Shulou(Shulou.com)06/01 Report--

Over the past three decades, Suning has been expanding its business ecosystem and striving to build an online and offline retail kingdom.

Since 2017, under the strategy of smart retail, Suning has accelerated the pace of offline layout, including Wanda Department Store, Na Carrefour China, Suning Store and other offline formats. Suning Easy Buy has formed a full-channel and full-scene layout.

However, from the data to see, Suning easy to buy performance is not ideal.

The latest financial report shows that in the first quarter of 2020, the company realized operating income of 57.839 billion yuan, down 7.07% year-on-year, net profit of-551 million yuan, down 505.45% year-on-year.

If the Timeline is lengthened, Suning Easy Buy has been in a loss state in recent years, but through the resale of assets, capital increase and share expansion, the net profit belonging to shareholders of listed companies is at a profit level.

As a well-known commercial retail enterprise in China, from the previous quarterly net profit of 10 billion yuan to this year Q1 loss of more than 500 million yuan, Suning easy to buy what exactly experienced?

Starting from offline, resolutely transforming online

Suning has experienced two major transformations in history, from air-conditioning franchise to chain development, from chain development to Internet retail.

Among them, the resolute transformation of Internet retail can be regarded as a bold change for Suning and its management team.

In the spring of 2009, Zhang Jindong, chairman of Suning Holding Group, held two sessions in Beijing at that time, and had already determined that the transformation was imminent."Take time to hold a video meeting with everyone. The meeting starts in the afternoon and lasts until 4 or 5 a.m. the next day." Later, Zhang Jindong recalled.

In 2013, Suning Appliance changed its name to Suning Yunshang to show its determination to enter online, and proposed to build the "One Body and Two Wings Internet Retail Roadmap" with Internet retail as the main body and O2O all-channel operation and online and offline open platform.

During the year, the Company completed the comprehensive sharing of online and offline channel resources, unified prices, comprehensive opening of eBuy platform and all-category operation, and promoted the re-engineering of the Company's Internet culture.

In January 2018, Suning Yunshang changed its name to Suning Easy Buy, and its business was further focused.

According to the operation data, the online transaction scale of Suning Easy Buy Platform in 2018 has exceeded RMB 200 billion yuan, more than 10 times that of 2012, and the annual compound growth rate has reached 54.7%. The number of monthly active users of Suning eBuy APP rose from less than 7 million in August 2016 to more than 60 million in 2019.

As an old player in the home appliance retail market, Suning still has a considerable market share. According to the Report on China Household Appliances Market in 2019 released by China Electronic Information Industry Development Research Institute, Suning Easy Buy's channel share in the domestic household appliance market is 18.09%, ranking second.

Photo source: China Household Appliances Market Report 2019

However, according to the sales data of various retail categories disclosed in the financial report, Suning Easy Buy is close to a "department store." "

In 2019, the revenue from communication products, refrigerators, washing machines, air conditioning products, digital computers and other Suning Easy Buy basic disks showed negative growth to varying degrees. The explanation of the financial report is that the overall growth rate of consumption in 2019 declined, the growth rate of household appliances and audio-visual equipment of units above quota decreased by 3.3% year-on-year, and the growth rate of communication equipment was only 1.4%, and the growth rate continued to slow down.

Photo source: Suning Easy Buy 2019 financial report

In contrast, revenue from daily necessities increased rapidly, with related commodities earning 45.57 billion yuan in revenue for the whole year, up 115.44% year-on-year, accounting for a significant increase in total revenue from 8.64% in 2018 to 16.93%.

From offline to online, from keen on home appliances to relying on daily necessities, the rapid expansion of Suning Easy Buy has not stopped, but also buried a lot of hidden dangers.

Building full-scene retail brings profit anxiety

In a public interview, Zhang Jindong said: "I think Suning will focus on two things in the future, creating a professional full scene, and the second is the smart supply chain." These two things have something to do with our big strategy. With such a strong scenario, capability and such a strong supply chain capability, if we only serve Suning Easy Buy in a closed system, the efficiency will not be brought into play.

At the 19th Asia-Pacific Retailers Conference and International Consumer Goods Expo held in September last year, Jing Wei, executive vice president of Suning Technology Group, explained Suning's full-scene retail layout in detail:

Online consists of Suning Easy Buy Master Station, APP, Weixin Mini Programs, etc.;

All types of offline smart stores have landed rapidly, forming a smart retail product group of "two big (Suning Square, Suning Easy Buy Plaza), two small (Suning Store, Retail Cloud Store), multi-specialty (Suning Easy Buy Cloud Store, Red Child, Su Xiansheng, Suning Sports, Suning Cinema, Suning Extreme Goods, Suning Easy Buy Automobile Supermarket, etc.)."

Among the many formats of Suning Easy Buy, the expansion of Suning Store and the merger and acquisition of Carrefour China are two large businesses invested more in recent years. According to the data, Suning Store is a self-built and self-operated new business mode based on convenience store and integrating Suning's original business.

At the end of 2017, there are only 32 Suning stores, but by the end of 2018, it has expanded to nearly 4300 stores. In 2019, the number of H1 stores has reached 5400, which can be described as an amazing opening speed.

According to the data from January to July 2018, 878 stores in Suning Store lost a total of 296 million yuan, with an average monthly loss of nearly 50,000 yuan per store.

Finally, Suning Easy Buy had to transfer the equity of Suning Store at the end of June 2019. According to the mid-term report of 2019, the net loss brought to the company by Suning Store from the beginning of the year to the date of sale was 2.213 billion yuan.

In June last year, Suning E-Buy spent 4.8 billion yuan to acquire Carrefour China, which is considered one of the measures to acquire mature fast-moving consumer goods supply chain.

Relevant data show that Carrefour China has been deeply engaged in the Chinese market for 24 years, and its store network covers 22 provinces and 51 large and medium-sized cities.

For Suning Easy Buy, controlling Carrefour can speed up the development of fast-moving categories, help reduce procurement and logistics costs, and assist Suning Store, Su Xiansheng and other daily hundred & fresh food formats to improve market competitiveness and profitability.

However, Suning E-Buy completed the acquisition of 80% equity of Carrefour China in September 2019, and Carrefour China realized a net profit of-304 million yuan from the purchase date to the end of the year.

It seems that the layout of "small shop + big supermarket" does not seem to bring the expected high returns to Suning Tesco.

Source: Oriental Fortune Choice

In fact, Suning's net profit has been negative since 2014 and as high as-5.71 billion yuan in 2019, which means that Suning's main business has suffered operating losses for six consecutive years.

The basic market has been eroded, and revenue mainly depends on investment.

On the evening of April 29, Suning Easy Buy released the first quarterly report of 2020. During the reporting period, Suning Easy Buy realized operating income of 57.8 billion yuan, down 7.07% year-on-year, which has been the lowest revenue growth rate in recent two years.

In addition, several core indicators of Suning Easy Buy have also declined significantly.

Source: Oriental Fortune Choice

Statistics show that by the end of 2019

The transaction scale of Suning Tesco online platform was 238.75 billion yuan, up 14.59% year-on-year.

The trading scale of commodities on the open platform was 80.31 billion yuan, up 37.14% year-on-year.

while in 2018

Suning Tesco's online platform transaction scale was 208.35 billion yuan, up 64.45% year-on-year.

The trading scale of commodities on the open platform was 58.56 billion yuan, up 100.3% year-on-year.

Compared with two years, the decline in online trading growth is obvious.

In addition to online, Suning easy to buy offline performance is not ideal.

According to market value statistics, in 2019, Suning Easy Buy closed 1757 direct-sale stores, opened 222 new stores, leaving only 833 at the end of the year. In addition to the above-mentioned loss-making Suning store and unprofitable Carrefour China, such performance can not help but worry.

Online growth slowed down, offline and powerless, Suning easy to buy money really not easy.

So why is Suining still profitable these years? It has to do with selling assets.

According to the financial report, between 2015 and 2019, Suning's annual investment income was 1.655 billion yuan, 1.445 billion yuan, 4.3 billion yuan, 13.99 billion yuan and 21.79 billion yuan respectively.

Source: Oriental Fortune Choice

Most of the above investment income comes from the operation of Suning Easy Buy at the capital level.

In December 2015, Suning E-Buy sold its 14 stores, earning 1.388 billion yuan of non-operating income. In the same year, Suning transferred 68.08% equity of PPTV to overseas subsidiaries of Suning Cultural Investment Management Co., Ltd., increasing the investment income of the company by 1.447 billion yuan.

In 2016, Suning E-Buy transferred 100% equity of Beijing Jingchao Suning Appliance Co., Ltd. to Suning Appliance Group Co., Ltd., an affiliated party, increasing investment income of RMB 1.304 billion yuan, and selling 6 storage properties with a surplus of RMB 510 million yuan.

In 2017, Suning E-Buy sold Alibaba shares, earning an investment income of 4.1 billion yuan; in 2018, it continued to liquidate Alibaba shares, earning an investment income of 11.3 billion yuan.

On June 24,2019, Suning E-Buy sold 100% equity of Suning Store to Suning Smart Life Holding Limited, which increased the net profit of Suning E-Buy in 2019 by about RMB 3.428 billion yuan.

This transaction greatly increased Suning's profit, and stimulated by investment income, the company's investment actions in the past two years have become more and more frequent.

Some of these are relatively large, such as:

In 2018, Suning Tesco invested 1.5 billion yuan to subscribe for 23.26% equity of TCL Industrial Holdings.

Invest 3.4 billion yuan to subscribe for non-public shares of Huatai Securities;

In 2019, Suning Easy Buy subscribed for Shenwan Hongyuan's H shares at a price of nearly 350 million yuan;

Invest 340 million yuan to subscribe for global depositary receipts of Huatai Securities, etc.

Although Suning Tesco's main business performance is not good, but investment and exit do well is also a new way to increase income. However, there is no investment that can make no loss in the world. I don't know what assets Suning will choose to sell to resist risks in the face of the surprise attack of the new crown epidemic in 2020?

summary

Suning E-Buy gave up the vertical retail leader of "small but beautiful" household appliance business at the beginning, resolutely chose the construction of "big and complete" full-scene retail system, and tried to be the third retail pole outside Ali and Tencent Jingdong.

Unfortunately, at present, its online and offline business has a lot of challenges.

After the release of the first quarterly report in 2020, some brokers lowered Suning's profit forecast for 2020.

Galaxy Securities said it downgraded the company's rating to "cautiously recommended" because its non-net profit performance fell short of expectations.

Everbright Securities believes that Suning easy to buy performance slightly lower than the express, the main business same-store performance flat, although maintain "increase" did not downgrade the company rating, but lowered the company's 2020-2021 profit forecast.

There is a saying on the Internet that "when people reach middle age, they are not outstanding, they will be out of the game." For Suning Easy Buy, which has been established for 30 years, in the face of the "middle-aged" exam in 2020, competitors who constantly emerge online and offline may have to unload some of their "baggage" in order to concentrate on the fight.

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