Carrefour left, Metro was sold, Walmart closed its stores, why RT-Mart is living better and better?

By Chen Fuming, editor-in-chief of Business Review

RT-Mart opened its first hypermarket in Shanghai in 1998. In the following ten years, by virtue of the opening strategy of focusing on second and third-tier cities, extremely refined store operations, and the hybrid management model of centralized headquarters and decentralized stores, RT-Mart has achieved explosive growth.

By 2009, RT-Mart has opened 143 stores in 21 provinces, cities and autonomous regions across the country, with annual revenue of 40.4 billion yuan, and single-store performance of more than 300 million yuan.

As an independent retail brand, RT-Mart surpassed Carrefour and Walmart to become the largest and most efficient retailer in China. In fact, RT-Mart has maintained its position as China's retail leader since then.

However, at the same time that RT-Mart was ascending to the retail throne, there was a big change brewing in China's consumer market environment. The rise of e-commerce not only brought new retail formats, but also changed the shopping habits of consumers.

These changes soon affected RT-Mart. 2011, although RT-Mart's total revenue continued to grow, but as the most important business indicators in the supermarket industry - same-store sales growth slowed down, and entered a negative growth in 2014.

According to the 2014 annual report of RT-Mart's parent company, GCL Retail, the decrease in same-store sales growth is mainly due to the slowdown in the overall consumer market growth, and more diversified user consumption channels.

In the face of the continuous loss of young consumers, the traditional hypermarkets what to do?

Huang Mingduan, then chairman of RT-Mart, knows very well that the big stores must be transformed and upgraded in order to survive, and the core issue is how to establish a connection with young consumers. Since young consumers have gone online, hypermarkets must also go online.

So, at the end of 2013, RT-Mart launched its own B2C e-commerce Feniu.com, began the exploration of the Internet, digital intelligence. However, this road is not good. High warehousing costs, high fulfillment costs, high traffic costs, low distribution efficiency, so that the Feniu network into the dilemma of sustained losses.

3 years later, Fei Niu network transition to store warehouse model, split into two, explore the integration of online and offline.

One way is the development of RT-Mart fresh food App, for the store around 5 kilometers within the customer to provide B2C fresh food one hour to the home service, to meet the shopping needs of young consumers. The other way is to launch RT-Mart eLuFa App to provide B2B stocking services for small and medium-sized supermarkets, restaurants, entertainment, enterprises and institutions around the stores.

At the end of 2017, Alibaba invested in Gao Xin Retail, and RT-Mart's digital and intellectual transformation entered the fast lane.

By today, all 414 hypermarkets opened by RT-Mart in mainland China have completed digital transformation, and in addition to the RT-Mart YouFresh App, it also provides one hour to home service for customers within 5 kilometers around the store, and half-day delivery service for customers within 5 kilometers to 20 kilometers, through a number of ports in the Ali system, such as Tao Fresh Dahua, Hungry Mou, and Tmall Supermarket.

Up to now, RT-Mart has more than 10 million online members, of which 20% to 30% overlap with offline store members. The online daily order volume is close to 400,000 pens, online sales account for 20% of total sales, and in the future we hope to reach more than 50%, which is equivalent to recreating an online version of RT-Mart.

In 2019, RT-Mart fresh food e-commerce achieved full profitability, and the same-store sales growth indicator began to turn positive after five consecutive years of negative values.

RT-Mart's outlets are located in five regions: East China, North China, Northeast China, Central China, and South China, and its services cover 29 provinces, cities and autonomous regions across the country, with more than 100,000 employees and more than 100,000 guides, providing services to more than 4 million customers every day.

In order to facilitate management, but also to avoid possible disconnection to the store business impact, RT-Mart's infrastructure system adopts a distributed architecture, the regional headquarters system, the store system, POS system are relatively independent, basically each store has its own a server.

The headquarters system and the store system are not online in real time, and the information exchange between them is batch uploaded or downloaded in a daily basis.

When the new era pushes traditional retail enterprises to transform and upgrade, requiring them to go online to do business and realize the integration of online and offline, a hurdle is in front of them - distributed architecture can not support online business, and even more can not be adapted to the integration of online and offline.

Yuan Chen, CTO of RT-Mart, explained that if a retailer wants to provide home services to users around the store based on LBS, in a store and warehouse model, not only does it need a centralized architecture to take over all the user's apps or third-party platforms, but also needs to allow the business systems deployed in the centralized architecture to interact with the systems of each store, which, in turn, forms a mixed architecture, i.e., part of the business systems are in the centralized architecture and part of the business systems are in the distributed architecture offline.

In 2016, Boxmart came along. This store-centered, online and offline integration of the new retail model allows RT-Mart to see the opportunity, because this model is more compatible with RT-Mart's core strengths - supply chain and store network.

So, RT-Mart decided to transform, developed RT-Mart YouFresh App and eLuFa App, respectively, for consumers around the store and corporate customers to provide home and inbound services.

Since online orders need to be shipped and delivered by offline stores, the online retail business system centrally deployed on the hybrid cloud needs to interact with the business system of each store, such as membership, payment, inventory, marketing, logistics, and other data, which results in the formation of a hybrid system architecture, with both the original distributed architecture of the stores and the centralized architecture of the cloud that can realize the integration of online and offline.

At the end of 2017, after obtaining Alibaba's investment, RT-Mart began to migrate the systems and equipment deployed on third-party clouds to AliCloud. RTD's original cloud architecture thus became a hybrid cloud of local IDC + AliCloud.

Of course, neither the hybrid system architecture nor the hybrid cloud is the ultimate goal of RT-Mart. Chen Yu'an revealed that RT-Mart's hybrid architecture is quite complex, the data flow needs to be from the headquarters to the store, the store to the middle of the cloud, the middle of the cloud and then to the middle of Ali, as long as there is a place in the middle of the disconnect, the whole system will be out of order.

So they want to simplify the data flow path, and to do that, they can only centralize all the systems on the cloud, so that they can operate directly in the cloud.

To this end, RT-Mart is prepared to spend two to three years, the original offline system are moved to the Ali cloud, the current distributed and centralized hybrid system architecture, completely upgraded to a centralized architecture deployed in the cloud.

At the same time, the current IDC will no longer purchase new machines after the expiration of the server, the business systems deployed in the IDC will be moved to the AliCloud. At that point, the hybrid cloud configuration of IDC + AliCloud will become pure AliCloud.

RTD imported the ERP system at its inception. With the ERP system, coupled with years of functional development and optimization, the business processes of RT-Mart's offline stores are basically computerized, and data on supply chain, commodities, transactions, and members are all deposited in the system.

In 2013, in the face of the fierce impact of e-commerce, RT-Mart began to explore online retailing, launched the Flying Cow self-owned e-commerce, in order to reach the growing online consumer groups.

However, this model of Flying Cow is too challenging, and after several years of continuous losses, RT-Mart saw the opportunity of new retail, so it gave up the idea of self-owned e-commerce, and transformed Flying Cow into an online and offline fusion of store delivery business.

Consumers can enjoy one-hour home delivery service to the nearest store through the RT-Mart You Fresh App, and merchants can get next-day delivery inbound service to the nearest store through the RT-Mart eLuFa App.

However, both RT-Mart YouFresh and eLuFa, the ability to pull new limited, most of its users from the original users of offline stores. Ali's investment opens up a vast online market for RT-Mart.

In March 2018, RT-Mart began to access Taobao's Tao Fresh Da project. Like RT-Mart YouFresh, the Tao Fresh Da project is also a 1-hour home delivery service for fresh food, so for RT-Mart, it is equal to another port to reach online consumers on the basis of RT-Mart YouFresh App.

What's more, this port is located on mobile Taobao, the latter's huge traffic not only brings considerable online sales to RT-Mart stores, but also allows RT-Mart to quickly obtain a large number of new users.

Since then, RT-Mart is stationed in the Hungry Mou platform, but also with Tmall Supermarket to reach "*** enjoy inventory" cooperation, for the store around the 5 kilometers within the user to provide one-hour service, for 5 kilometers to 20 kilometers within the user to provide half-day service, further expanding the RT-Mart online traffic and the number of users.

At this point, RT-Mart's new retail business has four online ports, and consumers can choose any one of them to place an order. Stores receive orders from different ports and deliver them through the same fulfillment system.

"We have a different front end and the exact same back end. We synthesize a batch of orders from neighboring communities and give them to a single boy to deliver, and the orders are dense enough to be delivered efficiently." Chen Yu'an explained.

Up to now, all 414 RT-Mart stores have access to the one-hour delivery to home service, and more than 200 stores have gone online with the Tmall Supermarket half-day service. The number of online users has exceeded 33 million, and the number of active users is more than 10 million; the number of eLuFa merchants is more than 530,000, and the number of active merchants is close to 240,000.

According to Wu Chunxiang, general manager of RT-Mart's new retail division, the user population of the four ports on the line is partially overlapping, but the overall separation is obvious.

RT-Mart You Fresh is dominated by family users, most of whom are loyal RT-Mart users; Taoshenda and Tmall Supermarket are mainly white-collar workers; and HungryMall belongs to a younger takeaway group, which mainly buys snacks and fruits.

In addition to the online digital port, RT-Mart is also trying the community group-buying model to reach more users.

On the one hand, RT-Mart cooperates with Cainiao, which develops the station manager of Cainiao station into a leader, so that they can establish and operate community group purchase groups, and then place orders in the small program, which is uniformly delivered to the community by RT-Mart stores.

On the other hand, RT-Mart itself has set up a specialized team to develop the head of the group, as well as the business representatives of eLuFa can also develop the head.

While expanding the online sales port, RT-Mart has also implemented a new retail transformation of all stores to equip them with online operational capabilities. The stores use Ali Cloud POS and self-service cash registers, which not only open up merchandise and inventory data with Ali, but also turn the store payment process into a consumer digital touchpoint.

In order to improve picking efficiency and complete on-site picking in less than 20 minutes, the store installed a hanging system and deployed a fast-picking warehouse.

Yu-An Chen explained, "Store goods, especially fresh and FMCG goods, are basically used online and offline***. For the faster turnover of goods, it is possible that the situation is, online customers ordered, the store did not have time to pick goods, the goods were bought by the store customers, or goods have been put into the shopping cart by the store customers, but not yet checked out, online inventory still shows that the goods are in stock. In order to avoid similar out-of-stocks, we do not do segregation of long-tail goods with slow turnover, and we have built a special fast-picking warehouse for physical segregation of goods with fast turnover. Currently, the out-of-stock rate of our shipments is around 0.6%."

In order to ensure the efficient and smooth operation of online and offline omni-channel business, especially since RT-Mart has multiple retail ports online and has to interface with the distributed systems of each store offline, RT-Mart needs an intermediary system to realize the docking and interaction between online and offline.

When RT-Mart YouFresh App and eLuFa App were launched in 2017 and started to do new retail, RT-Mart established such an intermediate system and called it the RT-Mart middle platform. This business middle office was deployed on RT-Mart's IDC + third-party cloud hybrid cloud at that time.

After receiving investment from Ali, RT-Mart accelerated the process of digital intelligence, introduced Ali Cloud POS in stores, and accessed Taobao's Tao Fresh Dada project, so the business middle office was moved to the hybrid cloud of IDC + Ali Cloud, in order to interact with the Ali middle office.

In the future, when the hybrid cloud becomes all AliCloud, RT-Mart business middle office will also be centralized in the cloud.

Now, the business center interacts in real time with the RT-Mart YouFresh app, HungryMart, and Ali Center in seconds, and also with the business systems of all the stores to get data on inventory, prices, commodities, logistics, and so on.

It is just that the ERP system of RT-Mart stores is a stand-alone system with no service capability, so RT-Mart has deployed another set of local systems in each store as a relay station between the business center and store systems.

Through the cloud-based business middle office, RT-Mart has realized the simultaneous launch of multi-channel business and is able to carry out unified resource management, data management, operation management, and business management, which effectively promotes the stable growth of the overall business. By the end of 2019, RT-Mart's online retail business had already realized profitability, while same-store sales growth in stores had begun to turn positive.

While the omni-channel new retail business is fruitful, RT-Mart is also reconstructing the underlying efficiency of its stores with digital and mobile means.

Previously, due to the use of ERP systems, there was less mobile management in stores. Every day, basically early in the morning to type out a pile of reports, distributed to the corresponding personnel in the store, they take the report to do the tasks listed above, all the tasks are done, and then hand back the report.

Now, RT-Mart using PDA equipment, store receiving, stocking, shelving, picking, packaging, distribution, inventory and other operations, are made into a mobile management.

"A lot of work can be assigned to the corresponding personnel through the system on the PDA, they receive the task to complete, and then directly on the device click on the report on the line." Chen Yu'an explained.

RT-Mart has also developed a store general staff App, the store manager on their own cell phone can always check the store's sales, fulfillment and so on.

ERP system allows RT-Mart stores to basically realize the informationization, and the use of the system deposited in the sales and inventory data, RT-Mart has established a very strong commodity management capabilities. However, in addition to the purchase and sale of inventory, other data such as membership, more often than not, it is just data.

In 2014, RT-Mart launched Feiniu.com and began to do online. "We know that online, people and transactions are to be associated, and it is a single person and his transactions, so we need to extract all the transactions." Yu-Ann Chen said.

It just so happened that, at that time, big data technology had matured, RT-Mart utilized a big data development framework to build a data middleware on its own hybrid cloud. It's just that this development framework uses an open source system with some security risks.

So currently, RT-Mart is working with Ali to rebuild the data center on the Ali cloud using Ali's DataWorks big data development platform and MaxCompute big data computing services.

It is expected that within this year, RT-Mart will first import the data related to members, transactions, fulfillment, etc. into the new data center. By then, RT-Mart will be able to take advantage of the finer granularity of online member profiles to achieve personalized precision marketing.

With Ali's products and tools, RT-Mart can predict how many users are around the new store and in which areas. After opening the store, you can clearly know how many users have been developed in the neighborhood, what the penetration rate is, how often they buy, and what categories they prefer.

For the online order fulfillment delivery, is RT-Mart and Hummingbird namely cooperation to complete, the whole process is completely data-driven.

When the RT-Mart store system receives online orders from multiple ports, the order will automatically be assigned to the picker, who will pick according to the order information displayed on the PDA partition. After picking and packing, the picker clicks Done on the PDA, and the order information will automatically flow to Hummingbird's intelligent scheduling system, which will automatically notify the rider to dispatch the order.

Hummingbird for RT-Mart customized in-store delivery mode to improve delivery efficiency and service quality, the current delivery punctuality rate of 99%.

At the same time, the Hummingbird system will be based on the order coverage area, distribution routes, will be the same area of the collection of multiple orders to a rider for distribution, not only greatly enhance the distribution efficiency, but also increase the income of the rider.

In the view of Chen Yu'an, the direction of IT technology development in the next decade is intelligence. There are many things that can be done once the digital intelligence capability is deposited in the company.

Although RT-Mart has a complete ERP system that produces a lot of reports, these reports are just data and information. Reading them and then converting them into an appropriate decision is still basically up to people.

Of course, there are different levels of decision-making, some of which are day-to-day, some of which are operational, and some of which are strategic.

After the realization of intelligence, the daily and business-type decisions can be replaced, so that the operational efficiency will be higher.

For example, RT-Mart does one hour to home business, there are two important things. One, the inventory should be accurate, because customers should be delivered one hour after placing an order. Second, there has to be enough manpower to deliver the order.

And to meet these two conditions, you have to reserve inventory and manpower in advance. But how much reserve is enough? To answer this question, RT-Mart must predict orders as accurately as possible.

At first, RT-Mart predicted online orders are manual, a week in advance, a store to store prediction, the accuracy rate is about 90%. Early last year, RT-Mart began to try to utilize Ali's intelligent system for prediction.

"At first, the intelligent prediction is a bit stupid, the accuracy rate is 70% to 80%, sometimes only 60% more, because it needs to consider a lot of decision-making factors, and needs to be constantly trained with data." Wu Chunxiang said.

After almost a year of adjustment and learning, on April 1 this year, RT-Mart began to fully enable the intelligent system to predict orders, and the prediction is the daily orders of each store, the accuracy rate has exceeded the manual.

"With accurate order prediction, we can prepare inventory and manpower in advance, and operational efficiency will be optimized. Later, we will continue to make adjustments to the intelligent system so that it learns new things, and we hope that in the future the forecasts will reach the hourly level." Wu Chunxiang added.

According to Yu-An Chen, intelligence brings efficiency.

RT-Mart is a distributor, one end is connected to the consumer side, one end is connected to the supply side, and between the two ends is like a pipeline that often piles up. How to pass a more efficient system, so that there is no pile up between these two ends, but also smooth circulation, is what RT-Mart should do.

For example, right now, the interaction between stores and headquarters is day-end, and it may take two or three days for headquarters to collect information and send it back to the vendor, and then the vendor may ship it a week later. The flow of information in this part of the supply chain is actually sluggish.

In the future, under the architecture of the Internet and intelligence, if the flow of information can be turned into seconds, what kind of impact it will have on the entire supply chain and the management of the enterprise is worth exploring.

Therefore, in the transformation of digital intelligence, RT-Mart next to do is to build a more active and intelligent IT system based on cloud architecture, at the same time, the use of Ali's resources and capabilities to cultivate RT-Mart's intelligent capabilities.

"When we have this kind of ability, our decision-making will be faster than other retailers, and after accumulating over time, the gap will become bigger and bigger." Yu-Ann Chen envisioned.