The “hard days” of Gaoxin Retail (06808.HK) are not over yet.

On the evening of November 14, Gaoxin Retail, the parent company of Da Runfa, released its 2024 fiscal year report ending September 30. It recorded revenue of 35.768 billion yuan during the reporting period, a year-on-year decrease of 11.94%; a net loss of 359 million yuan. You need to know that in fiscal year 2023, Gaoxin Retail has only just turned a loss into a profit under “cost reduction and efficiency” measures.

During the reporting period, Gaoxin Retail's product sales revenue was 34.225 billion yuan, accounting for 95.69%, a year-on-year decrease of 12.4%, and same-store sales decreased 5.9% year-on-year. Gaoxin retail was attributed to the decline in customer unit prices due to a year-on-year decline in macro-level pork and fresh vegetable CPI, a contraction in insurance and supply business, and a decrease in customer stocking.

During the reporting period, Gaoxin Retail continued the strategy of the previous fiscal year and continued to actively “reduce costs” across the board. In the first half of the fiscal year, sales and marketing expenses decreased 7% year over year to $8.718 billion; administrative expenses decreased 13.3% year over year to $888 million; and financial expenses decreased 9% year over year to $213 million.

However, the reduction in three fees is still not enough to offset the pressure brought about by Gaoxin retail stores bucking the trend and expanding.

Within six months, Gaoxin Retail opened 3 new Grand Runfa hypermarkets, 7 medium-sized supermarkets (Grand Runfa Super), and 1 M member store. Currently, Gaoxin Retail has 458 hypermarkets, 19 medium-sized supermarkets, and 1 M member store.

In contrast, the peer Yonghui supermarket (601933.SH) contracted its business and closed 25 stores in the first half of the year, successfully reversing losses.

Gaoxin Retail's M member stores carried its expectations of developing a second growth curve.

Financial reports show that Gaoxin Retail's M member store opened in Yangzhou in April this year. The number of payers has already exceeded 50,000, and the number of SKUs is about 3,000. More than 10% of these are its own brands. It is expected that two stores in Nanjing and Changzhou will open in the future.

In comparison, Sam currently has 50 offline stores in China, while Hema has 9 member stores. Gaoxin retail, which wants to participate in this competition among member stores, is clearly a bit slow.

According to retail industry insiders, the eventual transformation of supermarkets into member stores will be the “general trend”. Compared to that, member stores have more profit margins.

Take Walmart's Sam's Club as an example. On the one hand, it uses a strategy of broadening categories but streamlining SKUs to reduce procurement costs by taking advantage of scale advantages. According to public information, Sam's SKUs are about 4,000, while the traditional hypermarket Yonghui supermarket has more than 20,000;

On the other hand, Sam invigorates his own brand products, and can obtain higher gross profit through such products. For example, Sam's Swiss roll product. According to “Late Late Late Post,” this product can even account for 10% of sales in some stores, and the gross margin of bakery products is as high as 30%.

In fact, there is a precedent for the transformation of established supermarkets into member stores, but it just didn't end well.

In April of this year, Carrefour successively closed two member stores, the Chengshan Road store in Shanghai and the Zhongshan Park store in Shanghai. The Chengshan Road store was also its first member store, and it has been in business for less than two years. It can be seen from this that the transformation of supermarkets into member stores is not an easy task.

Lin Xiaohai, CEO of Gaoxin Retail, publicly stated, “Regarding the member store model, I did not set a profit target for the team in the first year. I only set two indicators: one is the number of members, and the other is the card renewal rate. In fact, our member store model does not plan to be profitable within 3 years.”

However, from beginning to end, not planning to make a profit and being difficult to make a profit are still two different things.