fresh prod­ucts and im­ported goods.

Con­sumers liv­ing within a few kilo­me­ters of these out­lets could shop on­line with the added at­trac­tion of a de­liv­ery ser­vice.

In May, another new brand was launched by the com­pany. YH Life first popped up in the fi­nan­cial hub of Shang­hai with the store cov­er­ing the neigh­bour­ing one square kilo­me­ter.

Just like a small con­ve­nience shop, it sells mainly cig­a­rettes, ice-creams, semifin­ished food prod­ucts and fresh food. On­line ser­vices are also avail­able, in­clud­ing de­liv­ery. The move has proved a hit. Yonghui Su­per­stores re­ported that op­er­a­tional in­come in the first quar­ter reached 15.3 bil­lion yuan ($2.3 bil­lion), a jump of 13.8 per­cent com­pared to the same pe­riod in 2016.

It also ex­ceeded an­a­lysts’ ex­pec­ta­tions. “When the en­tire re­tail­ing in­dus­try is shrouded in gloom, Yonghui Su­per­stores has come up with a to­tally dif­fer­ent story,” said Wang Lit­ing, a se­nior an­a­lyst at Haitong Se­cu­ri­ties, in Shang­hai.

“Quite sim­ply, it has in­te­grated its sup­ply chain and cre­ated new busi­ness mod­els,” he added. “We ex­pect the com­pany’s an­nual in­come growth rate will re­main at around 20 per­cent in the next five years.”

Yonghui Su­per­stores has cer­tainly man­aged to buck the trend for “bricks-and­mor­tar” re­tail­ers.

Statis­tics re­leased by the China Com­merce As­so­ci­a­tion for Gen­eral Mer­chan­dise showed that 150 depart­ment stores have been closed be­tween 2012 and 2016, with 100 go­ing to the wall last year.

Soar­ing rents have been a huge prob­lem as they have nearly dou­bled in the past five years in first-tier cities, ac­cord­ing to WinShang Com­mer­cial Prop­erty In­tel­li­gence Cen­ter in Guangzhou.

Ris­ing la­bor costs have been another huge bur­den.

Fig­ures from the Pudong In­no­va­tion Re­search In­sti­tute i n Shang­hai showed that the av­er­age an­nual in­come in ma­jor cities, such as Bei­jing and Shang­hai, in­creased by 10 per­cent in 2016.

Lannes of Bain & Co, agreed that tra­di­tional re­tail­ers have strug­gled in the past five years, with sales con­tract­ing 10.4 per­cent i n some sec­tors as stores are forced to close down.

“Re­tail­ers have to bring to­gether on­line and off­line busi­nesses, lo­gis­tics and data to in­te­grate them onto a sin­gle value chain and re­design the re­tail in­dus­try,” he said.

The ul­ti­mate goal is to in­tro­duce the con­sumers, who come into the store, to our on­line plat­form.” Lin Chuangyan, a part­ner at Su­per Species of Yonghui

ZHENG SHUAI / FOR CHINA DAILY

Con­sumers are at­tracted by the fresh seafood and cook­ing ser­vice at BravoYH in Fuzhou, Fu­jian prov­ince.

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