Sun Art Retail Group’s Downfall: Online Grocers Reign Supreme
Hong Kong shoppers flock to Sam’s Club Shenzhen across the border, leaving Mainland hypermarket giant RT-Mart in the dust. Sun Art Retail Group, RT-Mart’s parent company, has issued a profit warning, announcing a staggering 1.6 billion yuan loss for the fiscal year ending March 2024. This reversal from a slight profit of 78 million yuan the previous year stems from store closures, asset impairments, and business restructuring costs.
Store Closures and Restructuring
Sun Art acknowledges the need to close underperforming stores and consider selling non-performing assets. Despite this downsizing, the company emphasizes its strong cash flow for future development. Sun Art’s once-dominant RT-Mart stores are struggling to adapt to China’s grocery landscape, where online companies and offline shops with online ordering options have become the norm.
Sam’s Club Thrives while Hypermarkets Flounder
While traditional hypermarkets like RT-Mart face challenges, Walmart’s Sam’s Club has emerged as one of the few remaining brick-and-mortar supermarkets thriving in China. Its warehouse-style stores and paid membership model have proven successful. Costco, Sam’s Club’s US rival, has also found success in China with a similar approach.
Membership Stores: A New Model for Success
The success of membership stores like Sam’s Club lies in their targeted selection of goods and lower prices. They offer a more curated shopping experience with a smaller range of high-quality products. House brands, such as Sam’s Club’s Member’s Mark, contribute to differentiation and higher margins.
Sun Art’s Imitation: A Late Entry
Recognizing the success of membership stores, Sun Art has launched its own M Club stores. However, the company’s late entry into this segment may prove challenging, given Sam’s Club’s established brand and first-mover advantage. Sun Art’s transformation is more of an imitation than a genuine innovation, and the success of copycats is never guaranteed.
