MINISO wants to create a Chinese version of Sam's Club in the style of Pang Donglai

On the chessboard of the retail industry, every move may be a strategic layout. MINISO, a retail brand that started as a "10-yuan store", recently acquired 29.4% of Yonghui Superstores' equity for RMB 6.27 billion, becoming its largest shareholder, which has attracted widespread attention in the market. This move can't help but remind people of Amazon founder Bezos' "growth flywheel" theory, which is to drive overall growth by strengthening a key indicator.

MINISO has a new dream. ‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍

A surprising scene took place in China's retail industry.

"Xinpinlue Finance" noticed that on the evening of September 23, MINISO and Yonghui Supermarket successively issued announcements that their shareholders Dairy Farm, JD World Trade and Suqian Hanbang planned to transfer their shares in Yonghui Supermarket to Juncai International, and the actual controller of Juncai International is MINISO.

The announcement showed that MINISO acquired 29.4% of Yonghui Supermarket's shares for RMB 6.27 billion, including 21.1% held by Dairy Farm and 8.3% held by JD.com.

After the transaction is completed, MINISO is expected to become the largest shareholder of Yonghui Superstores. After the announcement, the capital market gave feedback first. Yonghui Superstores' stock price rose, while MINISO's stock price fell. On September 24, MINISO's Hong Kong stocks fell nearly 24%, and its market value evaporated by about 9 billion yuan.

Miniso, which operates "10-yuan store" retail collection stores, and Yonghui Supermarket, which operates traditional retail supermarket business, are both in the retail industry, but they are in completely different segments and it is difficult for them to intersect.

Now, MINISO’s acquisition of Yonghui Supermarket is seen by the outside world as an ambiguous business marriage. What exactly are the intentions of Ye Guofu and his MINISO behind it?

1. A business marriage in the clouds

Ye Guofu, the founder of MINISO, posted a message on WeChat Moments on the evening of September 23, saying, “If you don’t understand, it’s fine. If you understand, I’m wrong.” But the outside world still doesn’t understand and can’t figure it out.

In the view of New Product Finance, although Miniso's acquisition of Yonghui Supermarket shares is a business marriage that the outside world cannot understand, it is actually a business marriage that benefits both parties, and behind it is a business marriage that makes the outside world full of imagination.

Yonghui Supermarket also had its peak moments. At its peak, the market value of Yonghui Supermarket was as high as 100 billion yuan, but now the total market value of Yonghui Supermarket has fallen to 20 billion yuan. In recent years, traditional supermarkets have suffered a great defeat and Yonghui Supermarket has closed many stores, so it is natural that it has a hard time.

Yonghui Supermarket, which is in trouble, is actively trying to save itself. In the first half of this year, it even accepted the adjustment by the popular supermarket brand Pang Donglai in a high-profile manner. After the adjustment by Pang Donglai, Yonghui Supermarket stores have been completely renewed, and store sales performance has soared, as if it has ushered in a "second spring".

Although accepting Pang Donglai's adjustments and cooperation can bring topics and traffic to Yonghui Supermarket, it is still unknown whether the Pang Donglai model is suitable for Yonghui Supermarket's stores in various regions across the country.

Yonghui Supermarket currently needs new topics, new business resources, etc. It needs to introduce new partners, and it needs to tell a new story to the capital market. The entry of Miniso will surely become a market hot spot.

Although Yonghui Supermarket is now in decline, its business base is still there. Currently, Yonghui still has more than 800 stores across the country. The brand effect of Yonghui Supermarket, especially the Yonghui Supermarket after the transformation by Pang Donglai, is more attractive in the local area.

Yonghui Supermarket's brand effect and the supply chain business resources and systems behind it are exactly what MINISO needs at the moment. Yonghui Supermarket can drive MINISO's business upgrades in channels, categories, brands and other aspects.

For example, there are MINISO stores in front of the two Yonghui stores in Zhengzhou. After Yonghui was transferred to Pangdonglai, the customer flow increased dramatically, which also drove the growth of MINISO store performance.

The acquisition of Yonghui Supermarket's shares is also a need for MINISO to stabilize its current performance. Although MINISO released a financial report at the end of last month showing an increase in key performance indicators, showing a very good situation, in fact, under the bright spot, hidden worries have emerged, and MINISO's domestic performance has shown signs of fatigue.

According to MINISO's financial report, compared with 266 new stores in overseas markets, the number of new stores opened in China in the first half of the year is not ideal. In addition, in first-tier and second-tier cities, third-tier cities and below, the speed of MINISO's store expansion has slowed down to varying degrees compared with the previous six months.

Judging from the store operation data, the total GMV of MINISO stores in mainland China in the first half of the year was 7.097 billion yuan, an increase of 15.59% compared with the same period last year; but the same-store GMV growth rate was -1.7%, compared with 28.1% in the same period last year.

Naturally, MINISO was attracted by Yonghui Supermarket's huge store system and the supply chain resources behind it. The combination of both parties' advantageous resources can form a strategic resource multiplier effect. Moreover, from an investment perspective, MINISO only spent 6.27 billion yuan to become Yonghui's largest shareholder.

In a conference call about the investment, Zhang Jingjing, chief financial officer of MINISO, said that one of the reasons for the investment was that Yonghui Supermarket's current valuation was attractive and the premium on investment cost was low.

Nowadays, as more and more information is exposed and interpreted, the marriage between MINISO and Yonghui Supermarket seems to have become a business marriage that arouses the imagination of the outside world.

2. MINISO wants to create a Chinese version of Sam’s Club like Pang Donglai

Behind MINISO's acquisition of Yonghui Supermarket is a big chess game that Ye Guofu and his MINISO are planning.

MINISO has many labels, such as civilian fashion, small accessories, ten-yuan store, or a synonym for happy fashion. It follows a simple and fashionable style, and initially adopted a Japanese style, with a wide range of products and low prices, and a cost-effective route.

Miniso, which now has more than 6,000 stores worldwide, still looks like an upgraded and fashionable version of a 10-yuan store. Miniso has turned affordable daily necessities and small accessories into a chain fashion giant, and its business model is successful.

Ye Guofu once publicly stated that his franchise model is learned from international five-star hotels, with brand and management headquarters, and franchisees only need to regard themselves as investment partners, and do not need to understand business operations. MINISO was originally an imitator of MUJI, and in the early stages of its development, it quickly became popular by relying on the Japanese style.

As a veteran in the retail industry and a serial entrepreneur, Ye Guofu created a rapid franchise model that is extremely cost-effective, created the IP culture of MINISO, integrated the supply chain, and made the products extremely cost-effective, which led to the current success of MINISO.

Ye Guofu has been deeply studying and worshipping a brand, that is the American warehouse supermarket brand Costco. Ye Guofu believes that the key to Costco's popularity is its cost-effective and differentiated products, and he particularly praises Costco's ultimate experience of "you will lose money if you don't buy it."

Ye Guofu has publicly expressed his admiration for Costco many times, and even said that Miniso is still a primary school student in front of them. Ye Guofu is obsessed with Costco and has always wanted to make a Chinese version of Costco.

However, just as Ye Guofu was leading MINISO to follow Costco, the sudden popularity of Pangdonglai gave Ye Guofu new inspiration.

This year, the internet celebrity brand Pang Donglai made high-profile adjustments to brands such as Yonghui Supermarket, making the Yonghui Supermarket stores look brand new and fully revived.

Ye Guofu visited the Yonghui supermarket stores in Zhengzhou and Xuchang, Henan several times after they were restructured by Pang Donglai, and conducted on-site research and observation. Ye Guofu sat in the first Yonghui supermarket store after Pang Donglai's restructuring for several hours. Even after 2 pm, there were still crowds of people. At that time, Ye Guofu was thinking: How great it would be if this store was mine.

Later, when Ye Guofu visited the second Yonghui Supermarket store that was remodeled by Pang Donglai, his confidence was further strengthened, which led to the current business move of MINISO acquiring MINISO shares.

As we all know, Pang Donglai's success is mainly due to its service, which makes the simple supermarket business more warm. The Yonghui Supermarket stores adjusted by Pang Donglai have achieved a qualitative change effect.

Today, Ye Guofu has a grand plan to use the fast fashion and cost-effective model of MINISO, add the special services of Pang Donglai, and learn from Costco's high cost-effective and differentiated mass-market model, and build a combination of Pang Donglai and Costco with Yonghui Supermarket's business foundation and network.

In the warehouse membership supermarket market, Costco has few stores in China, and it is Sam's Club that is surging. It can be seen that Ye Guofu and MINISO are planning a big game, hoping to build Yonghui into a Chinese version of Sam's Club like Pang Donglai in the future.

As Ye Guofu said, in the future, we will fully support the Yonghui team to build Yonghui Supermarket into China's own Sam's Club and Trader Joe's."

3. Conclusion

MINISO's acquisition of Yonghui Supermarket's shares is like the owner of a 10-yuan store buying the shares of a supermarket giant, which has sparked a lot of speculation from the outside world.

The adjustments and changes made by internet celebrity Pang Donglai to Yonghui Supermarket stores have played a strong market chain demonstration effect and rekindled the market's hope for the revitalization of traditional supermarkets.

It is worth noting that Pang Donglai is still a Henan brand. The Pang Donglai model has not been verified in the national market outside Henan. It is unknown whether Pang Donglai's adjusted model can adapt to other Yonghui Supermarket stores across the country.

From worshipping Costco to being obsessed with Pang Donglai, Ye Guofu and his Miniso seem to have found the perfect business model in their hearts.

Ye Guofu said, "Over the past decade, I have traveled around the world and seen various retail formats and models. I found that a retail model that is better than Costco, Sam's Club and Trader Joe's is in China, and that is the Pang Donglai model." Ye Guofu also said that the Pang Donglai model is the only way out for Chinese supermarkets.

Whether it is MINISO, Pangdonglai, Yonghui Supermarket, Sam's Club and Costco, each has its own core competitiveness and unique labels. Cooperation and empowerment between them may create new sparks.

Is Yonghui Supermarket a hot commodity or a pitfall? How will Miniso be deeply tied to Yonghui Supermarket in the future? Can it successfully replicate Pangdonglai? Only time will tell.