Wu Mart, the biggest supermarket chain in Beijing and in northern China, announced it planned to delist from Hong Kong on October 20. The announcement came after the troubled grocer’s decision to suspend trading on October 5, when Wu Mart’s stock closed at HK $3.27.
Asked about its delisting, Wu Mart said its main business is focused on operating supermarkets and convenience stores in China. But its performance has slumped in recent years, hampered by rising real estate and labor costs and competition from Internet sellers.
It said the whole retail industry was facing a time of integration, and that Wu Mart would take decisive measures to consolidate its status in the market.
Wu Mart was founded in December 1994 by several people who had spent time abroad. It was the capital’s first standardized supermarket chain, and Beijingers were naturally curious about the store.
With few competitors, Wu Mart developed quickly and reached 100 million yuan in sales in 1995. Two years later, it began expanding its business through cooperation with the state-owned Beijing Shijingshan Gucheng Food Market, and then through mergers and acquisitions. Statistics from Iyiou.com show the chain opened 50 branches in Beijing in 2000, and by 2002 it had operated three hypermarkets, 30 supermarkets and 200 convenience stores.
In April 2004, Wu Mart purchased a 25 percent stake in Beijing Chaoshifa Chain Store. The move ensured its leading position as controlling 35 percent of the Beijing market.
Wu Mart continued its march by targeting Tianjin. In December 2004, it purchased 12 stores in the city of Tianjin from Daiei, a Japanese supermarket chain. Following development in Beijing market, Wu Mart grabbed the Tianjin market, as well.
While the strategy appeared effective early on, in recent years Wu Mart has come to reconsider its achievements.
The company’s growth rate in earnings always remained at around 50 percent, but since 2006, its net profit declined from 41.3 percent in 2007 to 2.6 percent in 2012.
2006 was the year Wu Mart met its greatest challenge: the slow fall of founder and CEO Zhang Wenzhong.
The Commission for Discipline Inspection of the Central Committee of the CPC began investigating Zhang in 2006, and by October 2008 Zhang had been sentenced to 18 years for embezzlement, bribery and swindling.
Before Zhang’s fall, Wu Mart was expanding quickly – at one time, it controlled a third of Beijing’s retail market. “This case hit Wu Mart so hard. No one was ready for it, and many plans had to be stranded,” Wu Jianzhong, the second CEO of Wu Mart, told Beijing Times in 2008.
Affected by this case, Wu Mart applied for a suspension at Hong Kong Exchanges and Clearing in November 2006. It resumed trading in September 2007.
On the surface, Wu Mart weathered the crisis: internally, it was broken. And its competition knew it.
In 2006, Wu Mart failed to acquire Family Market – a chain snapped up by China Resources (Holdings) in 2007. The missed opportunity cost it the Tianjin market. In 2013, Wu Mart missed in its attempt to acquire 36 stores from Lotus Market.
Even its successful acquisitions failed to benefit the company.
Faced with its internal problems, Wu Mart could hardly survive the loss of its shoppers to the Internet – a trend that has exerted a crushing effect on all Chinese supermarkets.
“I seldom go shopping on the supermarket. It is troublesome to park on the market,” Zhang Jing, an office worker in Beijing, told sh.winshang.com. “I can buy inexpensive and good-quality articles on the Internet, and the online shops provide home delivery service.”
Linkshop.com.cn released a report on April 30 that found as many as 120 large and mid-sized retail stores had perished in China.
The China National Commercial Information Center said that from January to February 2015, the gross sales of 100 large Chinese retail corporations dropped 1 percent: their growth rate fell 2.5 percent.
Today, Wu Mart is seeking room to reform.
“In the future, hypermarkets and supermarkets will probably be scattered into small convenience stores or community markets. Wu Mart might be preparing for that new business, so it delisted,” Sh.winshang.com wrote in an analysis.