Morningstar | Sun Art Report Update
Sun Art Retail is the leading hypermarket operator in China with the highest market share of 15.7% in 2018. However, Sun Art has been facing headwinds, including intensifying competition from e-commerce and existing offline players and the emergence of new retailing formats. Sun Art’s same store sales growth excluding electronic appliances decreased from negative 0.26% in 2017 to negative 1.72% 2018. Sun Art has ambitious plans to revert the declining trend. To be a leader in all categories, Sun Art will have the specialized categories run by professionals. For example Suning now operates Sun Art’s electronic appliance section and the supply chain, system and data services of the two companies are integrated. Sun Art will reinforce its strength in fresh food. The launch of white labels such as Taobao Xinxuan, supplied by Alibaba are part of categories restructuring. Sun Art connects its physical stores with Alibaba’s Taoxianda, enabling the fulfillment of online orders within a three-kilometer radius. Taoxianda helps integrating supply chain, inventory, logistics, marketing, payment and membership systems of the stores. With better understanding of customers empowered by data, personalized marketing can be conducted to enhance sales. He Xiao Ma stores leverage the traffic and technology of Alibaba and the firm’s supply chain and store operation to provide delivery within three-kilometer radius to customers for its online orders. Nine He Xiao Ma stores has been rolled by the end of 2018. Sun Art plans to supply to some of the 6 million smaller, independent stores in its catchment area, which can also increase Sun Art’s economies of scale in sourcing. Last but not least, RT-Mart will assist Auchan in upgrading its IT system and consolidate the buying office and the supply chain for the two banners will be integrated to enhance efficiency and cost advantage. As the market matures, Sun Art has slowed down its store opening pace. The firm had secured 55 sites to open hypermarket complexes as per its 2018 annual results, versus 117 sites three years ago.Sun Art Retail Group is an investment holding company, engaged in the operation of hypermarkets in the People's Republic of China (PRC), under two banners of Auchan and RT-Mart. As of Dec 31 2014, Co. had a total of 372 hypermarket complexes in China, with a total gross floor area of approximately 10,277,525 sq. m.
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