Sunning shop loses nearly 300 million a year and is stripped off by convenience stores.
Gu Ying, October 15, Suning Easy Purchase Group Co., Ltd. (hereinafter referred to as "Suning Easy Purchase", 002024.SZ) announced that the group's Suning Shop has been increased by $300 million, and has been stripped out of Suning, from a wholly owned subsidiary into a shareholding company. According to the announcement issued by Suning Easy Buy, Suning Shop lost nearly 300 million yuan between July 2017 and 2018.
"Sunning's current loss is a purposeful and predictable loss." Wan de Qian, a new retail senior practitioner, told the China business newspaper. It is understood that the current Suning small store to adopt the direct mode and Jingdong, Ali's alliance model compared to higher costs. Some experts said that the ultimate profitability of Suning shop depends on how much profit each terminal can produce.
At present, Suning shop has no profitable stores in Shanghai. Wang Ming, former salesperson of Shanghai sunning small shop (a pseudonym), told reporters. With the increasing rents and labor costs, the operating costs of convenience stores are rising rapidly, and convenience stores are showing a slight profit. It is not easy to run a good convenience store. In response to the case of Suning store being stripped, "China Business Newspaper" reporters to Suning Yi to buy and distribute an interview letter, as of the time the manuscript was not responded.
Preemption of quality stores
On October 15, Suning Easy Purchase announced that Suning Shop, a subsidiary of the group, had received a capital increase of $300 million and had been divested from Suning to become a shareholding company. According to the announcement, Suning Easy has since held 35% of Suning Shop through Suning International, while Great Matrix and Great Momentum together hold 65% of Suning Shop. According to the announcement issued by suning.com, Suning small store has a revenue of 7 million 710 thousand yuan in 2017 and a loss of 14 million 930 thousand yuan. In the first 7 months of 2018, the revenue was 143 million yuan, a loss of 296 million yuan, and the debt reached 653 million yuan.
As for the reasons for the loss, Suning explained that since this year, Suning Shop has accelerated the pace of opening stores, stores operating period is short, in the cultivation period. At the same time, more early-stage investment has been made in store standards, organizational personnel, store development and reserve, operation and promotion, as well as commodity supply chain construction, which periodically brings about operating losses of Suning Shop Company.
"Suning's current losses are purposeful and predictable losses." Mr. Wan said Suning's small stores are different from traditional convenience stores (such as good neighbors, today, every day, neighbors, full-time, etc.) and Internet convenience stores. For today's Suning, would rather lose money to seize the best quality of the store, the market may be many such shops, but for the community, quality shops are rare.
In fact, Suning group's expectation for Suning small store is not just "convenience store". In July 2018, the president of Suning Shop Company, Bao Junwei, announced in an open event that the store will soon be connected to the latest second-hand rooms, lottery tickets, helpers and other self-service business, Suning Finance, Suning Wenchuang, Suning Sports and other industries will be reflected in the business of the shop. Members can not only buy fresh vegetables, cut fruits, lunch orders in the shop, but also buy a lottery ticket to see the room.
After the new retail war spread to the offline, community convenience stores became the last battleground for the giants. It is understood that unlike Jingdong and Ali's affiliate mode, Suning stores are all proprietary mode. "China Business News" reporter searched the map of Baidu "Suning Shop" results show that there are 770 stores in Suning. Among them, 236 in Beijing, 174 in Nanjing, 142 in Tianjin, 107 in Shanghai, 74 in Taiyuan and 67 in Chengdu. "Equity transfers will only grow faster. According to leaks, it is expected that by the end of November, the number of small shops in Suning will increase to 2000, and is interested in acquiring related targets. Bao Junwei, President of Suning small shop.
Suning hopes that through the direct convenience store model, to establish and customer online, offline connection entrance, so as to obtain the value of terminal traffic. In this regard, Suning faces great risks. Hu Chuncai, a retail management expert, told reporters that the cost of running a direct store is actually very high. The traffic value of the convenience store terminal takes a long time to emerge. The ultimate profitability of Suning convenience store depends on how much profit value each terminal can produce and how much Suning Group spends on each store. The difference between the two is negative or positive.
"Suning small shop in the structure of goods, categories and fresh frozen logistics and packaging are not too much experience accumulation, convenience stores need to centralized configuration, if the distribution radius is too long, then the cost of distribution will be too high. Sunning development convenience store is a development of open type and big regulation mode. This makes it necessary to have logistics system construction and decentralized store operation support in each region, and these need high operating costs, but also need to achieve efficiency saturation. Lai Yang, director of Beijing Jing Shang Circulation Strategy Research Institute, said.
"In the future, the ultimate survival of the convenience store must have both the traditional convenience store supply chain and commodity management core capabilities, but also with the Internet operation capabilities." Wen Zhihong, a chain management expert with the China Federation of Commerce, said, "Traditional convenience stores, including today's Japanese convenience stores, still can't keep up with the pace of online and offline financing and intelligence, which will mean that they are not grounded in the air. For example, Jingdong and Tianmao convenience stores, because they are operating on-line, it is difficult to ground the electricity at once.
High expansion costs
The main reason for sunning's loss is the poor ability of single store operation. For example, according to the rental level, staff salary and other general level, a shop turnover needs to achieve 78,000 yuan to be profitable. But in a hurry to open a store, the average turnover may be only four or five thousand yuan, the average daily loss of two or three thousand yuan per store. In the case of poor capacity of single store but rapid opening of stores, the loss situation is also particularly prominent. Hu Chuncai said.
"As far as I know, there is no profitable shop in Suning store in Shanghai. The daily turnover of the top five stores in Shanghai area fluctuates around 5,000 yuan. The general turnover of the stores ranges from 1,500 to 2,000 yuan, and the bottom stores are below 1,000 yuan. I have worked in the top five stores in Shanghai, Pudong New Area first, but the store is still in a loss state. Wang Ming, former salesperson of Shanghai sunning small shop (a pseudonym) said.
According to the China Convenience Store Report 2018 issued by the China Chain Management Association, the operating costs of convenience stores are rising rapidly, mainly due to the increasing real estate rent and labor costs. According to Mr. Li, Merchants Manager of Rulin Convenience Store, a medium-sized convenience store in Beijing can rent about 30,000 yuan a month, which needs about 400,000 yuan a year. Opening a 100-square-meter shop in Beijing requires 600-800 yuan per square-meter of goods, a total of 60,000-80,000 yuan; operating a small shop requires about 65,000 yuan of equipment; according to the market price, the decoration price is 700-800 yuan per square-meter, the total price is 70,000-80,000 yuan. In terms of staff salary, the general store is 16 hours, two shifts, need four people, including shop manager 5000 yuan, staff 3600 yuan. As a whole, opening a store in Beijing requires at least 600 thousand yuan of start-up funds.
Mr. Li said that this kind of store return this week short, it will take 10 to 15 months, long, to reach about two and a half years. Convenience store business is actually retail, which can be understood as small profits but quick turnover. Hot food and fresh food collocation can greatly improve profit margins, because the restaurant involved are relatively high profits. "Sunning is not very good at this hot meal." Compared with the whole family, Rosen and 7-11, Suning's boxed meals, sushi and sandwiches are not rich in variety, simple in taste and high in price. Such products as Guandong boiled and baked sausages must have corresponding food licenses to sell, but stores in Shanghai are generally sold only under a business license, and many shop assistants do not know how to operate cooked food. In addition, cooked food has a fixed reporting time, but the clerk will probably forget to report losses, some dare not report losses. Cooking these foods for a long time will reduce the taste and appearance. " Wang Ming said.
In fact, for the convenience store market, the rapid expansion of scale is not necessarily linked to profitability. Because of the high cost of human resources and rent, convenience stores show a small profit. Convenience stores typically charge 15% more on average than supermarkets, with gross margins between 20% and 30%, but net interest rates are hard to exceed 5%.
Wen Zhihong said that at present, Suning stores' losses are relatively normal. The convenience store depends on the scale effect, and it needs to achieve a certain scale to achieve profitability. In the period of chain operation of convenience stores, the investment in the whole chain system, including the backstage of headquarters, supply chain, the whole chain organization system, information construction and so on, is actually very large. Suning now has more than 2000 stores, which are not large and are new. It is not easy to make profits. Convenience stores 7-11, which are doing better now, are profitable only after 6-7 years in Japan and Taiwan. At present, the number of 7-11 stores in Japan and Taiwan has reached more than 10,000, becoming the king of retail.
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