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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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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.

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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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As China becomes a key global retailing market for companies looking for inspiration about how operating models and formats could develop, France-based Auchan and Carrefour have made separate announcements about the country’s growing importance.

Carrefour says China is ‘testing ground’ for initiatives

Following the opening of its Le Marche concept in May, created with Tencent has increased its use of in-store technology alongside its grocery-focused range, Carrefour has said the country is ‘the ideal location to develop new methods for attracting shoppers’. Carrefour’s executive director for Asia, Thierry Garnier, said the retailer remained ‘very positive’ on its outlook in China, with Le Marche concept set to play a key role. Garnier went on to say Carrefour sees ‘the Chinese market as a true laboratory that can inspire the rest of the group’.

Carrefour has said the concept ‘is smart life store with French touch, focusing on catering, fresh, imported products, with many digital innovations applied with the support of Tencent’. Le Marche offers 25,000, mainly grocery, products, of which 20% are imported, while there is also a focus on health and beauty and apparel ranges. The store also offers free delivery within 3km for orders over CNY188 (US$29.40)

Auchan’s RT Mart enjoys ‘Alibaba-inspired’ digitisation

RT Mart has said it has finished the digital transformation of 100 stores. The initiative has seen it incorporate Alibaba-owned technology. As part of the update programme, RT Mart has incorporated elements of the Hema supermarket design owned by Alibaba. In an attempt to blur online and offline channels, RT Mart said its stores now offer ‘in-store fulfilment of online orders, “smart” shopping kiosks and a selection of popular products from Tmall’.

Commenting on the step, RT Mart’s chief executive, Peter Huang, said: “ New Retail has introduced a new way of thinking. By digitizing the store’s operation, the online and offline business merge into one. This will boost retailer’s online transaction volume.”. One hour delivery of orders to shoppers within a three kilometre radius of a store is part of the solution being rolled out.

Although the most visible elements of the partnership will be in-store, RT Mart also benefits from access to Alibaba’s customer insights, supply-chain management, retail technologies and electronic payments via Alipay, which is part of the company’s wider ecosystem.


Continue reading...


Walmart strikes strategic partnership with Tencent

Walmart and Tencent have announced a strategic partnership, allowing the two companies to develop and implement digital retail innovations in China.


Alibaba continues to revamp Sun Art

Alibaba continues to revamp Sun Art hypermarkets in China, integrating digital features across RT Mart banner stores up and down the country.


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Alibaba continues to revamp Sun Art hypermarkets in China, integrating digital features across RT-Mart banner stores up and down the country.

Influence of Alibaba

RT-Mart has finished the digital transformation of 100 stores and Alibaba plans to support transformation of 300 more outlets by end of the year. Revamped stores will be fully integrated into Alibaba’s New Retail ecosystem, and act as fulfilment centres for online orders alongside existing shopping operations. Stores will have dedicated staff picking-up products from shelves and sending the shopping bags directly to the delivery department, via overhead conveyor belts placed on the ceiling of the store. 


Source: IGD research

Transformed RT-Mart stores are a demonstration of the positive impact Alibaba has brought to Sun Art. Auchan is learning from Alibaba's New Retail concept and the move will also tie-up Hema supermarkets with RT-Mart to share resources to make deliveries.


Source: IGD research

More about Sun Art...

Alibaba owns a 36% stake in Sun Art, which operates the RT-Mart and Auchan hypermarket banners in China. In FY2017, Sun Art reached a total of 461 stores, covering 226 cities across 29 provinces, autonomous regions and municipalities. It has secured 78 sites to open new hypermarket stores over the next three years, many of which are already under construction.

Sun Art's online proposition, Feiniu, is also growing rapidly with GMV doubling in 2017 from previous year. Feiniu is now shifting its focus to B2B sales through a standalone app RT-Mart e Lu Fa. It aims to provide a strong range of products at low prices to support mom-and-pop stores in tier three and tier four cities.

 

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