1. Lianhua Supermarket has frequently carried out actions such as capital injection, divestment, and upgrades this year. A reporter from Cailianshe recently visited the Century Lianhua Central Environmental Store, which completed the adjustment not long ago. 2. It is reported that from September 26th to October 7th after the adjustment, the retail sales of Century Lianhua Central Environmental Store increased by 55.83% year-on-year, and the customer traffic increased by 36.43%.
On October 26th, Cailianshe News (Reporter Liu Yue): In the midst of dramatic changes in the traditional retail market, supermarkets are hot on the trend of radical transformations. Lianhua Supermarket (00980.HK) has been actively involved in capital injection, divestment, and upgrades this year. What are the results of Lianhua Supermarket's transformation journey? Facing the industry situation, what role will traditional supermarkets play in the future retail market?
A reporter from Cailianshe recently visited the Century Lianhua Central Environmental Store, which had just completed the adjustment not long ago. The store shelves 60% new products to reshape the shopping experience to attract young customers. Perhaps the upgrading of this store can reveal Lianhua's solution in its transformation.
Exploring the Century Lianhua Central Environmental Store in Shanghai
After undergoing a 90-day 'radical transformation,' the Century Lianhua Central Environmental Store reopened on September 26th, offering smart shopping carts with intelligent navigation, online payment, and personalized recommendations.
Upon entering the store, the layout of the Central Environmental Store has been completely revamped. It is understood that the store has introduced 60% new products, including Chongming series vegetables, Nonghua pastoral series, organic vegetables, and other local specialty products. Lianhua's own brand series such as '优品生活', '优飨', and '一番良品' are prominently displayed.
Regarding special products, the national specialty sauce that caused a sales boom on Huaihai Road in July this year has also been introduced to the Central Environmental Store. In the 'National Specialty Sauce' section, there are dozens of varieties of sauces to choose from. According to counter staff, there are over thirty types of sauces available, with four to five options for soy cucumber alone.
In terms of product display, the store has added product introduction plaques and arranged various tasting activities. In terms of customer service, Lianhua's '八百里牛' beef products offer free on-the-spot frying service. The store has set up a customer rest area with tableware, washbasins, power outlets, and even provides free chargers for customer use.
In terms of fresh products, the popular commodity durian priced at 19.9 yuan/jin continues to be attractive, with increased consumer frequency of purchase for on-site baking, cooked food, and other categories. Lianhua has introduced the high-end beef brand 'Ba Ba Li Niu,' which reportedly has boosted the sales volume of the entire beef category by 3 to 5 times. Overall, after the upgrade, Lianhua's fresh business at the Zhonghuan store has seen a year-on-year retail increase of 48.89%, currently accounting for about 48.33%.
In terms of operating area, the original large-scale stores with an area of 8000-10000 square meters have been reduced to around 3000 square meters. At the same time, the number of products has become more focused, shifting from a range of 10,000-20,000 products to predominantly over 8000 products.
Although the number of products has decreased, the variety of products has increased. Following adjustments, Lianhua has achieved a more comprehensive range of categories, not only filling in cooked food and baking categories but also continuously strengthening its layout for vegetables, fruits, and meat and eggs favored by young consumer groups. In response to the trend of upgrading consumption in the surrounding area, Lianhua has increased mid- to high-end products. Taking apple as an example, in addition to the previously best-selling, cheapest Fuji apples sold for as low as 3.99 yuan, they have also introduced imported apples, apples from niche origins, and other differentiated, multi-category mid- to high-end quality apples. It is understood that post-adjustment, the sales volume of mid- to high-end quality apples has increased from the original 1%-2% to now over 20%. Moreover, due to the higher unit price and profit margin of imported apples, the post-adjustment contribution to Lianhua's overall sales and profits is also greater.
Introducing investment + divestment with the support of Bailian Group to aid in transformation during the adjustment.
Lianhua Supermarket focuses on the Yangtze River Delta region and was established in May 1991. However, the Shanghai supermarket market is now witnessing fierce competition between new and old business formats and players.
Looking at the current situation post-adjustment, taking the Zhonghuan store of Lianhua as an example, from the opening on September 26 to October 7 after the adjustment, Century Lianhua Zhonghuan store saw a 55.83% year-on-year increase in retail sales and a 36.43% year-on-year increase in foot traffic.
In recent years, traditional retail superstores have generally faced performance challenges. It is reported that Bailian Group has preliminarily established a new industrial structure with commercial retail as the core, supported by commercial finance, commercial assets, and commercial investment. As a key enterprise in the commercial retail sector of Bailian Group, Lianhua has an undeniable impact on the growth of Bailian Group.
Lianhua Supermarket announced on the evening of September 27 that in order to focus on the development of key advantageous regions and formats, the company has signed an equity transfer agreement with a subsidiary of Bailian Group. This is another important capital move following the announcement on May 12, when the major shareholder Bailian Group premiumized and increased capital by RMB 0.36 billion.
From the perspective of performance, the capital injection of Bailian Group and the divestiture of part of Lianhua's business to focus on key areas and concentrate on core formats is undoubtedly a "tonic". Whether Lianhua can leverage the current popular "explosive transformation" trend to achieve a fresh start remains an unknown, but the company's intention for business transformation has been made clear. Lianhua stated that the raised funds are intended for business transformation and increasing the company's general operating capital. The transfer and sale of equity of some regional subsidiaries are based on the company's focus on key advantageous regions and formats, enhancing the company's advantages and market share in key areas such as Shanghai, Zhejiang, and more. Industry insiders indicate that the core of Lianhua's adjustment lies in the changes on the commodity and procurement fronts, starting with new attempts in purchasing categories and procurement models.
