Following Wumart’s announcement last October that it intends to acquire an 80% stake in Metro China, the deal is now complete on 23 April. In this article, we explore what impacts this merge might bring to China’s grocery industry.
Metro’s strengths make up the shortcomings of grocery retail in China
China might lead the world in digital payment and retail technology, its grocery retail industry suffers from the following shortcomings, which are the core strengths of Metro:
- Extensive global supply chain: in the past 56 years, Metro group has established a global supply chain with procurement centres in 28 countries around the world. No other domestic retailers in China have global sourcing capabilities at this level
- Strong and differentiated private label products: Metro China has more than 3,500 private label products, covering more than 200 categories. These goods accounted for 14% of Metro China's total annual sales in 2017. Its plan is that by 2020, the number of private label goods will exceed 4,600, responsible for 20% of the sales. Its core private label brands, such as AKA, Fine Life, RIOBA, SIGMA and Tarrington House, are well-known and popular in China
- Advanced food safety control: Metro sets the industrial benchmark of food safety control in China. It is the only grocery retail chain that has the HACCP (Hazard Analysis and Critical Control Point) certification in all its stores. Its food traceability system connects more than 25,000 farmers. More than 4,500 of its products can be traced through production and distribution for risk control
Acceleration of digitalisation by tapping into Wumart’s expertise
One of the reasons why Metro decided to exit from China after 26 years is because it found increasingly hard to compete in a market where ecommerce and omnichannel retailers dominate.
Wumart has plan to help Metro China achieve online and offline integration via comprehensive digitalization:
- Optimising the smart retail area in physical stores: for example the latest self-serve payment technology will be implemented to meet shoppers’ requirements for a safer, more private and more convenient payment experience
- Moving Metro products online by integrating inventories, synchronizing online and offline sales and rolling out home delivery service
- Recruiting new customers: through Dmall, Wumart's online platform, Metro China has already gained 50,000 members
Metro China has successfully rolled out home delivery in Beijing in a short space of time during COVID-19.
Help cement Wumart's market leader position
Wumart has a good track record in mergers and acquisitions. Its acquisitions of B&Q (the UK), Lotte (South Korea) and Darong (Japan) have been relatively successful and shown good results.
Through maximising the complementary strengths of the two companies, the acquisition of Metro will help cement Wumart’s market leader position in China's grocery industry. Just as Zhang Wenzhong, founder of Wumart, said: "After experiencing the epidemic, I believe that everyone will be more convinced that digitalization is the future, online and offline integration is the future, retail and wholesale development is the future, and high standard of food safety is the future. "
Retail Analysis Asia