Find out about the retailer's strategic priorities, commercial focus areas, channel and country presence.

See data on the retailer’s performance and forecasts for its operations by channel.

This in-depth guide to China explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

We review Sun Art's FY2017 results, its growth forecasts for the next five years, plus progress against key strategic objectives.

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Germany’s Metro has shortlisted eight companies for its China business, a deal valued at between US$1.5bn and US$2bn as previously reported.

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Alibaba Group announced financial results for the quarter ended 31st March 2019.

Strong performance with growing user base

The group reported strong performance for the quarter. Daniel Zhang, Chief Executive Officer of Alibaba Group commented that “Alibaba is becoming synonymous with everyday consumption in China, growing our base to 654 million annual active consumers and extending our penetration in less-developed cities. Our cloud and data technology and tremendous traction in New Retail have enabled us to continuously transform the way businesses operate in China and other emerging markets, which will contribute to our long-term growth.”

Top line figures for the quarter ended 31st March 2019 are:

  • Revenue: Up by +51%YoY, reaching CYN93.5bn (US$13.9bn)
  • Core commerce (Taobao & Tmall): sales reached CYN78.9bn (US$11.8bn) in 2019 Q1, up by +54%YoY
  • Annual active users: reached 654 million, an increase of 18 million from the 12-month period ended 31st December 2018
  • Mobile monthly active users (MAUs): increased by 22 million over December 2018, reaching 721 million in March 2019

Highlights of the group’s business and strategic updates are summarised below.

Taobao offers new shopping experience

  • A new Taobao app interface was launched in fiscal year 2019, which segments shoppers based on their shopping behaviour and then provides them with personalised recommendations
  • The new interface includes curated posts, videos and live broadcasts. The overall result is better user engagement, higher purchase conversion and more annual active users

Tmall establishes itself as a platform of choice for brands

  • Tmall paid physical goods gross merchandise value (GMV) up 33% YoY, driven by strong performance of fast-moving consumer goods (FMCG), apparel, electronics and home furnishing categories by identifying new consumption tends
  • Making use of its large data set and wide customer reach, the retailer provides brands with marketing solutions such as pre-launch campaign along the full purchase journey from discovery to purchase

New Retail transforming brick-and-mortar retailing

  • Digitised 470 Sun Art stores by end of March 2019, allowing customers to shop via the Taobao app and get goods delivered through on-demand delivery platform Ele.me
  • Freshippo (Hema) continued to achieve robust same-store sales growth and expand network, reaching 135 stores in China

Gaining market share in lower tier cities

  • Acquired on-demand delivery platform Ele.me and integrated it with service guide platform Koubei in 2018 to provide local services
  •  The local services are integrated with the Alibaba ecosystem, allowing it penetrating into less developed cities. Around 30% Ele.me platform’s total orders are from Alipay and Taobao apps

Building foundation for long-term international growth

  • Cross-boarder and international retail business continue to grow. Up to date, Lazada and AliExpress have a total of more than 120 million annual active users
  • In 2018, Lazada scaled back direct sales of low margin categories such as electronics to be better positioned for less capital-intensive long-term growth
  • Lazada continues to invest in logistics as delivery speed and convenience are key competitive advantages in the Southeast Asian market

 

 

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Following on from the announcement of its results, Sun Art has said its chief executive, Ludovic Holinier had resigned from his role. The retailer said Holinier will be replaced by Ming-Tuan Huang.

Huang to sustain recent strategy

At the moment, Huang is chairman of RT-Mart and is responsible for the overall strategic planning and management of the Group. He has also been CEO of RT-Mart Limited Shanghai where he is responsible for devising and implementing its overall strategies and the supervision of its business operations.

According to the press release announcing the change in management “The appointment of Mr Huang as the new general manager clearly shows the group's determination and confidence to revitalise its hypermarket and popularise New Retail.”

Will oversee further merging of RT-Mart and Auchan

One of Huang’s first responsibilities will be in implementing the creation of a single joint headquarters for RT-Mart and Auchan, which was announced in December 2018. The step will also see RT-Mart assist Auchan in upgrading its IT system and the supply chain as the two banners are integrated. However, the two companies are not being merged, with the step focused on ‘ improving the use of technology and management… with the purpose of enhancing efficiency of the Group.

 

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China’s major hypermarket operator Sun Art Retail Group Ltd, set up by Auchan and Ruentex and backed up by Alibaba, reported a 7.3% fall in 2018 profit.

Missing market expectations

The retailer reported its net profit fell to RMB2.59bn (US$386m) from RMB2.79bn (US$386m). This was below the expected RMB2.70bn. Turnover fell by 2.9% to RMB99.36bn and same-store sales fell 1.72% year-on-year. The group’s gross profit margin increased by 1.2 percentage point from last year to 25.3%.

2019 plan

The company, operating under the “RT-Mart” and “Auchan” banners, says that the competition is fierce including online. "2018 was a year where the digitalization of our retail business began, and also a year to plan future development," the company said in a statement. "Through digital management, supply will be closely tied with demand to provide customers with the right product offering, good prices..."

Just one day after publishing its 2018 results, Sun Art announced plan to open 25 more stores in China this year, aiming to return to positive growth in 2019.

 

 

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Sun Art has posted a 0.3% decline in sales revenue to CNY52.1bn (US$7.6bn) for the first six months ending 30 June 2018.

Growth slowing

For the first half, Sun Art recorded a modest 0.8% increase in profit to CNY1.9bn (US$278.1m), while same store sales growth fell 1.6% compared to -0.9% for the same period last year. This was attributed to increased competition, which has been diversifying how customers shop and therefore impacting the performance of Sun Art's hypermarkets. Growth for the retailer in 2017 also slowed down compared to previous years. 

The Group opened 11 new hypermarkets under the RT-Mart banner during the reported period. Five of the new stores were opened in the eastern part of China, two in the north, three in central and one in the south. As of 30 June 2018, it had a total of 472 hypermarkets in China with a total gross floor area of approximately 12.7m sq m. Approximately 8% of the Group’s stores are in first-tier cities, 17% in second, 45% in third, 22% in fourth and 8% in fifth. The Group has identified and secured 56 sites to open new hypermarket stores, of which 48 were under construction.

Offline and online integration still the key focus

Following the strategic alliance with Alibaba, Sun Art has launched several initiatives. It is also introducing, for example, popular online items in its hypermarkets to provide customers with greater choice. The retailer is committed to accelerating the integration between offline and online to allow customers to switch and shop freely in accordance to their needs.

Sun Art will continue to look for ways to understand its customers better, using technology and data to make it easier and more convenient for them to shop. It is planning to extend the O2O coverage of its brick-and-mortar stores; from a three-kilometre radius that its stores currently service to more than three (but potentially up ten) times the size in the future.


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