Redsuning

1KeyhighlightsOn9May2019,theChinaChainStoreandFranchiseAssociation(CCFA)releaseditsannuallistof"theTop100RetailChainOperatorsinChina"(theTop100s).
TotalsalesoftheTop100sin2018were2.
4trillionyuan,up7.
7%year-on-year(yoy),accountingfor6.
3%ofthetotalretailsalesofconsumergoods.
Suning.
comGroupCo.
,Ltd.
,GomeRetailHoldingsLtd.
andChinaResourcesVanguardCo.
,Ltd.
remainedthetopthreeretailchainoperatorsbyretailsales,withnochangeintherankingsoverthepreviousyear.
Byretailformat,conveniencestoresrecordedthehighestyoysalesgrowthof21.
1%yoyin2018.
Top100scontinuedtoseerobustonlinesalesgrowthof55.
5%yoy.
AsiaDistributionandRetailMay2019Top100retailchainoperatorsinChina,2018-KeyfindingsandtakeawaysChinaRetail2Exhibit1:TheTop100s'shareinnationalretailsales,2008-2018Source:ChinaChainStoreandFranchiseAssociation,compiledbyFungBusinessIntelligenceMajorfindingsGrowthpaceoftheTop100sremainssteadyin2018TotalsalesoftheTop100sin2018amountedto2.
4trillionyuan,up7.
7%yoy.
Thegrowthratewasslightlyslowerthanthatof8.
0%yoyin2017,andalsoslowerthanforthenationaltotalretailsalesofconsumergoodsof9.
0%yoy.
TotalnumberofstoresoftheTop100sreachedaround138,000,up16.
0%yoy.
Thegrowthofnumberofstoreswas9.
1%yoyaftertakingouttheeffectoftherapidincreaseinthenumberofconveniencestores(includingSuningXiaodian),similartothegrowthratein2017.
AsshowninExhibit1,theTop100smadeuponly6.
3%ofthetotalretailsalesofconsumergoods,downfrom11.
1%in2008,indicatingtheincreasinglyfragmentednatureofChina'sretailmarket.
Exhibit2showstheTop10retailchainoperatorsbyretailsalesin2018.
Suning.
comGroupCo.
,Ltd.
rankedthetopwithtotalsalesof336.
8billionyuan,followedbyGomeRetailHoldingsLtd.
andChinaResourcesVanguardCo.
,Ltd.
Therankingsforthetop5enterprisesarethesameasthepreviousyear.
AveragegrossprofitmarginoftheTop100swas18.
3%in2018,upfrom17.
9%in2017.
3Source:ChinaChainStoreandFranchiseAssociation,compiledbyFungBusinessIntelligence#SalesofChinaResourcesVanguardCo.
Ltd.
includedsalesofSuguoSupermarket.
Thepre-taxsalesforSuguoSupermarketwere27,550millionyuanin2018.
*EstimatesRankin2018Rankin2017EnterpriseSales,pre-tax(millionyuan)yoygrowth(%)Numberofstoresyoygrowth(%)11Suning.
comGroupCo.
,Ltd.
336,75738.
4%11,064183.
3%22GomeRetailHoldingsLtd.
138,184-10.
1%2,12232.
3%33ChinaResourcesVanguardCo.
,Ltd.
#101,254-2.
3%3,1920.
9%44SunArtRetailGroupLtd.
95,9000.
5%4076.
3%55Walmart(China)InvestmentCo.
,Ltd.
80,490*0.
3%4410.
0%66YonghuiSuperstoresCo.
,Ltd.
76,768*17.
4%1,27558.
2%7N/ABeijingEasyhomeNewRetailDevelopmentCo.
,Ltd.
71,00013.
1%30335.
9%87ChongqingGeneralTrading(Group)Co.
,Ltd.
67,48913.
3%413-2.
4%99SinopecGroup62,00019.
0%27,2595.
8%108LianhuaSupermarketHoldingsCo.
,Ltd.
49,229-2.
9%3,371-1.
5%Exhibit2:Top10chainretailers,2018(Rankedbyretailsales)422enterprisesoutoftheTop100srecordednegativesalesgrowthin2018,comparedwith21enterprisesin2017.
30enterprisesrecordednegativesalesgrowthand/orgrowthofnumberofstores,only18enterprisesrecordeddouble-digitgrowthinbothsalesandnumberofstores(Exhibit3).
Source:ChinaChainStoreandFranchiseAssociation,compiledbyFungBusinessIntelligenceRankin2018EnterpriseSalesgrowthNumberofstoresgrowthMajorretailformats1Suning.
comGroupCo.
,Ltd.
38.
4%183.
3%Homeelectronics,conveniencestores,B2Conlinewebsite6YonghuiSuperstoresCo.
,Ltd.
17.
4%58.
2%Supermarket7BeijingEasyhomeNewRetailDevelopmentCo.
,Ltd.
13.
1%35.
9%Homedecorationandfurniturestore20IntimeRetail(Group)Co.
,Ltd.
30.
5%23.
5%Departmentstore26RedStarMacallineGroupCorporationLtd.
23.
8%22.
6%Homedecorationandfurniturestore30A.
S.
WatsonGroup(China)10.
3%10.
3%Healthandbeautystore39MeiyijiaConvenienceStoreCo.
,Ltd.
37.
3%33.
5%Conveniencestore47FreshippoSupermarket300.
0%396.
7%Supermarket54XinyulouDepartmentStoreGroupCo.
,Ltd.
17.
3%13.
8%Departmentstore58KidswantChildrenProductsCo.
,Ltd.
47.
2%25.
6%Childrenswear59DashenlinPharmaceuticalGroupCo.
,Ltd.
18.
3%23.
3%Pharmacy60FamilyMartChina18.
3%17.
9%Conveniencestore62ShenzhenPagodaIndustrialDevelopmentCo.
,Ltd.
33.
1%32.
2%Fruitstore79Seven-ElevenChina25.
3%12.
0%Conveniencestore85DazhangGroup36.
8%16.
7%Shoppingmall,supermarket94Lawson(China)Holdings,Inc.
38.
0%41.
0%Conveniencestore95XinjiangWinkaTimesDepartmentStoreCo.
,Ltd.
19.
7%144.
4%Departmentstore99YunnanJianzhijiaHealth-ChainCo.
,Ltd.
17.
9%16.
3%PharmacyExhibit3:Enterprisesrecordeddouble-digitgrowthinbothsalesandnumberofstores,20185Conveniencestorescontinuetowitnessthefastestsalesgrowth;departmentstoresandhypermarketsseelowsingle-digitgrowthConveniencestorescontinuedtogaintraction.
Amongallretailformats,in2018,conveniencestoresrecordedthehighestsalesgrowthat21.
1%yoy,upfrom16.
9%yoyin2017,whilethegrowthrateforstorenumberswas18.
0%yoy,similarto18.
1%yoyin2017.
Onthecontrary,departmentstoresrecordedsalesgrowthof3.
5%yoy,whilehypermarketsandsupermarketrecordedsalesgrowthof2.
5%yoyonly(Exhibit4),muchlowerthantheaverageoftheTop100s.
Source:ChinaChainStoreandFranchiseAssociation,compiledbyFungBusinessIntelligenceRetailformatyoygrowthofsales(%)yoygrowthofnumberofstores(%)Conveniencestores21.
118.
0Departmentstores3.
53.
9Hypermarketsandsupermarkets2.
53.
6Exhibit4:YoygrowthofsalesandnumberofstoresoftheTop100s,byretailformat,2018Conveniencestores62.
5%ofthenewstoreopeningsofTop100swereconveniencestores.
MeiyijiaConvenienceStore(Rank#39,upfrom#54in2017)continuedtobethemarketleaderintheconveniencestoresegment(excludeforecourtconveniencestoreplayers),withsalesrevenueamountingto16,809millionyuanin2018,up37.
3%yoyandstorenumbersreaching15,559,up33.
5%yoy.
Exhibit5showsthetopconveniencestoreoperatorsamongtheTop100sbynumberofstores.
Mostoftheseconveniencestoreoperatorsareregionalplayers,andmostofthemoperatesingleformat,i.
e.
conveniencestore.
6Rankin2018EnterpriseConveniencestorebrandNo.
ofstores1SinopecGroup#EasyJoy27,2592PetroChinaCo.
,Ltd.
#uSmile19,7003DongguanSugar&LiquorGroupMeiyijiaConvenienceStoreCo.
,Ltd.
Meiyijia15,5594SuningXiaodianSuningXiaodian4,5085GuangdongTianfuChainBusinessCo.
,Ltd.
Tianfu4,2126ChengduHongqiChainstoreCo.
,Ltd.
Hongqi2,8177FamilyMartChinaFamilyMart2,5718C&UGroupShizu;Zhishang2,1419Lawson(China)Holdings,Inc.
*Lawson1,97310Seven-ElevenChina7-Eleven1,882Exhibit5:Top10conveniencestoreoperatorsamongtheTop100s,2018(Rankedbynumberofstores)Source:ChinaChainStoreandFranchiseAssociation,compiledbyFungBusinessIntelligence#Forecourtconveniencestoreplayers*NumberofstoresofLawsonincludestorescooperativelyopenedwithregionalplayerssuchasZhongbaiandChaoshifa.
DepartmentstoresSalesperformanceofdepartmentstoresvariedin2018.
Ontheonehand,amongtheTop100swithnegativesalesgrowthand/orgrowthofnumberofstores,halfofthemweredepartmentstoreoperators.
Ontheotherhand,somedepartmentstoreoperatorsrecordedstunningresultsin2018.
RegionalplayerXinyulouDepartmentStore(Rank#54),forexample,achievedsalesgrowthof17.
3%yoyandnumberofstoresgrowthof13.
8%yoyin2018.
Itadoptsaself-operatedmodelwithhighproportionofdirectsales,whichsetsanexampleforotherdepartmentstoreplayers.
Meanwhile,IntimeRetail(Rank#20)recordedstunningsalesgrowthof30.
5%yoy,whilegrowthinnumberofstoreswas23.
5%yoy.
SinceitsprivatizationbyAlibabainearly2017,IntimeRetailhasbeentransformedgreatlybyAlibabaasatestinggroundtoexploreomnichannelstrategieswithAlibaba.
Hypermarkets/supermarketsOperatingcostsforhypermarkets/supermarketscontinuedtorisein2018.
Laborcostswentupby13%yoyandrentalcostsincreasedby10.
6%yoy.
Foreignhypermarkets/supermarketsshowedsoundperformancein2018,withprofitmarginreaching23.
2%,higherthanthesector'saverageof21.
5%.
7Top100switnessrobustonlinesalesgrowth;foreignplayersactivelyexpandomnichannelbusinessAdoptingomnichannelstrategyisoneofthemajorinitiativesoftheTop100s.
OnlinesalesgrowthoftheTop100sincreasedby55.
5%yoy,lowerthan78.
9%yoyin2017butstillmuchhigherthanthenationalonlineretailsalesgrowthof23.
9%yoy.
Ofwhich,onlinesalesgrowthoftheforeignplayersamongtheTop100swas61.
4%yoy,5.
9pptshigherthantheaverageoftheTop100s.
Foreignplayersactivelyexpandedtheiromnichannelbusinessin2018–Carrefour(Rank#12)partneredwithTencenttoexpandonlinebusiness;Walmart(Rank#5)partneredwithJDDaojiatoprovideO2Odeliveryservice;Aeon(Rank#43)andItoYokado(Rank#83)launchedtheirownB2Cwebsites;Ikea(Rank#36)launcheditsWeChatMiniProgram,etc.
RegionalleadersseeslowergrowthRegionalplayersamongtheTop100susuallyoperatemultipleretailformatstoachieveahighermarketshareintheregionalmarket.
Amongtheseregionalplayers,thosebasedinprovincialcapitalsorintier1andtier2citiesrecordedsalesgrowthof4.
2%yoyandnumberofstoresgrowthof5.
5%yoy;whileenterpriseslocatedinprefecture-levelcitiesandcounty-levelcitiesrecordedsalesgrowthof4.
9%yoyandnumberofstoresgrowthof-0.
7%yoy.
BothsalesandnumberofstoregrowthwereslowerthanthatoftheaveragegrowthoftheTop100s.
Facingintensecompetitionfromforeignrivalsandnationalenterprises,togetherwiththerapidgrowthofe-commerceplayers,regionalenterprisesneedtoinnovateandtransformtoretaintheircompetitiveness.
OurviewsIn2018,theperformanceofleadingretailersimprovedconsiderably,butchallengesremained.
Indeed,thegrowthoftheretailsectorwasmainlyattributedtofavorablepoliciesbythegovernmenttoincreasedomesticconsumption,aswellasthecapitalinjectionsfrominvestors.
Operationefficienciesandprofitmarginsofsomeretailersremainedlow.
Moreover,someretailerstappedintootherretailformatstoextendcustomerreach,butmanywerestillexploringthenewbusinessesandprofitabilitywasunclear.
FungBusinessIntelligencebelievesin2019,transformationandmergerandacquisitionactivitieswillcontinuetotakeplaceintheretailsector.
Tobettersuitthechangingneedsofconsumers,goingforward,weexpecttheTop100stocontinuetoadoptformatinnovationandstoreoptimizationstrategiestoseeknewbreakthroughsandimproveefficiencies.
Meanwhile,weakerplayersthatcannotadjusttothechangingmarketconditionsaresettofacebiggerchallenges,orwillbeacquiredbystrongercounterparts.
2018wasayearofchangeandchallengeforbusinesses.
TheescalatingChina-U.
S.
tradewarhasandwillcontinuetonegativelyimpactbotheconomies,particularlytheChineseeconomyinviewofitsmassivetradesurpluswiththeU.
S.
China'sretailsectorisexpectedtobeimpactedbythetradewarwithdampenedconsumersentimentandsofteningretailsalesgrowth.
Meanwhile,inthe"NewConsumption"era,theretailsectorisundergoingrapidtransformationandprofoundchanges.
RetailersneedtorampupeffortstotransformandreinventtheirbusinessestocatertothenewneedsofChineseconsumers.
ReferencesPleaseclickhereforthefullreportbyCCFA(inChinese).
ContactsAsiaDistributionandRetailTeresaLamVicePresidentE:teresalam@fung1937.
comChristyLiSeniorResearchManagerEmail:christyli@fung1937.
comFungBusinessIntelligence10/FLiFungTower888CheungShaWanRoadKowloon,HongKongT:(852)23002470F:(852)26351598E:fbicgroup@fung1937.
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