Sun Art Retail Group Ltd. (06808.HK), China’s leading hypermarket operator, hopes to build its online sales to 10 billion yuan (US$1.6 billion) within three years from 150 million yuan as online retail burgeons in the country.
“In 2014, China’s retail sales of consumer goods grew 10.9 percent to 26.24 billion yuan, and online retail sales grew 49.7 percent,” chief executive Bruno Mercier said.
“In response to this evolving environment, our e-commerce site Feiniu.com started operations at the beginning of the year.”
Executive director Peter Huang Mingtuan said Feiniu.com, which is at present limited to southern China, will be able to deliver fresh products to places all over the country this year on the online-to-offline business model.
Gross merchandise value from online sales — the total of the sales of products manufactured by Sun Art and the commission received from other companies that sell their products on its online platform — is expected to grow to more than 10 billion yuan by 2018 from 150 million yuan in 2014, Huang said.
Expansion of new brick-and-mortar stores will be maintained at the same pace of about 50 to 60 each year, while e-commerce will be a main focus of the business, he said.
But Huang said the firm is not yet making a profit from online sales, and it is only likely to do so in three to five years.
“We want to enlarge our market share in the first place … This is our business strategy,” he said.
The Shanghai-based company has 372 hypermarket complexes across the country that operate under the banner of French retailer Auchan and RT-Mart.
The firm has a market share of 14 percent. State-owned China Resources is nipping at its heels, with 13.9 percent, and the world’s largest retailer, US-based Walmart, has 10.6 percent.
Net profit at Sun Art rose 4.8 percent to 2.9 billion yuan for the financial year to December 31, 2014.
Same-store sales growth fell 1.6 percent during the period.
Huang said that the firm is not optimistic about same-store sales this year amid competition from other e-commerce operators and soft sales of prepaid cards.
Mercier said consumer sentiment in China is not strong this year.
“It is not going to be better in 2015,” he said. “And even our suppliers are expecting a difficult 2015.”
– Contact us at [email protected]