The most sensational commercial event of this week, without a doubt, is the major investment and shareholding from Miniso (09896), a focus on interest consumption, in the traditional offline supermarket Yonghui Superstores.

According to the China Economic Weekly APP, on the evening of September 23rd, Miniso announced on the Hong Kong Stock Exchange that it would acquire 29.4% of Yonghui Superstores for 6.27 billion RMB, which includes 21.1% held by the dairy company and 8.3% held by JD.com. After this transaction is completed, Miniso will become the largest shareholder of Yonghui Superstores. This also means that Miniso will further expand and improve its offline retail layout, officially entering the trillion-dollar fresh retail track.

Upon this news, the retail industry, investment circle, and even the entire business community immediately ignited discussions focusing on why Miniso wants to be the 'white knight' for Yonghui Supermarkets. Can this bold investment help Miniso's founder Ye Guofu achieve his dream of creating the Chinese version of Sam's Club or Costco?

Perhaps these questions can all be answered from the very beginning of Miniso's birth 11 years ago. For this moment, Ye Guofu has waited a full 11 years.

From Guangzhou to Times Square, a story of growth.

First, let's briefly review the growth story of Miniso. In 2013, Miniso opened its first store in Huadu, Guangzhou. In over 10 years, Ye Guofu has developed Miniso into a 'super brand' with stores spanning over a hundred countries and enjoying global fame.

As of June 30, 2024, Miniso Group has exceeded 7,000 global stores, with 2,753 of them being overseas. In May 2023, Miniso became the first Chinese new consumer brand to settle in New York's Times Square. By the eve of the 2024 Paris Olympics, Miniso's largest flagship store globally landed on the Champs-Elysées in Paris. Miniso bravely ventures into top global business districts, becoming neighbors with big brands like LV, Chanel, Hermes, Dior, and Balenciaga.

Returning to Miniso's beginnings in 2013, at that time, platforms like Taobao and JD had deeply penetrated the internet e-commerce market, and mobile e-commerce was booming, while the domestic physical retail industry was struggling. However, Miniso was still able to break through the strong siege of internet e-commerce and create a business miracle of new retail.

Financial writer Dubochi once wrote the book 'Miniso Has No Secrets.' He evaluated Miniso on the cover as 'a dark horse in the economic winter, rising against the tide of closures.' In the ups and downs of offline retail over the years, this was almost the highest praise for offline physical retail, providing great encouragement for their forward progress.

Wu Xiaobo once analyzed the elements of Miniso's success from six dimensions: direct sourcing of goods, design management, rapid circulation, franchise with capital, global thinking, and fan operation. These six points may not be astounding innovations but strike at the core of the retail industry. With determined and efficient execution, Miniso has made a mark in the chilling 'retail winter'.

According to the Wise Finance App, a well-designed business model is only the surface of Miniso's long-standing foundation. Within it is an industrialist represented by Ye Guofu, who firmly believes in physical retail – they do not believe that physical retail will easily lose in the future.

According to the data from the National Bureau of Statistics, from January to August 2024, the total retail sales of consumer goods in the country reached approximately 31.25 trillion yuan, with online retail sales accounting for about 9.65 trillion yuan, or approximately 30.8%. Physical offline retail still plays a crucial role in the national economy, with abundant structural opportunities unfolding.

As a new generation entrepreneur who has battled on the retail battlefield, Ye Guofu, like entrepreneurs such as Cao Dewang, embraces the real economy and is bullish on the future of offline retail in China. This consistent entrepreneurial spirit has empowered Ye Guofu with great courage in investments, daring to break conventions, seizing opportunities that others may not understand, injecting new vitality into the market, and boosting industry confidence.

On the evening of announcing the acquisition of shares in Yonghui Superstores, Ye Guofu stated: 'I continue to be bullish on China, investing in China, as long as the retail industry continues to innovate there will always be great opportunities.'

This once again confirms that market innovation requires entrepreneurial leaders to lead the way. In this regard, Ye Guofu's entry into the commercial superstores is like Lei Jun entering the automotive industry, both requiring extraordinary courage. His commitment to offline retail and investments in China, similar to traditional entrepreneurs like Cao Dewang, is rare in contemporary China and embodies a high sense of social responsibility as an industrialist.

Lay out 'essential + discretionary consumption' and perfect offline retail layout.

Returning to the question raised at the beginning of this article, the reason Miniso dares to invest heavily in Yonghui Superstores is a firm belief in the development potential of offline retail in China. Ye Guofu stated in a telephone conference on the evening of September 23 that currently, China's offline supermarkets are facing a once-in-20-years structural opportunity.

Ye Guofu introduced that his memorable experience buying roasted sweet potatoes at Pinduoduo and subsequent visits to several modified Yonghui stores have strengthened his conviction in offline retail. He believes that it is not that offline retail is no longer viable, but that traditional retail and supermarket business models have issues. Now, a group of domestic supermarkets led by Yonghui has sparked a revolution, reshaping the landscape of China's offline supermarkets. Yonghui, which was personally nurtured by Pinduoduo, has tremendous potential to stand out in this transformation.

From the perspective of miniso's strategic layout, the current consumer market has two dimensions: optional consumption and essential consumption. This is the guiding direction for the group to carry out its own architecture construction and further strategic layout, with the decision-making foundation based on a profound understanding of the multidimensional changes in the consumer market and forward-looking arrangements.

Miniso focuses on interest consumption, layout in the global market, providing global consumers with emotionally valuable 'optional products'. This strategy allows miniso to take the advantage in the 'optional consumption' dimension, the brand carries an expression of the new era consumer lifestyle, accumulating tremendous growth potential amidst the global background of consumption upgrade.

Yonghui Superstores, with a focus on fresh retail, is based in the domestic market. Transforming 'Fat Tonglai' initiative into an opportunity to create the Chinese version of Sam's Club, offering distinctive 'essential products' to the general public. With its strong resistance to risks and stability, it provides the group with the ability to traverse cycles, with examples like Costco, Sam's Club, Kroger and other American supermarket giants representing this resilience.

This innovative combination has created a new landscape for the Chinese retail industry by integrating 'essential + optional consumption', covering both the 'China + global markets'. As a result, miniso's offline layout becomes more complete, serving as a strong support in addressing uncertainties, navigating economic cycles, and resisting business risks.

From a market perspective, such organic integration can help companies balance risks in uncertain market environments and achieve a 'two-legged' approach. From a long-term strategic standpoint, the combination of essential and optional consumption brings dual enhancements of market breadth and depth to miniso, enhancing the brand's international visibility and influence, further solidifying the domestic market base, providing a solid insurance against market fluctuations, and driving the transformation and upgrade of the Chinese retail industry.

An important opportunity to create a retail giant in China

To explore the effectiveness of this synergistic effect, we need to focus on the three companies that have been repeatedly mentioned: miniso, Yonghui Superstores, and Fat Tonglai. Whether they can form a good 'chemical reaction' between them depends first on the superiority of the 'Tonglai Model', and second on the replicability of the 'Tonglai Model'.

From a results-oriented perspective, Pinduoduo, as a "phenomenal" supermarket that brings consumers back offline, the superiority of its business model is self-evident.

In the view of Ye Guofu, "Pinduoduo model is the only way out for Chinese supermarkets." The Pinduoduo model is similar to Costco and Sam's Club, focusing on products but placing more emphasis on customer experience and employee respect. Employee salaries are above the industry average, and good benefits and holidays are provided. Pinduoduo emphasizes small-packaged products, which better align with Chinese household consumption habits.

In addition, Pinduoduo is also very attentive to service details, such as actively replacing problematic goods for customers. The decline of traditional offline supermarkets is partly due to competition from e-commerce, but more importantly, it is due to their own issues. In the past, many supermarkets adopted a landlord mode, only focusing on collecting shelf fees, barcode fees, etc., while neglecting research on products and consumer needs, leading to a gradual disconnect from real consumer demands.

The success of Pinduoduo is no secret, just repeating the right things, doing them carefully, and truly putting people first. Emphasizing consumer experience is the biggest "common denominator" of physical retail, containing huge structural opportunities and is the fundamental reason why the "Donglai model" can be widely replicated.

According to the Securities Times APP, Yonghui Superstores has achieved significant success through the "Donglai model transformation." For example, after transformation, the Xinyuan Plaza store in Zhengzhou achieved a first-day turnover of 18.8 million yuan, 14 times higher than before the adjustment; the turnover of the Fuzhou store exceeded 11 million yuan, 6 times higher than before the adjustment; the daily sales of the Xi'an store reached 16 million yuan. These data indicate that Yonghui's reform model has the potential for national replication. It is believed that with the support of Pinduoduo, Yonghui Superstores will definitely be successful in transformation, further fulfilling customers' aspirations for a better life.

The strategic synergy between Miniso and Yonghui Superstores mainly focuses on channel upgrades and supply chain. The management of Miniso stated in a conference call that the company plans to leverage Yonghui's good positions nationwide to upgrade its channels and increase coverage in commercial properties. In addition, Yonghui's expansion will help Miniso obtain prime locations in more commercial properties, thereby enhancing brand influence and performance.

Furthermore, Miniso plans to assist Yonghui in the innovation and development of proprietary products, leveraging its own experience to help Yonghui enhance product differentiation and gross margin. Miniso has rich experience and resources in this area, including over 1400 high-quality suppliers and over 1000 product developers. The management of Miniso believes that through collaboration, Yonghui's proprietary brands and overall gross margin can be significantly improved.

In the view of Zhitong Finance APP, the acquisition of Yonghui Superstores by Miniso has further strengthened Ye Guofu's retail territory, providing Miniso with an important opportunity to transform into a retail giant.

Any transformation requires time to complete, and the ultimate results need to be tested over time. It took Ye Guofu 11 years from founding Miniso to leading it towards the world. In the next 11 years, can the Chinese retail market, under Ye Guofu's guidance, welcome its own Sam's Club, Costco? From Ye Guofu's determination, we also see confidence.