How Winmart, Bach Hoa Xanh grocery chains make first profits

Winmart operator WinCommerce, a subsidiary of conglomerate Masan Group, said it achieved profits for the first time in June 2024, but did not disclose further details.

Bach Hoa Xanh, belonging to electronics retail giant Mobile World, reported its first ever profits of VND7 billion (US$281,400) in the second quarter.

Customers shop in a Bach Hoa Xanh outlet. Photo courtesy of Bach Hoa Xanh

Both chains have been making significant efforts to cut costs.

WinCommerce uses its own logistics system Supra, with 10 distribution centers, to ships goods to its thousands of stores nationwide.

A dry storage ships over 450 tons each day, while a cold storage ships 275 tons.

WinCommerce has been able to cut logistics costs by 11% thanks to Supra.

Another strategy has been to develop new store models WiN and WinMart+ Rural, targeting urban and rural customers.

They reported 6.3% and 10.7% year-on-year sales growth in the second quarter.

Bach Hoa Xanh has been able to reduce logistics costs to less than 4% of total expenditure by lowering its storage area while still maintaining sales growth.

It has also found a way to increase its trucks' loads and reduce their travel time.

After redefining its stores as "mini supermarkets" instead of "modern markets," Bach Hoa Xanh has made changes to improve product quality and reduce payment time.

It also removed shopping carts to prevent long queues.

Its average revenue per store has been rising steadily to reach VND2.1 billion in June.

But the rapid growth brings with it new challenges.

CEO Pham Van Trong told shareholders recently that many stores have reached maximum capacity since they have only 150-200 square meters of space.

This might be a drag on its plans to achieve profits for the full year.

Analysts at securities brokerage SSI said under the current model, average revenue per store would not be able to exceed VND2.2 billion.

They said opening new stores and cutting costs would be key in determining future growth.

Trong said expansion is on the agenda with 50-100 new stores scheduled to be opened in the remainder of this year.

"We now know how to find store locations that guarantee expected revenues. We have been developing human resources to operate the new stores."

Developing a strong supply chain is key to ensuring the new stores operate sustainably.

WinCommerce, with nearly 3,700 outlets at the end of June, also plans to expand quickly to increase the number to 4,000 this year.

"We have completed our restructuring and are opening new stores which cater to the specific demands of customers in each area," a company spokesperson told VnExpress.

WiN stores, for instance, sells fresh and premium quality foods, while Rural stores offer affordable products.

Analysts at Bao Viet Securities said the new store models have helped WinCommerce achieve significant growth.

BIDV Securities expects Rural stores to achieve 8-9% revenue growth in the second half of this year.

WinCommerce also seeks to attract customers with lower prices.

The company has developed its own consumer goods brands which are 10-20% cheaper than average market prices.

Bach Hoa Xanh will, in the long run, continue to focus on fresh foods, which account for 40% of its products.