Huachuang Securities: The transformation period of offline retail enterprises is nurturing new investment opportunities. It is recommended to focus on Yonghui Superstores (601933.SH) and other companies.

Huachuang Securities has released a research report stating that the offline retail industry is abandoning extensive expansion of stores, focusing on improving existing stores, positioning themselves with a "quality-price ratio" to differentiate in competition, which is in line with the trend of consumer stratification. With the shift in policies and stimulus for consumption, offline retail companies are facing a period of transformation and giving rise to new investment opportunities. In the long term, supply chain capability is key for retailers to compete, and those with strong supply chain capabilities can accelerate their development with instant retail. They recommend focusing on retail companies such as Yonghui Superstores, Better Life Commercial Chain Share, Chongqing Department Store, Jiajiayue Group, Chengdu Hongqi Chain, and Rainbow Digital Commercial, which are in the phase of improving their operations. Huachuang Securities' main points are as follows: Under external pressure and internal restructuring, offline retail is moving away from homogeneity and shifting towards a new phase focusing on trust assets (product quality, service experience) and human care as core competitiveness. The pandemic has accelerated the penetration of e-commerce, leading to further diversion of customers through community group purchases and instant retail, causing traditional supermarkets' revenue growth to slow down. As the real estate market enters a downturn, commercial rents decrease, and the penetration rate of e-commerce is also slowing down. The shift towards online sales increases costs, reducing the gap in cost rates between online and offline channels through a holistic cost realignment. Pinduoduo has set an example in the offline retail industry by initiating a wave of restructuring commercial chains, emphasizing a return to the essence of business focused on people and quality. Pinduoduo's model, based on the principle of "doing business with integrity", provides a systematic solution from supply chain to values, marking a shift in business competition from efficiency to value creation. Yonghui Superstores and other supermarkets have followed Pinduoduo's example, moving away from price wars and improving efficiency and reputation through restructuring, proving the replicability of quality retail. Pinduoduo's model reconstructs business ethics and consumer trust, converting employee happiness into service warmth, reshaping the logic of goods with a focus on top brands and competitive private labels, building a dual barrier of "product strength + service strength". This soft and hard restructuring essentially redefines the value chain of business shifting from profit-oriented to a win-win situation for consumers and employees, emphasizing "fair profit", a new sustainable growth paradigm. The transformation of food retailing is an opportunity for supermarkets to break through, transitioning from "product sales endpoints" to "providers of life solutions". Changes in population demographics (aging, smaller households) and the rise of the "convenience economy" drive demand for convenient food products. Food supermarkets can create high-frequency consumption scenes through a "retail + food" model, meeting consumers' demands for daily meals that are both time-saving and affordable, while also promoting additional product sales through food services. There is tremendous value creation opportunity in the shift from Chinese consumers going to supermarkets primarily for ingredients to buying ready-to-eat food, as demonstrated by benchmark companies in the food retail sector like LIFE Supermarket in Japan and Trader Joe's in the US, which heavily invest in prepared food categories, attracting repeat customers, boosting profit margins, and differentiating themselves. Instant retail is an upgraded alternative for offline retail, combining the convenience of online shopping with the timeliness of offline delivery, driving channel transformation in retail. As consumer habits shift towards instant retail, the industry is experiencing rapid growth, becoming one of the highest growth and most certain retail channels for the future. From the perspective of retailers, instant retail can broaden sales channels, expand sales range and hours, improve efficiency in all aspects of inventory management, reduce costs, and better understand local consumer behavior for optimized user operations. The industry predicts that the market size of instant retail is expected to reach 2.2 trillion RMB by 2030, with a compound annual growth rate of 16.2% from 2025 to 2030, and the penetration rate of instant retail in offline retail reaching 6.8%. In the long term, supply chain capability is crucial for retailers to compete, and those with strong supply chain capabilities can accelerate their growth through instant retail. Risk warning: Weak expectations for household income recovery, slow demand recovery; store restructuring effects may fall short of expectations.