Yonghui Plans To Change: The "Old Trees Sprout New Shoots" Of Traditional Shangchao?

A black short sleeve shirt, a pair of black rimmed glasses. Li SONGFENG, who just became CEO of Yonghui supermarket, made his first public appearance in front of the media.

Li SONGFENG did not prepare any other materials, only a paper version of the internal letter just released in September. However, in this internal letter, he "burned a fire" - to Yonghui supermarket's current organizational structure.

As an old brand supermarket in China, Yonghui supermarket has long been well-known abroad: the promotion model of "agricultural reform supermarket" and Minsheng supermarket. In the capital market, its value was once booming: from 2017 to 2020, the company's total market value exceeded 100 billion yuan several times, becoming a big white horse in the retail concept.

However, if we use "hero Twilight" to describe the current Yonghui supermarket, it is both mean and realistic. On the one hand, some of the company's "persistent diseases" accumulated in the past were exposed to the outside world in the form of Waterloo in the first half of this year; On the other hand, the capital market's recognition of its value has fallen into a freezing point, and the stock price has dropped by two-thirds compared with the peak period.

In the face of difficulties, Li SONGFENG said frankly, "since this year, the whole offline retail industry has been under great pressure. Not only Yonghui, but also the traditional retail industry has encountered a lot of challenges." but we can't avoid it. "After the strategic goal is set, we can match the strategic goal with the adjustment of the organization, and then we can fight this battle well."

Abolish "theater"

Looking at the regular financial reports of Yonghui supermarket from 2019 to the first half of 2021, we can find a "feature": when introducing the situation of the main business by regions, the company is divided into zones 1, 2 and 3. This is the "theater system" before Yonghui supermarket. The change is that from 2019 to 2020, the number of "war zones" of the company will be adjusted from 10 to 7.

In 2019, for some reasons, Yonghui supermarket divides its regional business into ten "war zones". In an interview with tiger smell, then CEO Li Guo said, "after the establishment of ten war zones, the war zones can learn from each other and compete with each other, and promote development through internal competition and cooperation."

However, the outside world is more willing to associate Li's reasons for advocating the "theater system" with his military background, as well as his well-known saying that "if you run through 70% of the war zones, Yonghui will have a future of 150 billion yuan".

It is undeniable that Yonghui supermarket under the "theater system" has taken a big step in expansion. In 2019, the company opened 205 new stores and 244 new contracted stores. By the end of 2020, Yonghui's supermarket business has entered 29 provinces and cities, with more than 1000 supermarkets and 1017 supermarkets.

But "theater system" is also a double-edged sword. A senior retail industry analyst told the 21st century economic reporter that with the help of the "war zone system", Yonghui supermarket hopes to establish a "territorial thinking" and speed up the layout by delegating management rights and other measures. "However, the revenue gap between each theater is gradually widening, and there are also too many development differences among provinces in the theater. In addition, with the centralized power and responsibility of each theater level, there will be management and communication problems with the headquarters," the analyst said.

In an interview with the 21st century economic reporter, Li SONGFENG reflected on the shortcomings of the "theater system", "The drawback of the original" theater system "is that the communication link between the theater and the headquarters is too long, which makes it difficult to reach directly, resulting in low efficiency. When implementing the headquarters strategy, it encounters greater resistance, and the penetration is not strong, so it is easy to form isolated islands; in the theater, it is easy to have problems such as large provinces ignoring small provinces, so it needs to be more flat and flexible."

Yonghui supermarket's financial report in the first half of this year shows that there is a significant difference in revenue between the seven war areas. The operating revenue of three districts (Jiangsu, Zhejiang, Shanghai, Anhui), four districts (Chongqing, Hunan, Hubei, Guizhou, Yunnan) and one (Fujian and Jiangxi) ranked the top three in terms of operating revenue, which were 9.918 billion yuan, 8.997 billion yuan and 7.454 billion yuan, respectively; The business income of seven districts (Henan, Shanxi, Hebei) and six (Guangdong and Guangxi) is relatively backward, with 3.644 billion yuan and 2.202 billion yuan respectively.

At the same time, in the first half of the year, the operating revenue of all war zones generally declined, but the operating costs of some of the front war zones increased, diluting the overall gross profit margin. For example, in the first half of this year, the operating costs of the three districts and one district were 8.636 billion yuan and 6.484 billion yuan respectively, with a year-on-year increase of 1.04% and 0.08%.

"We have more than 20 provinces and autonomous regions, and the whole capability is presented on the platform and precipitated on the platform, so as to strengthen the organizational ability of the platform and eliminate the organization's chimney and isolated island." Li SONGFENG told the 21st century economic reporter that changing the previous Theater Mode and implementing the provincial and regional business system can gradually strengthen the platform organization ability and enhance the front-end combat capability.

In fact, the withdrawal of the "war zone" into a province can be called the core of the organizational structure adjustment of Yonghui supermarket.

In his internal letter half a month ago, Li SONGFENG believed that Yonghui supermarket needs a flatter, more flexible and younger organizational structure. Among them, it is more flat and more flexible, pointing to that after the "theater system" is cancelled, the company's headquarters platform can be directly operated to the provinces and regions, providing sufficient supply chain support, operation support and technical capability support to the provinces and regions. To be younger is to realize the flow of talents and seize the trend and business opportunities of younger consumers.

The 21st century economic reporter has learned that with the disappearance of the "theater system", the original theater management will also face job adjustment, or withdraw, or return to the headquarters platform, or flow to the larger provinces and regions for management. It is reported that under the provincial system, the regional business of Yonghui supermarket will also be divided into three categories: large, medium and small. Among them, the size of large provinces and regions is expected to exceed 100, and the size of small provinces and regions may be only dozens. However, compared with the original 10000 person theater model, such regional organizational units have indeed been streamlined.

"Our goal is to achieve an inventory and an operation organization," Li told the 21st century economic report.

The elephant turns

In the eyes of the outside world, Li SONGFENG's promotion in Yonghui supermarket can be called rapid.

In January this year, Li SONGFENG moved from Jingdong to Yonghui supermarket as CTO and vice president, focusing on promoting the construction of the company's technology business and digital capability. Just a few months later, Yonghui supermarket held the 30th meeting of the Fourth Board of directors, deliberated and passed the "proposal on the appointment of senior managers of the company" - Li SONGFENG will be directly promoted from CTO to CEO.

But there was a small episode in the meantime. Liao Jianwen, a director with the same Jingdong background as Li SONGFENG, voted against it. His reason is that "the candidate (Li SONGFENG) has a strong technical background, especially the construction of enterprise technology center, which helps to promote the technology realization behind the omni channel strategy currently promoted by the company. However, it needs to supplement the experience, leadership and organizational ability in retail, especially in the supermarket industry."

For Li SONGFENG himself, the change behind his position means great pressure and great responsibility. As CTO, he was in charge of "Yonghui technology", which is the big science and technology center of Yonghui supermarket; But after taking office as CEO, what he wants to achieve is "technology Yonghui". "There's not much difference in words, but there's a lot of logic," Li told 21st century economic reporter.

In the internal letter, Li SONGFENG made clear the strategic goal of Yonghui supermarket in the next decade: "an omni channel digital retail platform based on fresh food and customer-oriented"

For this goal, he did a disassembly. "Based on fresh food", that is to continue the ability of making and selling fresh food, strengthen the construction of fresh food supply chain and the precipitation of fresh food operation capacity; "Customer centered" is to maintain suppliers and partners as "assets" while meeting the needs of consumers; "Omni channel" means to do a good job of "home" business on the basis of "arrival at the store"; "Digitization" is to realize the digitization of users, stores, commodities, suppliers and management, so as to improve efficiency.

He also stressed that Yonghui supermarket has always been a "retail platform" and "we should deposit all our capabilities on the platform, including supply chain capability, operational capability and digital technology capability."

With the development of more than 20 years, Yonghui supermarket has become a giant elephant in the field of domestic supermarket. When the volume and scale are expanding, the overstaffed structure leads to slow response and slow action, which makes Yonghui supermarket in a dilemma to a certain extent. In the first half of this year, the company suffered losses: during the reporting period, Yonghui supermarket realized 46.827 billion yuan of operating revenue, down 7.30% year-on-year; The loss was about 1.083 billion yuan. This is the first time it has lost money in 11 years since it was listed.

Looking back on the past experience, Yonghui supermarket is not without transformation response in response to changes in the industrial environment. From super species to Yonghui, its transformation is not easy.

The 21st century economic reporter noticed that for the whole traditional supermarket enterprises, the continuous impact of the epidemic situation and the impact of community group buying are having a significant impact on them. Taking the performance of 13 A-share supermarket (including convenience stores) listed companies in the first half of this year as an example, including Yonghui supermarket and Bailian shares, the total operating revenue of 13 listed companies reached 106.473 billion yuan, a year-on-year decrease of 4.89%; The total net profit attributable to shareholders of the listed company was a loss of 212 million yuan, and a profit of 2.914 billion yuan in the same period of last year.

"On the one hand, affected by the high base number in the same period of last year, the growth of supermarket enterprises is under pressure; on the other hand, affected by the repeated epidemic situation and community group buying, the passenger flow and sales revenue of supermarket hypermarkets have decreased, and fresh products have been greatly impacted. In addition, the adjustment of the new leasing criteria has resulted in an increase in expenses. For supermarkets with high dependence on rental properties, more stores are available The greater the impact. "Shanxi securities analysis shows that in the first half of the year, the decline of passenger flow of physical supermarket enterprises is also affected by the change of residents' consumption habits, food price fluctuations, multi-channel diversion and other external factors.

However, including Yonghui supermarket, they have found the driving force that drives their elephants to turn around.

Since this year, with Yonghui supermarket, Carrefour, HEMA, etc. have successively entered the warehouse business format of the Bureau, the weak traditional supermarket hypermarket has opened a transformation way out.

In May this year, Yonghui supermarket opened its first warehouse, which is called the foothold of "technology Yonghui, digital empowerment". And different from other warehousing member stores, Yonghui warehouse does not charge membership fees, and the price advantage is obvious.

"Yonghui's warehouse business mode enables customers to return to offline consumption, and through the digitalization of operation, procurement and logistics links and process reconstruction, it improves the operation efficiency and makes increment in the stock." Li SONGFENG told the 21st century economic report reporter that in this format, Yonghui chooses the people friendly mode.

Li SONGFENG also admitted that the warehouse business is still in the grinding stage.

However, how much "storm" the warehouse store model can set off in the industry in the future remains to be verified by time.