How to achieve 'good products at reasonable prices' is what enterprises need to adapt to in the changing competitive landscape.

Under the drastic changes The pandemic has been a major upheaval for any industry. Over the past three years, the real economy has been hit harder. There were periods of lockdown, barriers defining boundaries, red codes trapping footsteps, and corridors housing strangers... Especially for the retail industry, which requires a large workforce, many enterprises have hovered on the brink of life and death. Some have quietly exited, while others have made cuts—such as New Huadu divesting its retail business, and foreign enterprises like Walmart and Carrefour closing their iconic hypermarket stores. Of course, there have also been innovations and adjustments under the crisis—from unmanned convenience stores and community group buying to warehouse membership clubs, and then to discount stores for near-expiry products and hard discount stores. At that time, everyone was looking for new breakthroughs to survive. Many supermarket enterprises also adopted a stance of 'not pessimistic, not complaining, actively responding,' slowing down store expansion, making great efforts to adjust product structures, studying customer needs, and then launching 'big single product' plans, collaborating with suppliers and major restaurant chains to develop new products. There are many supermarket enterprises that have taken a different development path, such as the typical regional supermarket representative Beijing Chaoshifa. In response to the pandemic and changes in the macro environment, supermarket enterprises have made adjustments, transformations, and trials, with varying performance after market practice. Some have adapted and responded positively; others, due to their own reasons, have accumulated problems that are hard to reverse. Chen Liping, a professor at Capital University of Economics and Business, stated that under the pandemic, the entire domestic economic situation has been sluggish, with inflation, rising unemployment, and declining personal income, leading to significant changes in consumers' purchasing power and behavior. This change in consumers has directly affected the retail industry, causing changes in the competitive structure of business formats. He said that under the impact of the pandemic, the domestic retail industry has formed two factions: one is those who adapt to changes. They continuously adapt to environmental changes under the pandemic's impact, like Hema, Fresh Legend, and convenience store 7-Eleven. 'They have been adapting to changes in the external environment, so they have been able to maintain relatively good growth,' Chen Liping told Ling Shou. The other faction is those who do not adapt. Mainly offline enterprises like Suning, Gome, and Bubugao, including traditional hypermarket enterprises. Chen Liping said that these enterprises have their own reasons for not adapting: first, their past debts were too high, the economic situation was poor, coupled with real estate policy controls, leading to significant funding problems; second, the retail industry was overly concentrated in traditional hypermarkets, and under the pandemic, due to external reasons like lockdowns, they frequently had to close, and hypermarkets are large, inconvenient to enter and exit, and even pose infection risks. 'Moreover, hypermarket goods are too expensive, homogenization is serious, and shopping is inconvenient, making it difficult to resist the impact of online price disruptors like Douyin,' Chen Liping said.

Reformers adapting to the environment Under the impact of the macro environment, many retail enterprises are also developing through reform. Take Fresh Legend as an example. Looking back at its entire development history, it is not difficult to see that Fresh Legend has been iterating on improving efficiency and reducing costs. Under the pandemic's impact, Fresh Legend has continuously adjusted its product structure, using its short distance to residents to meet their needs, and forming its own advantages with low prices and high quality. Ling Shou learned that as of the end of 2022, all Fresh Legend stores had been upgraded to the seventh-generation format. In June 2021, it opened the first seventh-generation store, covering about 200 square meters. The seventh-generation store is similar to a mini market, designed around the target customer group of '41-60 years old,' enhancing the atmosphere of everyday life. Overall, the seventh-generation store has optimized categories, management, and display. In terms of product categories, it has added aquatic products and farm vegetables, expanded daily necessities like washing and care products, and reduced the proportion of snacks; in management, it promotes color management and digital management to further strengthen standardized operations; in product display, it displays many full-box products at the entrance, customizes large plastic buckets for bulk grains and dried goods, creates a market sales atmosphere, and uses many reusable folding baskets instead of cardboard boxes to improve store restocking efficiency and reduce packaging material costs. At that time, Fresh Legend founder Wang Wei said, 'The seventh-generation store feels great, and I've found the joy of opening stores again. I have an urge to upgrade all stores immediately.' Wang Wei introduced that compared to before, the store upgrades over the past year have more highlights: for example, achieving open storefronts, more prominent private brand display, highlighting category clusters, and enhancing the performance of products. Besides Fresh Legend's continuous upgrades and iterations, from the perspective of regional supermarkets, in the face of the impact and challenges from the macro environment, Beijing Chaoshifa has made corresponding adjustments in product structure and launched a 'big single product' plan, thereby turning the situation around. In the first year of the pandemic, Chaoshifa's sales declined. Facing the sudden impact, it did a lot of work on cost savings and made great efforts in product adjustment, deeply developing products with suppliers. For example, among them, the Yue Sheng Zhai series of 4 single products sold over 2.26 million yuan in 4 months, and the bread series of 4 single products sold 1.63 million yuan in 5 months. Regarding industry changes in recent years, Chen Liping said that fierce price competition in the industry has changed the competitive structure. How to achieve 'good products at reasonable prices' is what enterprises need to adapt to in the changing competitive landscape. Fresh Legend's 70% private brands are a typical case of achieving 'good products at reasonable prices' in the industry. It is obvious to all that under the new competitive landscape, these enterprises have made some adjustments, some doing better, some slower. 'The entire adjustment is mainly focused on product structure adjustment; besides that, other things are not the main focus,' Chen Liping said.

The conservatives Over the past 20 years, it has been an era of great wealth explosion in China, with many industries producing a large number of billionaires whose wealth has continued to rise. The real estate industry is the one that can produce super billionaires, such as Wang Jianlin, Xu Jiayin, and Yang Huiyan, who were once China's richest people. In addition, the retail industry also had its glory days. In the traditional retail era, Huang Guangyu was crowned China's richest man three times, and Zhang Jindong was also at the top of the rich list. With changes in China's retail business environment, more than a decade later, the wind has changed, and the giants of the era have begun to decline. Today, some enterprises have reached a point of struggling to survive, especially represented by Gome and Suning, whose days are particularly tough—market share is shrinking, and losses continue. Suning.com's cumulative non-GAAP net loss from 2014 to 2020 was 16.79 billion yuan. In 2021, the loss reached 43.3 billion yuan. From Gome's previously released financial reports, the data on the statements show that in 2021, revenue was 46.484 billion yuan, net loss was 4.77 billion yuan, and total liabilities were as high as 63.3 billion yuan. After Huang Guangyu returned to Gome in February 2021, he proposed to restore Gome to its original position within 18 months, but after more than a year, the results were not ideal. The retail business environment has changed. In the traditional retail era, people bought home appliances at offline appliance stores, or even brand specialty stores. Gome and Suning also had stores covering the whole country, so they achieved large scale and considerable profits. But with the rise of e-commerce, foot traffic in offline appliance stores has decreased, and many stores have become showrooms, with consumers viewing products offline and then ordering online. In addition, the home appliance industry is greatly affected by real estate, because generally, when buying a new house, people purchase a whole set of new appliances, which is a large expenditure. However, the real estate market has entered a cold winter, making it difficult to sell appliances. Furthermore, the pandemic's impact has made physical operations difficult, adding insult to injury for such enterprises. The business world is like a battlefield; there are no eternal kings. Both Gome and Suning have enjoyed the dividends of an era. But when a new era begins, both companies face new challenges. Of course, as first-generation private entrepreneurs, Huang Guangyu and Zhang Jindong have never given up their struggle, and they deserve respect. From the perspective of supermarket hypermarkets, the 'one-stop' model of hypermarkets emphasizes product richness, with thousands or even tens of thousands of SKUs, which naturally dilutes sales per square meter, so sales efficiency is naturally lower than that of convenience stores and community stores. At the same time, rising rent and labor costs have caused all-round impacts on the hypermarket format. In today's competitive business environment, the dividend period of hypermarkets is gradually fading. There is still some survival space in lower-tier cities, but it is foreseeable that this format will gradually exit the retail stage. As Chen Liping said, the era of low-price retail is definitely an era centered on products. 'Whether it can provide consumers with cost-effective products—low price, high quality, and convenient and delicious—these are what consumers pursue, and they will not change in the next 10 to 20 years.' At the same time, Chen Liping said that after 2022, it is the era of retail circulation revolution. In the past, it was a process of upgrading high- and mid-end consumption, and that period has passed. 2022 is a watershed for the industry. Retailers can no longer view the industry from their own perspective but must think from the top of the circulation industry chain, incorporating manufacturers, brand owners, and consumers into their overall thinking. Through product development and reengineering, promote the growth of the entire industry.

This may also be a trend in the retail industry for the next few years or even a decade.

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