Qihe Yi's "broken arm to survive" : commercial considerations behind the decision to sell the supermarket business

Recently, the Nikkei business daily disclosed a blockbuster news: Seven &I Holdings plans to give Bain Capital, an American investment fund, preferential negotiating rights in the sale of its supermarket business. It is reported that Bain proposed a corporate valuation of more than 700 billion yen, which undoubtedly caused widespread concern in the market. In this context, Zihe Yi will give up the management rights of supermarket businesses such as ITO Yokado and focus on convenience store business. What kind of business logic is behind this decision? Are the business considerations sound?

First of all, from the perspective of Qiheyi's decision-making motivation, it is undoubtedly a response to the current market environment that Qiheyi chose to sell non-core businesses such as supermarkets and catering and focus on convenience store business. In recent years, with increased competition in the retail industry, especially the rise of e-commerce and online shopping, the traditional supermarket business is facing unprecedented challenges. In contrast, the convenience store business is more in line with the needs of modern consumers because of its convenience and flexibility. Therefore, Qi and Yi's decision, to a certain extent, is a response to the market trend.

However, while complying with the market trend, Qiheyi's decision also exposed its shortcomings in the business layout. As a diversified retail giant, Qihe Yi's business covers many fields such as supermarkets, convenience stores and catering. However, this diversified business model also brings management complexity. Especially when it comes to resource allocation and strategic planning, Qihe Yi may not be able to do everything. Therefore, choosing to give up some non-core businesses and focus on convenience store business may be regarded as a decision made by Qiheyi to "break his arm to survive" under the circumstances of limited resources.

However, is it really a wise decision to "break one's arm to survive"? From a business perspective, this is not a simple question. On the one hand, by selling non-core businesses, Zihe Yi can quickly obtain a large amount of cash flow to support the expansion and development of the convenience store business. At the same time, the abandonment of some businesses will also help Zihe Yi reduce management costs and improve operational efficiency. On the other hand, such a decision may also cause Qi and Yi to lose their competitive advantages in some fields, and even affect their brand image and market position.

Especially in the supermarket business, ITO Yokado, as a well-known brand under Zihe Yi, has a wide consumer base and a good market reputation. However, under Mr Zikazi's plan, ITO Yokado will be sold to Bain Capital. This means that Zihe will lose direct control of the brand and may even face the risk of brand depreciation. In addition, the sale of the supermarket business, which is an important source of revenue for Qihe, will also have a profound impact on Qihe's financial position.

Now look at Bain Capital's role. As a professional investment fund firm, Bain Capital has extensive experience and resources in investing and mergers and acquisitions in the retail industry. So, to some extent, Bain Capital's involvement may bring new opportunities for supermarket businesses such as ITO Yokado. Bain Capital, for example, could consider renovating and upgrading its ITO Yokado store in a prime location to boost customer capacity and sales. At the same time, Bain Capital can also consider cooperating with large real estate companies and other operating institutions to further expand the map of supermarket business.

Bain's involvement, however, comes with some potential risks. On the one hand, as an outside investor, Bain Capital may have a poor understanding of the culture and consumption habits of the Japanese market, which may lead it to make wrong decisions in the process of investment and operation. On the other hand, as a profit-oriented investment fund, Bain Capital's investment behavior may be more focused on short-term returns than long-term development. This means that under the control of Bain Capital, supermarket businesses such as ITO Yokado may face greater operating pressure and risk.

In addition, Zihe Yi also faced some challenges and uncertainties in the process of selling the controlling shares of York. First, although Bain Capital was chosen as the preferred negotiating partner, the final deal will depend on the outcome of the negotiations and the terms of the transaction. If the two sides have differences in price, equity ratio, etc., the deal may be stalled or even aborted. Second, even if the deal is successful, Zihe will need to consider how best to deal with the other companies under York Holdings. For example, for businesses other than convenience stores such as Seven&i Food Systems, LoFt and Akaja, does Zihe choose to keep them or sell them separately? This will directly affect the future business layout and strategic direction of Qiheyi.

From a business point of view, Qihe Yi's decision also exposed its lack of strategic planning. As a diversified retail giant, Zihe Yi should pay more attention to business synergy and integration when facing market challenges, instead of simply giving up or selling part of its business. For example, Zihe Yi can consider ways to enhance the competitiveness of its supermarket business through digital transformation and supply chain optimization, rather than simply selling it to outside investors. At the same time, Qihe Yi can also consider strengthening the synergy and complementarity between convenience store business and other businesses to build a more complete retail ecosystem.

To sum up, although the decision of Qihe Holdings to sell its supermarket business and give Bain Capital priority negotiating rights reflects its determination to follow the market trend and "break its arm to survive" to a certain extent, it also exposes its shortcomings in business layout, strategic planning and risk management. From a business perspective, the decision was not a smart one. In the future development, Qihe Yi needs to pay more attention to business collaboration and integration, strengthen digital transformation and supply chain optimization and other aspects of the work, in order to build a more complete retail ecosystem and enhance the overall competitiveness. At the same time, Qihe also needed to strengthen its risk management and compliance efforts to ensure the robustness and sustainability of its business operations.