Click to read the original article for details Do you remember the little supermarket you loved most after school as a child? It was packed with snacks and drinks—spicy strips for one mao, ice packs for five mao... The store was usually run by a savvy couple. These small supermarkets are gradually dying out under the siege of chain snack stores. Nowadays, when you want to buy a drink, the first thing that comes to mind is a convenience store like FamilyMart, right? And when you want to buy snacks, you definitely think of snack stores with eye-catching signs like Three Squirrels or Bestore. Through the glass windows, the stores are filled with a wide variety of snacks, and the decor has style. But Old Zhang and Old Li, who are still stuck in their mom-and-pop stores, have now gotten used to a life of drinking tea and scrolling through Douyin all day, only checking out when someone buys water. Facing the "siege" of snack stores, mom-and-pop store owners are forced to adopt a "Buddhist" attitude, but the helplessness behind this is something no one can articulate. 01 Brand Snack Stores Siege Mom-and-Pop Stores "Their prices are low; we can't afford to compete." Old Zhang runs a supermarket next to a residential community in a third-tier city in Hunan, with a sign reading "Jialegou Supermarket." But now he just sits in the store scrolling through Douyin. Jialegou Supermarket The owner, surnamed Zhang, has been running this 50-square-meter store with his wife for seven years. The store is divided into two main areas: one is the product display area, mainly stocking FMCG products like beverages, alcohol, snacks, and grain and oil; the other is a courier service area, piled with over 50 packages. Behind the store is the kitchen, and the second floor is for their own living. The store opened at the same time as the community. The couple decided to open it to take care of their elementary school child and avoid the hardships of working away from home. "Jialegou" opens around 8 or 9 in the morning and closes around 9 or 10 at night. Most customers are nearby residents. Old Zhang can recite the names of people who come to pick up packages, and he knows everyone's spending habits. "Our store used to be the community's treasure chest. When business was good, we even brought my parents from the countryside to help take care of the kids. On good days, we could make over a thousand yuan in revenue," Old Zhang recalled with excitement. "Business is tough now. Several snack stores have opened nearby, and sales aren't what they used to be. In the last two years, we've made less and less each year. Especially with the pandemic outbreak in recent years, many stores have closed down," Old Zhang pointed across the street, where there used to be another mom-and-pop store, now closed and up for lease. Since two snack stores, Snacks Busy and Dai Yonghong, opened around the community, Old Zhang's business has dimmed significantly. These snack stores first catch your eye with their brightly colored signs, which are visually very appealing. Inside, they play the most upbeat music, and the stores are usually long and deep, filled with snacks arranged by category, very inviting under the glass doors. Snacks Busy storefront In contrast, Old Zhang's "Jialegou" sign looks cramped and dull. These vibrant snack stores also sell some daily necessities. The prices are even lower than other supermarkets, and some are even cheaper than Pinduoduo online. The staff greet you with smiles; even if you buy a 1.7-yuan milk tablet, they'll welcome you warmly, giving you a pleasant shopping experience. Ask any adult or elementary school student on the street which snack store nearby has the best snacks, and almost everyone will answer: "Dai Yonghong and Snacks Busy." Some wandered in out of curiosity and became regulars; others became loyal customers through word-of-mouth. What's left for the neighborhood grocery stores is only "occasionally stopping by to buy a bottle of water, a pack of cigarettes, or a pack of betel nut." Old Zhang said, "We can't win a price war with snack stores. There's no profit margin left. We can only serve as a neighborhood gossip hub, selling oil, salt, soy sauce, and tea on the side." "I haven't calculated it systematically, but I estimate our revenue has dropped by about 40%. The average daily foot traffic is about 20 people, and monthly revenue is around 12,000 yuan. That's barely enough to support a family of four. To increase income, we added the courier pickup service," Old Zhang said, lighting a cigarette and frowning as he talked about the store's situation. Courier storage area "There used to be several small stores on this street, but now only ours and a Meiyijia convenience store are left. There's no money to be made. Some people went to Guangdong to work, and others went to work in factories in the nearby economic development zone," Old Zhang said. In short, Old Zhang's words accurately sum up the current situation of mom-and-pop stores: if you're within the radiation radius of a snack store, it's hard to survive. 02 High Costs, Low Profits: The Dilemma of Mom-and-Pop Stores "We never aspired to be rich; we just wanted to make a living with this small store." Rent, utilities, and restocking costs are the three major cost burdens for mom-and-pop stores. Most small supermarkets rent their storefronts. Even in relatively remote communities, rent is around 4,000 yuan per month, which adds up to 40,000 to 50,000 yuan a year—a significant expense for frugal mom-and-pop owners. "Even if we're not business-savvy, we know that good locations sell faster, but the rent is high. At the end of the year, it feels like we're working for the landlord," Old Zhang said with a helpless look. To keep products fresh, electricity bills for refrigerators and air conditioners are also a considerable expense. Old Zhang's store has one refrigerator and one air conditioner. According to him, the electricity bill alone is over 500 yuan per month in summer. After deducting restocking costs, they can barely maintain a normal life, with no high profits to speak of. Moreover, mom-and-pop stores have very weak risk resistance. When uncontrollable factors arise, closing down is an expected outcome. Jialegou Supermarket interior layout But at the same time, grocery stores are a place where "face recognition" was implemented long before AR facial recognition technology. It's common for customers to ask for a discount on the odd change. "Five yuan and thirty cents? Just give me five yuan," is Old Zhang's instinctive response when collecting money. This makes the already low-profit mom-and-pop stores even more strained. "Jialegou Supermarket" is thus caught in a contradictory situation of high costs and low profits. Behind this struggle, they've thought about changing, but they feel helpless. "As for supply channels, these snack stores either have their own production factories or buy in bulk from the Gaoqiao Wholesale Market in Changsha, which is the largest wholesale market in East China, with a scale exceeding 140 billion yuan. For our 50-square-meter store, it's not cost-effective to go all the way to Changsha Gaoqiao to stock up," Old Zhang said about supply channels. Snack display in a specialty snack store, with a wide variety Old Zhang's purchasing plan has no standardization; he makes decisions on a whim. Daily necessities and snacks are bought from a local wholesale market in his own beat-up Wuling Hongguang van. For bottled water and beverages, they get supplies from the last-tier distributor of the brand, who is essentially a salesperson. If sales are good in the city, the salesperson has the upper hand, with restrictions on delivery times and order quantities. But if sales are poor, although there's a return and exchange process, it's extremely difficult to implement. For beverages, Old Zhang sometimes orders through JD's Zhanggui Bao and Alibaba's Retail Link. "Around summer, beverages sell well and fast, and online drinks often have discounts, so it's more cost-effective," Old Zhang said. Running a grocery store requires careful budgeting, and there's almost no room for price cuts. In summer, beverage sales are the main source of income for mom-and-pop stores. Water has the highest profit margin; for example, a bottle of Xiaoming Classmate retailing at 5 yuan can earn 1 yuan, but some tobacco, alcohol, and snack items have a profit margin of only 0.5 yuan. And this is exactly what snack chains have latched onto. "Those snack stores sell C'estbon and Nongfu Spring for only 1.2 yuan, and Ganten for only 1.8 yuan. Beverages are basically 60% of the market price. Now our beverage income has taken a big hit." Snack stores use popular items like water, beverages, and bagged snacks to attract customers; strong brands endorse weak brands, and they earn revenue from bulk snacks of weak brands. The 8th of every month is a discount day, with an additional 12% off. Beverage prices at Snacks Busy Snack chains also have various marketing tactics, with their own standards for product display and arrangement. Their packaging is often more attractive than many strong brands, and they even hire celebrity endorsements. Old Zhang's store, in contrast, is more like a shelf for displaying products, relying on thin price differences to stay afloat, with fewer product options compared to snack stores. Old Zhang said stores like his no longer need to pay taxes. A quick map search shows there are already 10 Dai Yonghong stores and 4 Snacks Busy stores nearby, leaving very little room for mom-and-pop stores to survive. Four Snacks Busy stores nearby 03 Wolves at the Door, Tigers at the Back Nowadays, ordinary people's simple dreams are increasingly unlikely to come true. Besides the inherent disadvantages of mom-and-pop stores, the retail landscape is changing rapidly under the influence of capital. First, online shopping and food delivery threatened mom-and-pop stores; now, snack chains are "stirring up" offline retail. This not only discourages consumers from going out but also shifts traffic away. With the entry of hypermarkets into China, what was once the most frequented shopping destination has gradually fallen out of favor. Now, in the internet age, various new shopping formats have emerged—convenience stores, fresh food supermarkets, B2C, O2O one-hour delivery, community group buying—and mom-and-pop stores are becoming increasingly irrelevant in the buying and selling sector. Old Zhang talked about the industry: "In the past, if someone went out to see a movie, they'd also eat nearby and buy some snacks, so there was plenty of consumer traffic. Now, young consumers rarely go out; they do everything on their phones. Delivery trucks come full and leave empty, and food delivery riders zip through the community." According to Kantar Retail's "2021 China Shopper Report Series II," in the first three quarters of 2021, sales at mom-and-pop stores, mainly small supermarkets and grocery stores, all showed a downward trend. Mom-and-pop store sales decline in the first three quarters of 2021 (Source: Kantar Retail) On the other hand, the Ministry of Commerce previously issued the "Notice on Promoting the Branding and Chain Development of Convenience Stores in Three Years," aiming to reach 300,000 branded chain convenience stores nationwide by 2022, up from 193,000 in 2020. For mom-and-pop stores without strong brand backing, this is undoubtedly another thorn. As of June 2022, Bestore had nearly 3,000 offline stores, and Three Squirrels had 1,104. Hunan's Snacks Busy has also exceeded 1,000 stores, with a significant market in third-tier cities outside Changsha. Data published on major snack store websites shows that snack stores are already expanding into third- and fourth-tier cities and even county towns to find new growth. At the same time, a "fruit + snacks" retail format in Hunan, scattered near communities and even next to mom-and-pop stores, seems to be tapping into markets beyond the Fifth Ring Road. "Fruit + bulk snacks" physical store format These are all huge impacts on mom-and-pop stores. Stores that used to make money selling bulk goods are now besieged by snack stores. Stores that used to make money selling fruit are now facing the rapid growth of "fruit + snacks" physical stores. Old Zhang has thought about transforming and developing online business, but he admits he doesn't know where to start. After all, they lack the capital, ability, knowledge, and even time to turn things around. Old Zhang said, "Jialegou Supermarket is now in a state of wolves at the front and tigers at the back. I don't know how much longer we can hold on. If we can't, we'll rent out the storefront and find another way." 04 An Unavoidable Death The small store, ancient and primitive, these small, scattered mom-and-pop retail stores are powerless against novel and aggressive capital. This is undoubtedly a dimensionality reduction attack. Mom-and-pop stores are gradually being marginalized and quietly disappearing. There are 6.8 million retail stores in China. They are unremarkable, yet for decades they have provided us with the greatest convenience in our lives. They are not just fond memories; these small stores also sustain the livelihoods of entire families. But as the wheels of new retail roll forward, any struggle by mom-and-pop stores under siege seems like a trapped beast's fight, inevitably heading toward death. Of course, we may prefer trendy and beautiful snack stores, but we will also miss those small shops where we could casually bargain and round down the change. Source: Wuhuanwai (ID: wuhuanoutside) Author: Zhou Xipi [Genki Forest National Sales General Manager Ye Licheng] Salute to channel partners, meet in Chengdu, August 31-September 2, 2022 (7th) China FMCG Channel Innovation Conference. ****-END-**_