"Losses of 6.77B in 2 Years, Debt Ratio Hits 86.54%"

Once the "big brother" of local supermarkets, Yonghui Supermarket, has begun a massive clearance sale.

Recently, Yonghui Supermarket announced the sale of assets, stating that Sichuan Business Investment Co., Ltd. plans to purchase 136 million shares of Hongqi Chain held by Yonghui Supermarket in cash, with a total transfer price of approximately 799 million yuan.

Not long ago, Yonghui Supermarket just sold its 1.43% shares in Wanda Commercial Management to Dalian Yujin Trade Co., Ltd. for 4.53 billion yuan.

At one time, Yonghui Supermarket was regarded as the "pride of Chinese retail." At its peak, it was second only to Walmart and Home Depot, firmly establishing itself as the "big brother" of local Chinese supermarkets.

Advertisement

However, since the end of 2017, this retail giant has experienced continuous losses. Particularly in the last three years, in 2021, Yonghui Supermarket suffered a loss of 3.944 billion yuan, and in 2022, it lost another 2.763 billion yuan. Over two years, it lost 6.7 billion yuan, essentially erasing the gains of the previous four years.

Moreover, over the past three years, Yonghui Supermarket's debt-to-asset ratio has remained high. At the end of 2021, 2022, and the first three quarters of 2023, its debt-to-asset ratios were as high as 84.47%, 87.68%, and 86.54%, respectively.

As of September 30, Yonghui Supermarket's liabilities have reached as high as 47.24 billion yuan.

Now, Yonghui, which has entered a "massive clearance sale" mode, is fully contracting and reserving cash to weather its low point.

However, with external and internal troubles, can Yonghui Supermarket still break through the predicament?

"The First Stock of Supermarket Fresh Produce"In 1995, Zhang Xuansong, a young man from Fujian who did not finish high school, opened the predecessor of Yonghui Supermarket, "Gule Weili Supermarket," and became a small supermarket owner.

At the beginning, Yonghui Supermarket was not much different from its peers. Even though it was located at Fuzhou Railway Station, it still couldn't compete with big brands like Metro and Walmart, and business progress was slow.

However, Zhang Xuansong's outstanding feature was that he found the handle of fresh food and recognized a path: to fully transform towards fresh food.

At that time, the fresh food area in ordinary supermarkets only accounted for 20% of the total area, and what was sold was mostly frozen meat and root vegetables. The reason was also very simple: the preservation time was long, the turnover pressure was small, and compared with fresh meat and leafy vegetables, the loss was smaller and the cost was lower.

However, Zhang Xuansong's Yonghui Supermarket went against the trend, increasing the fresh food area to 70% of the total area, and mainly selling fresh meat and leafy vegetables. Even to grab the business of the morning market, Yonghui Supermarket also advanced the opening time to 6:30.

By 2001, Yonghui Supermarket, with its unique fresh food model, had already achieved a small scale. It coincided with the country's promotion of the "Agricultural Reform Supermarket" project and officially embarked on the high-speed development road.

Three years later, Yonghui Supermarket had opened 50 stores. By 2010, Yonghui Supermarket had already listed on the Shanghai Stock Exchange, with revenue breaking 10 billion yuan, and was known as the "first stock of fresh food in supermarkets."

Although the crisis in the offline retail industry began to brew at this time, and the e-commerce industry was booming, Yonghui Supermarket still went against the trend and continued to soar after getting the support of the capital market. In 2015, the revenue had already broken through 42 billion yuan, and in 2018, the number of stores reached 1275, and the market value also broke through the 100 billion yuan threshold.

However, even though Yonghui Supermarket has become the top supermarket in the local area, it still cannot avoid the dimensional attack of internet players and its situation is becoming more and more difficult.No matter how successful Yonghui Supermarket becomes, it is essentially still an offline retail model with low gross margins and high cost rates. The transition from offline to online is a challenge it faces. In particular, the impact of e-commerce on offline businesses has been overwhelming for Yonghui.

In 2016, the first Hema Xiansheng store was established, and it quickly spread across the country like a wildfire. Fearing its position was threatened, Yonghui Supermarket followed suit and launched the "Super Species" in 2017. According to Yonghui's vision, the "Super Species" was intended to combine "catering + supermarket + digital retail." However, it not only failed to leverage its comprehensive strengths but also failed to successfully establish its brand, resulting in failure within just two years.

By 2018, Yonghui Supermarket began to develop "mini stores," investing heavily in this venture, opening nearly 600 stores in 2019 alone. Despite this, it still did not achieve good results. According to media statistics, from October 2020 to March 2021, Yonghui Supermarket closed a total of 336 mini stores, marking another failure.

The key point here is that Yonghui Supermarket's aggressive expansion and experimentation with new business formats require substantial financial investment. In essence, the more money spent, the greater the losses incurred. This led to a loss of 6.7 billion in just two years, 2021 and 2022, plunging Yonghui Supermarket into a cold winter period.

Moreover, this is not the end of the story. In addition to external challenges, Yonghui Supermarket is also facing significant internal turmoil. In August 2021, Yonghui Supermarket's CEO, Li Guo, resigned and was succeeded by Li Songfeng, a senior director from JD.com. Other high-level executives within the company have also been changing frequently, like a revolving door, with one batch after another being replaced.Facing external challenges and internal difficulties, how to survive the harsh winter and turn the tide has become the top priority for Yonghui Supermarket.

The Way Out for Yonghui Supermarket

After repeated failures in trying new business formats, Yonghui Supermarket is now focusing on discount stores.

The person in charge of Yonghui Supermarket said that discount stores are a major trend in the retail industry under the current market environment, with various advantages such as accelerating the efficiency of product replacement and enriching the variety of products.

Moreover, unlike other discount stores, Yonghui Supermarket is not going to "start from scratch" and open stores independently this time, but to set up a discount store area within Yonghui Supermarket, integrating this model into the existing system.

In addition, in the selection of discounted products, Yonghui Supermarket plans to choose some internal products to enter the discounted product pool, and sell them at 30%, 50%, and 70% discounts according to specific situations, which is also different from other discount stores.

In fact, facing a new business model like discount stores, peers such as Wumart, Hema, and Jiajia Yue are also laying out, and Yonghui Supermarket seems to be late, which seems to follow the trend.

But at the same time, this new way of playing with discount stores will have higher requirements for the supply chain management, inventory management, and operational capabilities of supermarkets, and these are exactly the advantages of Yonghui Supermarket, after all, it started with fresh food.

It's just that the world is changeable, and whether Yonghui Supermarket can get out of the predicament and make a beautiful comeback, it's too early to draw a conclusion now.

Written at the end:In August of this year, there were rumors that Yonghui Supermarket was so short of money that it was going to "sell out" to JD.com.

However, judging from the frequent "fire sales" of Yonghui Supermarket now, it seems that there are no such plans in the short term. The once-dominant local supermarket is still striving to overcome difficulties.