Reporting sales growth of 5.3% to RMB 28.99bn alongside a decline in profit of -0.7% to RMB 3.9bn, domestic Chinese retailer Lianhua outlines its strategy for an improved performance in 2013.
Competing in an increasingly challenging market
Announcing its results for the financial year ending December 2012, Lianhua reported pressures from an unfavourable business environment impacted performance, including a decline in profit of 0.7% to RMB3.9bn and decline in same-store-sales of -0.7%. The combination of increased inflationary pressure, a dip in consumer confidence and fierce competition in the market, particularly in the hypermarket segment, made growth challenging.
Mixed performance across formats
Revenue growth was boosted by new store openings; Lianhua opened 394 new outlets, comprising of 12 hypermarkets, 156 supermarkets and 226 convenience stores.
Hypermarkets accounted for roughly 60% of Lianhua's turnover. In this segment, same-store sales declined -2.8%, leading the retailer to launch a two-pronged strategy to improve its image and enhance its competitiveness, centring around enhancing price perception.
Supermarket operations also saw a decline in same-store-sales, of -2.4%, attributed to increased competition from other retailers as well as from larger and smaller formats, in the wider context of the market's slowdown in economic growth. Lianhua focused on improving relations with its franchised supermarkets to ensure the standardisation of high store quality across the portfolio.
Convenience operations performed more robustly, seeing same-store-sales grow 6%, and mid and high end outlets delivering particularly good results.
Lianhua's strategies for the year ahead
- Open 327 new outlets - 10 hypermarkets, 160 convenience stores and 157 supermarkets
- Pursue a regional focus, developing presence in the Yangtze Delta area
- Prioritise the quality delivery of new stores, in terms of location, segment positioning and pre-opening preparation
- Build links between the health and beauty division and main store estate
- Accelerate implementation of e-commerce business, converging online and offline activities
- Optimise operations and procurement through a range of actions including merchandising reviews, data analysis and bulk purchasing
- Completion and trial of Jiangqiao logistics centre to be undertaken, leading to the establishment of a unified procurement platform
- Tightening of cost control and improved efficiencies underpinned by simplification and leverage of scale
- Enhanced category management including collaboration with suppliers and the establishment of category captains
- Realising the opportunity of the membership program through marketing initiatives and deeper discounts