Image source: Internet The era of housewives stocking up in bulk is history. With the convenience of logistics and increased retail coverage in communities, people are more inclined to buy only the amount needed for the day or two or three days, which makes hypermarkets with large displays very uncomfortable. Declining sales more easily lead to the generation of near-expiry goods, with inventory piling up like a mountain, while the next batch of procurement arrives on time. Over time, they cannot afford the ever-increasing operating costs, nor can they afford the high rents. In the first three quarters of 2022, Carrefour's stores in mainland China sharply decreased from 205 to 151, closing a total of 54 stores. The collapse of hypermarkets stems from the ever-changing lifestyles of people. In the past, the whole family would drive to the hypermarket to stock up, but now it has become convenient to consume at nearby convenience stores, occasionally going to hypermarkets on weekends, and then the convenience of same-city retail with fast delivery. New business formats such as same-day delivery, next-day delivery, and flash warehouses allow consumers to buy their desired products without leaving home. At the same time, with the development of live-streaming models by influencers on platforms like Douyin and Kuaishou, many daily necessities and appliances have been priced lower. Streamers directly connect with manufacturers, bypassing the hypermarket as an intermediary, which also impacts the offline customer flow of hypermarkets. In the past, people's stocking up was based on the principles of more, fast, and complete, but now, with e-commerce plus live-streaming, along with convenience stores and membership stores each gaining space for their vertical services, the reasons to go to hypermarkets are rapidly shrinking. In the early years, hypermarkets were a seller's market. By controlling the venue and shelves, suppliers had to beg to get their products on the shelves. Carrefour was also the inventor of the "shelf fee." However, years of dependence on supplier fees resulted in the internal procurement department's weakened ability to select products, and corruption followed closely. In 2006, Carrefour launched an "anti-corruption storm," but from the results, they never solved the problem of excessive store power. One of the fundamental reasons for the internal decline of hypermarkets is inertia. In the past, they had market and discourse power, and over time they became complacent, thinking they could manipulate consumers and no longer put effort into product selection. Little did they know that in the current era of booming e-commerce and various convenient formats, consumers know more and have used more products. They compare multiple options and naturally choose the best cost-performance. Twenty years ago, when 24-hour supermarkets first appeared, hypermarkets thought operating all day was "foolish." I wonder what they think now when they see convenience formats everywhere. Why are they facing difficulties? Recently, I saw a brand activity on my social media that mentioned four major systems: RT-Mart, Wumart, China Resources Vanguard, and Yonghui. Unfortunately, Carrefour was not included. Many of the above brands have undergone transformation and upgrading, either passively or actively, while Carrefour has remained stagnant. When the channel is no longer strong, what can hypermarkets rely on? It changes from the store deciding the brand to the brand deciding the store. What role does the supply chain play in this? We can see that some old-brand hypermarkets are continuously upgrading, transforming digitally, and improving organizational management, but the core remains supply chain management. The difficulties encountered by hypermarkets stem from the overall changes in the retail industry. First is the shift in supply structure, with discourse power gradually disappearing from hypermarkets. In the past twenty-plus years, the supermarket market was basically the private domain of several large brands, and the channel discourse power was held by supermarkets, leaving brands in a relatively weak position. Only those who paid shelf fees could enter, and those who couldn't afford it were squeezed out. This led some innovative products to seek space online. However, with the vigorous development of the internet in recent years, the retail industry has undergone earth-shaking changes, with the internet empowering it significantly. More and more brands, due to their cost-performance, stand out among consumers, bringing high GMV to e-commerce, thereby replacing the market share of hypermarkets. From a competitiveness perspective, the three core competitive advantages of traditional hypermarkets are complete goods, low prices, and authenticity. These three points have been fully replaced and intercepted with the upgrade of mobile internet. Online supermarkets like Taobao, Tmall, and JD.com have replaced the completeness of goods. Supply chains like 1688 have SKUs several times that of hypermarkets, and with self-operated logistics, they reduce costs. Community group buying is even lower in price. Various group leaders and group buying models bring traffic-generating prices even below cost. The online "mini-program + official account + community group buying" provides an efficient closed loop for customer acquisition and conversion. Once customers have a better solution, it's hard for them to continue shopping at supermarkets based on past shopping habits. At the same time, the continuously cultivated consumption habits act like a hook, making people addicted. Online O2O completely solves the authenticity problem through real-time traceable platforms, ensuring every batch of goods has a clear origin and complete chain. Image source: InternetAt the same time, one of the characteristics of hypermarkets is that they require in-store shopping to generate more purchases, which significantly deviates from people's current lifestyles. With increased life pressure, people are becoming lazier, and home delivery is gradually becoming a necessity. However, the proportion of online shopping for hypermarkets is difficult to increase. First, there is the change in payment methods, with more online payments being used, but the construction of online payment channels in hypermarkets often lags behind. Second, some professionals believe that the "zero-supply model" shuts out small and medium-sized suppliers who focus on making good products, while only bringing in first- and second-tier big brands because they can afford the fees. But the fees collected by the channel ultimately have to be paid by consumers, which has led to consumer complaints about the prices of products in Carrefour and other supermarkets. The same products are more expensive than outside. In today's developed internet, any slight price difference will be infinitely amplified, let alone such a significant difference, such as a pack of paper being eight yuan more expensive than at a convenience store. For current hypermarkets, reputation is particularly important. The chain reaction of being expensive is that consumers stop coming. The rapidly developing home delivery business, food delivery, convenience store membership store delivery, etc., save consumers a lot of time and provide a better shopping experience. Currently, Walmart has achieved 100% online presence in all its stores nationwide. Through the Walmart mini-program, official flagship store, JD Super, and JD Daojia app, consumers can place orders with one-hour express delivery and nationwide delivery services. In the industry-wide digital transformation, traditional hypermarkets are also making slow progress. Carrefour only started e-commerce in 2015, nearly four years later than Walmart. It wasn't until October 2021 that Carrefour opened its first warehouse-style membership supermarket in Shanghai on Chengshan Road, with an annual membership fee of 258 yuan, but it announced closure less than two years after opening. This inevitably makes people wonder: will hypermarkets really disappear? Where is this business format headed? Where are hypermarkets headed? With changes in consumer demand and market environment, online channels have become an important trend in the retail industry. Hypermarkets urgently need to strengthen the construction and operation of online channels, which can bring more sales opportunities and growth space. At the same time, online channels can provide a more convenient, fast, and safe shopping experience to meet the diverse needs of consumers. However, this does not mean that hypermarkets will disappear. Take Ito Yokado as an example. Although the stores upstairs are still in hypermarket format, sales have not decreased but increased. China's Shuangnan Ito even achieved the global single-store champion, focusing on service quality and supply chain coordination. What exactly is Ito's strength? I will elaborate in the future. Let's return to the issue of the way out for hypermarkets. There have been many opinions on the way out for hypermarkets. In my view, it's just a few things: lock in customer groups, lower the focus, and change the model. Precisely lock in customer groups and conduct in-depth category operations and scenario creation for those groups. Simply put, it means designing categories around housewives, just like live-streaming e-commerce, abandoning the previous mindset of "give users whatever you want them to like," and instead starting from user needs—procure what users need. Image: Walmart performs strongly in the Chinese market. Image source: InternetAt the same time, around the corresponding shopping scenarios, launch products in a targeted manner to help users use them better. Modern service competition is about empathy, not just providing rigid instructions. Secondly, it's about market sinking, not just focusing on big cities. Big cities have intense competition and many categories. Go down to the county and town level markets, where consumers might prefer the hypermarket model more. Moreover, county towns have a large population base and a strong shopping atmosphere. By sinking the market, disadvantages can be turned back into advantages. In 2022, the number of counties in China with a GDP of over 100 billion yuan increased to 52. Among them, the "most impressive county-level city" Kunshan's GDP exceeded 500 billion yuan, surpassing eight provincial capitals. Its market capacity is evident. Insufficient online presence is one of the main problems for hypermarkets. Providing delivery is an important means to solve these problems. I believe some consumers actually care not about the delivery price but about whether delivery is available. After appropriately reducing delivery prices, consumers will definitely value convenience more. Against the backdrop of the overall environment, not being able to deliver is strange. Hypermarkets should actively collaborate with logistics companies to establish their own special supply model. For example, IKEA chooses a few logistics companies to complete deliveries, ensuring that when customers need it, vehicles and personnel are available. Of course, the most important thing is still the change in business logic; changing the model is inevitable. The days when hypermarkets enjoyed dividends are over. The most important thing is to transform the consignment model that squeezes suppliers into a product selection model that is responsible to consumers. Shelf fees, display fees, entry fees, and various other fees have long made suppliers miserable, and many corrupt behaviors are inevitably related to the lack of transparency in these fees. Removing the consignment model is like liberating the productivity and sales enthusiasm of distributors, similar to the household responsibility system in the past. It is also a form of self-rescue for hypermarkets and a good opportunity to reshape their image. Let's take a simple example: why do Sam's Club and Metro have good revenue? Why are traditional stores doing poorly? The key lies in whether there is sufficient space—one is profit space, and the other is consumers' psychological space. Why do Sam's members flood in? Because the sense of gain is real. The product selection is unique, and after reaching volume, costs are lowered, truly achieving relative value for money. In September 2022, Sam's Club membership exceeded 4 million. Metro, on the other hand, defines and limits its customer range, uses a strict, standardized, and highly electronic supply chain management system to reduce costs, in exchange for a smooth shopping experience for customers. Wanamaker, the father of American department stores, pioneered the return model, allowing consumers to experience something beyond shopping for the first time, creating a new shopping culture. This is exactly the "customer first" original intention that current hypermarkets lack. Extended Reading