Sun Art's French CEO is to step down and be replaced by a Chinese successor. The retail group is in French (Auchan) and Chinese (Alibaba) hands, and this move turns out to be proof that China is anything but an easy market for Western companies.
Exit French managing director
Could Auchan be preparing for a gradual retreat from China? That rumour first surfaced back in November, when Chinese internet juggernaut Alibaba paid 2.9 billion dollars for 36.16 % of Sun Art's shares. Up until then, the French had almost three quarters of the shares under their control; the rest was held by Taiwanese group Ruentec (known from supermarket chain RT-Mart). Sun Art is active in China with two formulas (Auchan and RT-Mart) and has 484 outlets in the country.
Last year, there was talk of a takeover by RT-Mart of Auchan China. It turns out that rumour is not (yet) true: in a press release, Sun Art does confirm that Auchan is outsourcing operational management of its Chinese subsidiary. In May, French managing director Ludovic Holinier (an Auchan man) will be replaced by Ming-tuan Huang, who founded RT-Mart China and turned it into one of the most important retail groups in the country.
The leadership exchange comes in the wake of a decision by Sun Art's board of directors to integrate both chains to a far-reaching extent, "in order to improve the effectiveness and efficiency of the operations, respond to the difficult competitive environment and better serve our customers". To achieve these goals, there will be a single joint operation headquarter, both chains will share RT-Mart's supply chain and RT-Mart will be helping Auchan to upgrade the IT system of its stores. In the press release, Sun Art does emphasise there won't be a merger of the two chains, stating that "the brand and corporate identities under the RT-mart and Auchan banner remain unchanged".
“Chinese retail in full transformation”
"Chinese retail is in full transformation. The size of that change and its influence on our industry is bigger than ever," says Holinier. "Almost every day, new technology pops up and new competitors enter the market. At the same time, customers' expectations keep evolving at an accelerated rate."
All in all, this is an unfortunate ending for the Frenchman: during his last financial year, the group's turnover in China decreased by 1 % to 13.5 billion euros and net profits dropped by 6.7 % to 398 million euros. Apparently, new shareholder Alibaba was particularly insisting on a "quick digital transformation and improvement of the commercial infrastructure."