Wumart, Dmall, Metro tie up to benefit all

Gains for Metro

Wumart's abundant capital and its leadership in digital operations as well as its local sourcing capacities have made it a strong suitor among many competitors.

"We have to increase our scale in the buying department, enhance digitalization and accelerate our number of stores," said Sarrailh.

Slow digitalization, due to the expense, has held the German retailer back in China.

Currently e-commerce is only 1 percent of Metro China's business while the ratio is about 14 to 15 percent on average at Wumart stores.

For example, he said, Dmall has 800 engineers while Metro only has 30.

Dmall's mix of payment system and membership information has created a data mining capacity that offers individual customers products they care about, said Sarrailh.

Through a collaboration with more than 80 retailers and over 10,000 brick-and-mortar stores in China, Dmall, which was founded by Zhang Wenzhong, has become the country's largest online-and-offline fresh food retailer since 2017.

By October 2019, the number of Dmall's registered users had increased to 75 million. The number of monthly active users reached over 15 million.

"First, we will be able to make a good jump by adopting their digital know-how once the deal is finalized," said Sarrailh, adding they are eager to make personnel exchanges with Wumart to enhance the digital experience in Metro.

Second, in China's vast retail market, the capacity to source locally, particularly fresh vegetables, is a challenge for European companies such as Metro. Wumart's strength in local assortment offers a solution, said the CEO.

Further, Sarrailh said it is Wumart's track record in integrating international companies including South Korea's Lotte Mart and Britain's B&Q and making them successful that convinced Metro. A successful consolidator in China's retail industry, Zhang and Wumart acquired B&Q China (which is now called B&T Home) from Kingfisher, the United Kingdom-based home improvement retailer, and turned it around from a $300 million loss to profit within 12 months of acquisition by applying the omnichannel new business model.

Wumart Chairman Zhang Wenzhong's international DNA - he is a postdoctoral graduate from Stanford University School of Engineering - can be seen in his willingness to develop the group in China and leverage Metro while keeping it independent and growing the two together.

Sarrailh said with Wumart's investment, it is expected that Metro China will expand stores quickly nationwide and penetrate into third-and fourth-tier cites where more consumers are valuing food safety and quality.

Last year the company opened only five stores. This year the momentum will be driven up, he said.