About Sun Art Retail Group Limited
Sun Art Retail is a leading retailer with hypermarket and fast-growing e-commerce businesses in China. Sun Art Retail operates its business with hypermarkets, superstores and mini stores under RT-Mart, RT-Super and RT-Mini. As of 31 December 2020, Sun Art Retail had a total of 484 hypermarkets, six superstores and 24 mini stores in China with a total gross floor area (“GFA”) of approximately 13.07 million square meters, covering 232 cities across 29 provinces, autonomous regions and municipalities.
On 19 October 2020, Taobao China Holding Limited (“Taobao China”) announced the completion of acquiring 70.94% of A-RT Retail Holdings Limited (“A-RT”)’s issued share capital. A-RT holds approximately 51.00% of the issued share capital of Sun Art Retail Group Limited (the “Group”) and therefore has become the ultimate controlling shareholder of the Group. The two parties will integrate online and offline professional capabilities to jointly explore new retail development opportunities in China's retail industry.
Sun Art’s main development strategy is “to synchronize hypermarkets, superstores and mini stores, integrate online and offline business, develop multi-formats and omni-channels”, and to become a leader in digital transformation and a benchmarking enterprise for New Retail.
B2C business grows rapidly due to the pandemic
The outbreak of COVID-19 accelerated the formation of consumers’ online shopping mindset, represented by the continued increase in the Group’s B2C Daily Order per Store (“DOPS”). Since May 2020, the Group’s online DOPS exceeded 1,000. In the second half of 2020, the Group’s average DOPS in first-tier cities was more than 2,000 and for lower-tier cities, it was close to 1,000. The Group set a new DOPS record exceeding 2,900 for the first time on “double 11” day.
For the full year of 2020, the Group’s B2C performance increased by more than 80% and the total B2C order density increased by more than 60% compared with the same period last year. For the B2C ticket size in the second half of 2020, despite the significant decrease compared with that in the first half, it still increased by 5.7% over the same period last year, reaching net amount after tax RMB66. The fresh products and dairy products contributed more than 53% of the revenue, the FMCG accounted for more than 45% and non-food products was about 2%.
As of 31 January 2021, the number of registered B2C users was over 69 million, among which the active users exceeded 16.5 million.
Incubate new business
As of 31 December 2020, the Group opened six RT-Supers. The current store operating area of RT-Supers is approximately 3,000 to 5,000 square meters, providing around 15,000 stock keeping units (“SKU”). The fresh products and dairy products contributed about 57% of the Group’s revenue, the FMCG accounted for around 38% and non-food products was about 5%.
According to the differentiation of catchment areas and customer positioning, each RT-Super can feature different offerings suitable for customers in the catchment areas. By leveraging the Group’s strong supply chain, sufficient products, as well as more streamlined store teams, RT-Super can achieve a relatively reasonable gross profit margin and cost ratio. The business model of RT-Super is not far from matured.
In 2021, RT-Super will enhance the scale expansion by focusing on the second and third-tier cities, and build fresh superstores which are closer to young consumers through the construction of core categories.
As of 31 December 2020, the Group opened 24 mini stores, of which 20 were located in Nantong City, Jiangsu Province and four in Taizhou City, Jiangsu Province. The operating area of each mini store was about 200 to 500 square meters. Fresh food and dairy products accounted for about 75% of the Group’s revenue, representing a rather high proportion. 60% of the store’s revenue derived from fruits and vegetables, seafood products, and meat.
In view of the high proportion of fresh products, mini store continues to improve direct sourcing from original production areas to offer booming items by season and local specialties, which aims to create offerings with a full range of categories and affordable prices. In addition, mini store shares the FMCG product pool with hypermarket, and designs different display models and offerings according to store operating area and customer positioning for the purpose of building a good foundation for accelerating expansion in the future.
Community group buying made a good start in 2020.
As of 31 December 2020, the Group’s community group buying business strengthened its business synergy with Cainiao pick-up station with more than 100 stores located in over 36 cities. The number of active stations reached nearly 8,000. The stations developed by the Group were also launched in 125 cities, and more than 220 stores started the community group buying business. At the same time, the Group also actively calls on employees to become community group buying initiators. They are the Group’s unique buying initiator resource and features with high stickiness in their nature.
Community group buying not only has its own exclusive booming items but also shares the supply chain and product pool with hypermarket. The sales of non-standard fresh products accounted for around 33.5% of the revenue, and FMCG contributed about 64.7%.
Pilot “warehouse-based” store model, give support to omni-channel through “one warehouse for one city”
Considering the online impact on sales of non-food products in physical stores, the Group initiated a renovation project to transform some stores into the “warehouse-based” model.
The non-food operating area was reduced but the warehouse area was increased significantly in the pilot stores. After the renovation, the pilot store will not only meet the needs of the store itself, but also support half-day delivery, community group buying and B2B business of the city.
The renovation means each city has its own city warehouse. Logistics costs are greatly reduced. Product efficiency is significantly improved and customers’ shopping experience can also be greatly upgraded.
2020 was a year of transformation as well as a year of polishing the Group’s business models for multi-formats and omni-channels development. 2020 was also a milestone year. The future is an era of Internet and new retail. As Alibaba Group becomes the controlling shareholder of the Group, it will definitely bring in new vitality and impetus to the Group, and lead the Group to reach a new peak and create prosperity. Looking to the future, 2021 will be a year of investment and the first year of launching new business models. Although the investment cost to new business will affect the Group’s profitability in the short term, this impact is anticipated, limited, and worthwhile. We believe that today’s investment is for better and faster growth in the future. The Group expects that the revenue will return to a high-speed growth trajectory within two years.
