The key to failure: blind expansion and lack of credibility

Market result: headquarters moved to Shanghai.

After that, Trust-Mart expanded too fast, resulting in tight funds and damaged reputation. As a last resort, the headquarters moved back to Guangzhou.

Just when Trust-Mart launched the enclosure movement with great fanfare, many people in the industry thought it was a blind expansion. A consultant of AC Nielsen who is quite familiar with the retail industry said, "How many stores in Trust-Mart are making money?"

When Trust-Mart moved its headquarters from Guangzhou to Shanghai in order to enter the East China market, it probably didn't expect to leave so soon.

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When Trust-Mart moved its headquarters from Guangzhou to Shanghai in order to enter the East China market, it probably didn't expect to leave so soon.

Trust-Mart, a large chain enterprise from Taiwan Province Province, opened its first store in Guangzhou from 65438 to 0997 and quickly established itself in South China within a few years. In March 2003, in line with the national strategic layout, Trust-Mart moved its capital to Shanghai in order to gain a firm foothold in the East and North China markets on the eve of the full opening of the retail industry.

Then, Trust-Mart expanded at a spurt rate in the past two years, and now there are more than 90 stores in China, far exceeding the number of stores of Wal-Mart and Carrefour in China, becoming the first Sino-foreign joint venture commercial chain enterprise with the largest number of branches in the mainland. However, Trust-Mart moved its capital to Guangzhou less than two years ago. Between this trip and this trip, trust-mart management problems surfaced one after another.

In fact, when Trust-Mart launched the enclosure movement with great fanfare, many people in the industry thought it was blind expansion. A consultant of AC Nielsen who is quite familiar with the retail industry said, "How many stores in Trust-Mart are making money?"

Fault analysis:

Poor flow of people and logistics

Trust-Mart's losses in East China are mainly due to the fact that many of its goods are transported in the Pearl River Delta.

A person in charge of the Guangdong Chain Store & Franchise Association analyzed that as a retail enterprise in the circulation field, it should be different from the resource elements needed by industrial enterprises. For retail enterprises, the first condition is geographical location, followed by procurement channels, in which the concentration of suppliers and the distance of supply will directly affect operating costs. Trust-Mart entered the very mature retail market in East China in 2003, and the above two factors are greatly restricted. Yu Yuejiang, president of Trust-Mart, also admitted that due to the limitation of personnel and material resources, the development of East China was not as smooth as expected.

The first is logistics. Trust-Mart has a 30,000-square-meter logistics warehouse in Huangpu District, Guangzhou. In addition to some local procurement, Trust-Mart's national procurement work is also concentrated here. Yu Yuejiang once said that the purchase volume in Guangzhou is far greater than that in Shanghai, and Guangzhou has the best foundation. It can be seen that Trust-Mart relies heavily on the procurement market in Guangzhou, and some goods in the East China market also come from here.

According to industry analysis, the sales of chain mass market stores are relatively regional, and long-distance procurement will definitely affect the cost and sales price. So many supermarkets choose to purchase nearby. Moreover, the product price structure of mass market stores is relatively complex, such as product update and category expansion, which all need strong supplier support. However, due to the high investment cost in Shanghai, many manufacturers and suppliers will not choose this place as their permanent residence. Therefore, the high logistics cost is also the main reason why Trust-Mart was forced to leave.

Second, it is the manpower problem. A person close to Trust-Mart said: "Trust-Mart has no advantage compared with other large supermarket chains because of the shortage of funds, and the quality of its employees does not match the company's development scale and plan." Yu Rijiang also said that although Trust-Mart has more than 20 branches in East China, it has been suffering from the lack of suitable talents, and many key members have to rely on Guangzhou to continuously transport them to Shanghai, which makes him very worried. It is understood that in Chengdu, the newly opened Convergence Supermarket has just entered the market, and several middle and high-level "trust-mart" have been poached with high salaries.

Capital chain problem

In the list of the top 30 chain stores (including foreign-funded enterprises) in China in 2003 released by the Ministry of Commerce at the beginning of 2004, Trust-Mart became the most foreign-funded retailer with more than 90 branches.

At the beginning of 2003, Trust-Mart launched a large-scale expansion in the whole country, focusing on North China and East China. In less than 1 year, Trust-Mart has opened more than 50 branches all over the country, which is more than 1 times of the total number of stores opened since 1997 entered the mainland for more than four years. However, while Trust-Mart is expanding at a high speed throughout the country and its store network is becoming more and more perfect, a series of problems from the capital side are beginning to plague Trust-Mart.

A middle-level manager of Trust-Mart said that the company's lack of funds was mainly due to excessive investment in newly expanded stores in the past two years, hasty opening of stores, poor foundation and unsatisfactory operation. Many loss-making shops need to invest extra money to make up the deficit. After the headquarters moves back to Guangzhou, some stores in East China and North China with serious losses may consider selling or closing.

Professor Chen Xinkang from the School of International Business Administration of Shanghai University of Finance and Economics believes: "From the marketing point of view, if a company does not have enough strength to implement decentralized operations, the result of blind expansion will only lead to the inability to establish its strongest position in every place, so it is in a passive position of being squeezed. It is better to shrink operations, avoid powerful competitors, find favorable space in a certain area, concentrate investment and expand. If Trust-Mart focuses on the South China market, it will undoubtedly benefit the overall development of the company. "

An industry insider said, "Trust-Mart is almost a rootless enterprise in the Mainland (Trust-Mart did not obtain a license to operate in the Mainland a few years before entering China), and its parent company does not focus on retail, so it will not invest a lot of money in unprofitable expansion areas. But as far as Trust-Mart is concerned, despite the financial pressure, it has to expand further under the pressure of competition. Therefore, Trust-Mart can only rely on its own funds. "

Lack of credibility

A Trust-Mart supplier of daily chemicals once said in a report: "Doing business with Trust-Mart is very frustrating."

As we all know, the trust of suppliers to retailers is the fundamental guarantee to ensure the quality of goods. For suppliers, the size and influence of retailers are not the focus of attracting him. Whoever can guarantee timely payment will get the goods in time.

Some suppliers said that Trust-Mart's funds are often in arrears, and in the process of cooperation, Trust-Mart will put forward some harsh requirements instead of considering the relationship with suppliers from the perspective of long-term cooperation. At the same time, compared with other large supermarket chains, the company's management is not strict enough, and sometimes it operates behind closed doors, which will naturally affect the quality and structure of the goods in the store.

"Carrefour, Wal-Mart, Lianhua and other NKA (retail national stores) will purchase in a unified form, and the payment will be unified with the head office's finance, which will generally not be in arrears, while trust-mart and other LKA (retail regional stores) will mainly purchase independently in the region, so the payment will depend on the regional financial situation and will generally be delayed." The supplier said.

It is understood that in April and May 2004, Shanghai Trust-Mart stores were seriously out of stock because suppliers stopped supplying. A person in charge of a daily necessities production enterprise said that since Trust-Mart began to default on the supply in June the year before last, it has not yet been returned, far exceeding the contract. The company's working capital is only 2 million yuan, and the major stores of Trust-Mart owe hundreds of thousands of dollars, so the company dare not deliver any more goods. For those direct selling manufacturers, the phenomenon of "Trust-Mart" defaulting on the supply payment is sometimes better, and those middlemen or distributors will be more seriously owed and more passive in the negotiation process.