On April 29, Suning.com (002024.SZ), China’s leading O2O retailer, owned by Suning Holdings Group, released its 2019 Q1 financial report, which showed that its smart retail strategy continues to drive the rapid growth of the company. Operating income in the first quarter was RMB 62.242 billion, a 25.44% increase compared with the same period last year. Sales across all-channels were RMB 86.926 billion, among which sales of Suning’s online store were 40.87% higher than the same period last year. In the first quarter, Suning realized a net profit of RMB 136 million.
Omni-channel Retail Network Provides Dual Drivers for Growth
In the first quarter of 2019, the overall domestic consumer market still exhibited potential for growth. Despite the softer market environment, Suning’s online and offline businesses maintained relatively rapid growth. With the continued roll out of the strategic plan to grow its business network.
In the off-line market, Suning continues with its large-scale expansion. As of March 31, 2019, the company had 9,758 self-owned stores and 2,571 franchise stores. Through the optimization of store and product structure, the company has continuously enhanced the quality of store management. Among them, Suning’s Redbaby store has gradually matured and its sales revenue increased by 15.70% compared with the same period of last year.
In the online market, with the enhanced industrial synergy and the improved efficiency brought by resource integration, the growth rate of Suning’s sales clearly outpaced the industry average. In the first quarter of 2019, transactions on Suning.com online platform amounted to RMB 54.124 billion, an increase of 36.09% over the same period last year. Among them, sales of products via its self-operated stores were RMB 37.909 billion, an increase of 40.87% over the same period last year. Transactions on open platforms amounted to RMB 16.215 billion. In addition, the Q1 report also showed that as of March 31, the company’s retail system had 422 million registered members.
All-Categories Product Portfolio Strategy Sharpens Competitive Edge
In the first quarter, the company set up five major product groups including household appliances, consumer electronics, FMCG, clothes and accessories, and international items to streamline product management. Suning further strengthened its capability to empower others with 3C, household appliances and other premium categories, while speeding up the integration and expansion of supply chains for FMCG, fresh food and general merchandise.
In terms of 3C and large household appliances, Suning has released more than 10 new smart products such as air conditioners, floor sweeping robots and smart headphones. It has also established the Suning Eco-chain Fund and Biu+Joint Laboratory to support innovative enterprises developing smart hardware and continuously optimized products, technology and the user experience.
In the FMCG department, Suning has constantly strengthened its brand and achieved dual online-offline growth through centralized procurement, purchasing directly from the manufacturer and strategic cooperation, which has also helped grow its network of offline stores. In the same period, Suning has further optimized the supply chain management of online and offline stores through the acquisition of 37 Wanda stores, marking a significant success for Suning’s All-Categories Product Portfolio operational strategy.
Investment in Logistics, Finance and Technology Remains High
In the first quarter, Suning continued to increase investment in logistics, finance, technology and building of other core capacities to lay a solid foundation for growth over the next decade.
In terms of logistics infrastructure, by the end of March 2019, the total area of warehousing and related support facilities for Suning Express and Daily Express was 9.64 million square meters and there were 26,700 express delivery outlets.
During the first quarter, investment in the consumer finance business surged 229.66% compared with the same period last year, and that of supply chain finance business increased 78.01%. Suning Finance was named on KPMG’s 2018 China Leading Fintech 50 list, and Suning Paypassport was awarded certification as a National High-and New Technology Enterprise”.
Suning has continued to invest heavily in R&D, with expenditure increasing 81.79% in the first quarter compared with the same period last year. At the beginning of 2019, the Suning Technology Group was formally established and in January, it launched the first “Smart Retail Brain”, which empowers consumer families, retail service and channel providers, manufacturers and other links across the entire industrial chain.
Founded in 1990, Suning is one of the leading commercial enterprises in China with two public companies in China and Japan. In 2018, Suning Holdings ranked second among the top 500 non-state owned enterprises in China with annual revenues of 80.85 billion USD (557.9 billion RMB). With the mission of “Leading the Ecosystem across Industries by Creating Elite Quality of Life for All”, Suning has strengthened and expanded its core business through eight vertical industries: Suning.com, Logistics, Financial Services, Technology, Real Estate, Sports, Media & Entertainment, and Investment. Suning.com is listed on the 2018 Fortune Global 500.