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About Sun Art Retail Group Limited

Sun Art is a leading retailer with hypermarket and omni-channel e-commerce businesses in China. Sun Art operates its business with hypermarkets, superstores, mini stores and M club store under RT-Mart, RT-Super and RT-Mini. As of 31 March 2023, Sun Art had a total of 486 hypermarkets, 12 superstores and 84 mini stores in China with a total gross floor area (“GFA”) of approximately 13.81 million square meters, covering 212 cities across 29 provinces, autonomous regions and municipalities. The Group has always been committed to high quality-to-price ratio and the customer value of health and pleasure by providing high-quality shopping experience for customers with fresh and inexpensive commodities, comfortable and convenient environment, as well as lump-sum buying. The Group aims to become a good neighbor of communities and a trustworthy shopping representative of customers.

Brands

As of 31 March 2021, Taobao China Holding Limited (“Taobao China”) directly or indirectly holds 78.70% 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 will focus on the four strategies of ‘product differentiation capabilities, offline experience centers, online logistics fulfillment centers, and multi-format and omni-channel development’, as well as the development of FPPC capabilities and digitalized capabilities, and to become a leader in digital transformation and a benchmarking enterprise for New Retail.

Became offline experience centers, and accelerated the remodeling version 2.0 nationwide

During the reporting period, the Group remodeled more than 80 stores. The hypermarket remodeling version 2.0 validated the value of RT-Mart's "shopping". The Group continued to optimize the tenant mix of galleries and reduced vacancy rates, with the proportion of traffic-generated tenants, such as restaurants and neighbourhood-like services, accounting for nearly 40% of the total number of tenants. The vacancy rate was kept within 5%.

In fiscal year 2024, the Group will focus on the offline demands of “three generation families” to create pleasant scenes, experiences and attentive services and replicate them more efficiently and quickly nationwide. The Group will accelerate the restructuring of its tenants mix and promote better synergies with hypermarkets in all aspects to become a community service center.

Became online fulfilment centers, the sustainable growth of online channels became a core competitiveness

During the reporting period, the B2C revenue increased by approximately 15%, and remained the the driver of revenue growth of the Group. The Daily Order per Store ("DOPS") of B2C was nearly 1,300 orders, and the ticket size was approximately RMB75 per order. The profitability of B2C business continued to be optimized.

The Group continued to develop its procurement capabilities for multi-channels and online operations. B2C business continued to grow and has become the Group’s core competency. The revenue derived from its own mobile application, RT-Mart Fresh, has increased by nearly 40% compared to the same period last fiscal year. The Group’s Taoxianda business, as the core supplier of near-fields fresh products for Taobao, continued to grow steadily. Eleme’s revenue growth, driven by its ticket size expansion, was up by nearly 20% compared with the same period last fiscal year, and its business model has been further improved.

During the reporting period, the Group improved its digital membership capabilities to achieve the member operation in all aspects. In the second half of the fiscal year, the Group’s membership system integrated with that of Eleme and Taoxianda, and established content and channels through public platforms such as Douyin, Xiaohongshu, Weibo and Enterprise WeChat. The omni-channel digital membership operation will become an important competitive edge of the RT-Mart.

In fiscal year 2024, the Group will focus on young and middle-aged individuals with children by fully leveraging advantages of its fresh produce and proximity to enhance certainty and stability of its experiences and services. The B2C business will maintain sustainable growth and become a reliable online fulfilment center to meet customers’ delivery-to-home needs anytime and anywhere.

Continued to enhance the multi-format development. RT-Super showed positive growth trend. The first membership store focused on member value

During the reporting period, the Group had 12 RT-Super stores with five new openings during the fiscal year. RT-Super is the low-cost extension of the RT-Mart. During the reporting period, the business model of RT-Super was further developed and its gross cash flow performance of comparable stores continued to improve during the fiscal year. Looking forward, the Group will continue to invest in RT-Super’s national roll-out, and focus on dominant regions. RT-Super will fully leverage the advantages of RT-Mart's supply chain and secure a competitive market position quickly to drive medium to long-term growth.

RT-Mini’s headquarter was further streamlined with focus on the Nantong region. During the reporting period, the Group had 84 mini stores with 21 new openings and 40 closures. In the future, RT-Mini will utilize RT-Mart's supply chain resources and gradually develop into a channel for RT-Mart to cover surrounding communities and counties.

During this fiscal year, the Group completed the organizational construction of its membership store, M Club, with its first store located in Yangzhou. The Group will continue to invest in M Club. By remodeling existing hypermarkets and leveraging the “big box” advantages of RT-Mart and the resources of the Group's owned properties, M Club will use a brand new supply chain system to develop differentiated products power to create value for members.

The large-scale development of fresh product supply chain capabilities

During this fiscal year, the Group had a total of 14 standard FPPCs, covering a majority of stores nationwide. Among the stores, 100% of the stores and more than half of the stores realized self-operation in vegetables and fruits respectively. Revenue from direct sourcing was about 50%. The operating costs of FPPCs have significantly decreased, effectively reducing the wastage of vegetables and fruits and improving price competitiveness.

The Group will deepen the construction and accelerate the investment in the nationwide roll-out of the fresh product supply chain, and establish full chain solutions for core categories. The aim is to build up customers’ mindset for stable quality and competitive prices of fresh products.

In fiscal year 2024, the Group will further strengthen the development of digital capabilities. Through the application of technology, process optimization and organizational innovation, the digital capabilities will be used to drive the improvement of product efficiency, labor efficiency and area efficiency, as well as the optimization of the Group’s overall organizational efficiency.

In fiscal year 2024, competition will become more intense, and the business model of hypermarkets will face greater challenges. Sun Art will focus more on offline target customers, creating shopping experience featuring the customer value of health and pleasure, and becoming an offline experience center, to enable our target customers to love life and shopping in RT-Mart. Online one-hour-delivery service has become a standard feature for all retailers, and we will continuously improve the quality and service certainty and stability, becoming an online fulfillment center to meet the deliver-to-home needs of online users anytime and anywhere. We will continue to invest in exploring and developing multiple formats, including M Club’s business model, the expansion of RT-Super, and the exploration of RT-Mini, in order to create a second growth curve for Sun Art. At the same time, Sun Art will continue to extend clean energy utilization, facilitate energy conservation and emission reduction, as well as to adhere to the business philosophy of green operation, responsible procurement and people-oriented, and create value for the sustainable development of the environment and society.”

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