---
title: "Are Traditional Supermarkets Still Worth Visiting?"
description: "Since 2018, rumors of Carrefour's exit from the Chinese market have circulated, and by the end of 2022, they became reality as the company faced supplier payment issues and store closures. The decline of traditional supermarkets is attributed to external factors like e-commerce and small-store trends, as well as internal issues such as lack of innovation. However, some chains like Jiajiayue and Yonghui are finding success through regional focus and online-offline integration."
author: "赵胜男"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2023-03-26"
language: "en"
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# Are Traditional Supermarkets Still Worth Visiting?

> Since 2018, rumors of Carrefour's exit from the Chinese market have circulated, and by the end of 2022, they became reality as the company faced supplier payment issues and store closures. The decline of traditional supermarkets is attributed to external factors like e-commerce and small-store trends, as well as internal issues such as lack of innovation. However, some chains like Jiajiayue and Yonghui are finding success through regional focus and online-offline integration.

Since 2018, rumors have circulated domestically that Carrefour was exiting the Chinese market. At the time, the relevant person in charge responded: "This news is too bizarre!" However, after a few years, the bizarre rumor of that time is no longer bizarre. At the end of 2022, incidents of Carrefour being pursued by suppliers for payment were frequently exposed, and a large-scale wave of store closures occurred in various places. As of January 30, 2023, Carrefour has withdrawn from major cities such as Hunan, Hangzhou, and Chengdu. Its business in China has come to an end, and it is difficult to turn around. **In fact, with the rise of e-commerce and new retail models, the operational difficulties of traditional supermarkets are not limited to Carrefour; many chain supermarkets are facing great difficulties.** According to the latest financial report data from major listed supermarket companies, in 2022 as a whole, the supermarket industry's revenue did not increase but decreased, and it was struggling. Almost all supermarkets expected losses. This also makes people wonder: Can the Chinese market really no longer accommodate traditional supermarkets? Will traditional supermarkets really never recover? **Traditional supermarkets that cannot keep up with the times** 40 years ago, with the gradual opening up of China's economy, the domestic retail industry began to show a trend of flourishing. Retail was no longer dominated by a single state-owned large department store, but rather a coexistence of multiple formats. Community supermarkets, supermarkets, convenience stores, specialty stores, etc., all sprouted and developed to this day under this opportunity. Among them, traditional supermarkets, with their novel shopping methods such as self-service, complete goods, and price discounts, attracted many consumers. However, because shopping habits had not yet been formed at that time, consumers often arbitrarily opened packaging or tasted directly without paying, leading to an initial development that was not smooth for the supermarket industry. For example, the Friendship Store established in 1981 was popular throughout Guangzhou, but eventually closed hastily due to poor theft prevention and high product loss rates. Over time, Chinese people gradually adapted to this new mode of shopping. Visiting large supermarkets became a fashion, and one-stop shopping could save a lot of time, which exactly met the needs of consumers at that time. Supermarkets such as Lianhua, RT-Mart, Jiajiayue, and Yonghui began to rise one after another. Since then, the chain supermarket model has gained a firm foothold in China and developed steadily. By the millennium, with the rapid economic development and accelerated urbanization in mainland China, commercial real estate began to rise, and many large comprehensive commercial projects such as shopping malls and shopping centers were built one after another. As an important form of retail, supermarkets also began to enter these commercial complexes, forming a good cluster effect with other business, entertainment, catering, and other formats. When consumers shop in supermarkets, they can enjoy a large business circle, which includes a rich collection of food, leisure, entertainment, and service projects that complement each other, jointly attracting consumers' attention and providing a more comprehensive, one-stop consumption experience. At this time, both foreign and local supermarkets entered a period of rapid development. Foreign supermarkets such as Carrefour and Walmart, benefiting from many super-national treatments such as tax and rent, coupled with mature management experience and strong capital support, quickly won consumer favor and achieved high growth; while state-owned supermarkets benefited from policy support and network advantages, also achieving rapid development. **For a long time, chain supermarkets were the main circulation channel for household consumption and one of the most important forms of traditional retail.** However, the emergence of e-commerce shook the status of chain supermarkets. For example, in 2011, Taobao's "Double 11" transaction volume was 5.2 billion yuan, equivalent to the performance of Carrefour's national stores in two months, greatly diverting customer traffic from physical stores. After that, more and more novel shopping methods appeared, and consumers' shopping needs became increasingly diverse, causing traditional supermarkets to begin an uncontrollable decline. Now, after the baptism of the three-year pandemic, traditional supermarkets are already bleak. According to the statistics of the Lianshang Network Retail Research Center in 2021, among 14 listed supermarket companies, only Jiajiayue and Hongqi Chain achieved year-on-year revenue growth, while the remaining 12 all experienced year-on-year declines, with Bubugao experiencing the largest decline of 15.23% year-on-year. In terms of net profit, all 14 companies experienced significant year-on-year declines, with 9 companies suffering losses. Yonghui Superstores even suffered a huge loss of 3.944 billion yuan, which was also the company's first annual report loss since listing. According to the financial reports of various companies in 2022, many companies continued to experience more losses than gains. For example, Renrenle released its 2022 annual performance forecast, expecting a net profit attributable to shareholders of listed companies of -480 million to -530 million yuan, compared with -857 million yuan in the same period last year, with the loss narrowing year-on-year; net profit after deducting non-recurring gains and losses was -520 million to 570 million yuan, compared with -795 million yuan in the previous year. Beijing Hualian released its 2022 annual performance forecast, expecting a loss in net profit attributable to shareholders of listed companies. ... Performance continued to decline, and when forced, they had to close many stores. According to statistics from the Lianshang Network Retail Research Center, 14 listed supermarket companies opened a total of 1,276 new stores and closed 725 stores in 2021; as of the end of 2021, the total number of stores of the 14 listed supermarket companies reached 11,996. From the former prosperity to the current desolation, traditional supermarkets have undergone tremendous changes. **From the initial supply shortage, with no competitors within a few kilometers, to the current oversupply and increasingly fierce competition; from the unique advantage of one-stop shopping to the current diversion by online e-commerce, etc., these are all factors that have driven traditional supermarkets to decline due to changes in the times.** **Reasons for the decline** A deep exploration of the reasons for the decline of traditional supermarkets reveals that they have been affected by both internal and external environments. From the perspective of the external environment, there are mainly three factors that have affected traditional supermarkets, and the pandemic was a catalyst for all factors. **1) Online impact** With the continuous development of internet technology, more and more consumers have developed the habit of shopping online. Compared with traditional supermarkets, online shopping offers a richer selection of goods, often more attractive prices, and also enjoys convenient services such as home delivery. Especially during the three-year pandemic, consumers developed the habit of online shopping out of necessity, and new models such as instant retail, home delivery services, and community group buying also emerged, bringing a huge impact to traditional supermarkets. **Even after the pandemic ends, many consumers will continue to maintain the habit of online shopping, and this behavioral habit is not easy to change.** **2) Trend towards smaller stores** In recent years, smaller store formats have become an increasingly popular trend. More and more young consumers are turning their attention to convenience stores, small supermarkets, and other small retail stores. These small stores are usually located in communities, providing daily necessities and daily-use items, with affordable prices and more convenient shopping. In addition, the cost of opening these small stores is relatively low, making it easy to attract entrepreneurs to enter the market. During the pandemic, to protect personal health and safety, many consumers reduced the number of trips to large supermarkets and chose to meet their daily needs within the community. This behavioral habit not only reduced gatherings but also gave small stores more opportunities. Therefore, the foot traffic in large supermarkets gradually decreased. **3) Rising rent and labor costs** A common problem faced by traditional supermarkets is the rise in rent and labor costs. The continuous increase in these operating costs has not been supported by corresponding price increases, leading to a decline in sales. Especially during the pandemic, the customer traffic in traditional supermarkets decreased significantly, but operating costs did not decrease, making it difficult for many chain stores to maintain normal operations. In addition to the impact of the external environment, internal problems are also important reasons for the decline of traditional supermarkets. Many supermarkets lack innovation and updated marketing methods, gradually losing customer trust and loyalty, making consumers more willing to choose other retailers or online shopping platforms. **Actively seeking self-rescue** Many chain supermarkets, under operational pressure, have had to try innovation and seek breakthroughs, such as opening mini stores, warehouse stores, and integrating with online e-commerce. However, while seeking breakthroughs, the results have been quite different. Some have progressed very unsuccessfully, finding it difficult to achieve growth from new models. For example, many supermarkets have tried opening mini stores, but none have succeeded. In 2018, Walmart China tested Walmart Community Stores, "Walmart at the doorstep of residents," and once opened 8 Walmart "Huixuan" stores. But in the end, Walmart's model of hoping to make money in 600-1000 square meter community stores did not succeed, and it stopped after 2 years. Yonghui Superstores also extensively explored community fresh food stores Yonghui Life and Yonghui mini stores of 300-1000 square meters in recent years. Yonghui mini stores had two slogans: "Yonghui at the doorstep" and "Fresh Yonghui." In 2019, Yonghui mini stores opened over 500 stores. In 2020, there were large-scale closures, and by 2021, 123 stores were closed throughout the year, leaving only 33. According to its 2021 annual report, "Yonghui mini" stores lost 130 million yuan. Another example is that doing warehouse membership stores well is not easy. For example, Taiwan-based chain retailer Trust-Mart once tried to introduce the membership system to the Chinese market and attempted to develop the warehouse-style supermarket model, but announced the closure of all its stores in 2019. Not all traditional supermarkets have ended in failure; Jiajiayue is one of the companies that has grown against the trend. On January 30, Jiajiayue released its 2022 annual performance forecast. The announcement showed that Jiajiayue expects to achieve a net profit attributable to shareholders of listed companies of 35 million to 52 million yuan in 2022; net profit after deducting non-recurring gains and losses attributable to shareholders of listed companies was 12 million to 18 million yuan, achieving a turnaround from losses to profits. Regarding the reasons for the year-on-year improvement in performance and profitability, Jiajiayue stated: In 2022, the company moderately controlled the speed of store openings, continuously improved the quality of store openings, closed inefficient stores, maintained stable growth in operating revenue, and at the same time, continuously improved operational efficiency, with the expense ratio declining year-on-year, and losses in new regions also improved. In addition to the officially announced reasons, we can also see other important factors from the financial reports. **1) Deep cultivation of key regions** Jiajiayue places great emphasis on the construction of core regions. In its development process, it expanded from Jiaodong as a base to the entire Shandong province, creating model markets, and radiating outward to surrounding provinces, expanding business north and south. Currently, Jiajiayue focuses on several model markets, such as Shandong, Inner Mongolia, Hebei, Northern Anhui, Beijing, etc., continuously sinking to lower levels to achieve broader coverage. **2) Online-offline integration** Although offline consumption has always been the mainstream, the trend of diversion to online channels is inevitable. How to balance the relationship between online and offline, and achieve positive traffic diversion, is crucial to the company's revenue. Jiajiayue fully achieved online-offline integration, seizing consumers' pursuit of convenience, and providing online services such as home delivery and in-store pickup. In this way, it can attract both online and offline consumers, enhancing the linkage and traffic diversion between online and offline. The results are very significant. According to the 2022 semi-annual report, the company provided home delivery services through third-party platforms such as Meituan and JD.com, as well as its own Jiajiayue Youxian platform, in 511 stores, an increase of more than 60 stores from the beginning of the year. Online sales accounted for about 4% of store sales, and online sales and order volume both increased by more than 80% year-on-year. In addition, the offline conversion rate of customers from in-store pickup services continued to improve. In addition to Jiajiayue, Yonghui Superstores is also worth mentioning. In previous years, Yonghui fell into a dilemma between online and offline relationships. Its launched Yonghui Yunchuang suffered losses for consecutive years and eventually had to be abandoned. But the failed Yonghui did not become discouraged; instead, it increased investment in technology. It is reported that in 2022, Yonghui invested about 700 million yuan in technology. Now, with the support of digitalization, Yonghui provides home delivery services, focusing on warehousing and distribution, products, and users, and has gained many fans. According to the 2022 performance forecast, Yonghui's online business sales maintained a growth of 21% in 2022, and the model of integrating warehouses and stores achieved a common customer base for online and offline, diverting traffic offline. Yonghui Superstores released an announcement on main operating data from January to February 2023, stating that after preliminary calculations, from January to February 2023, the company achieved an operating net profit of about 860 million yuan, a year-on-year increase of about 14%, and a net profit attributable to the parent company of about 820 million yuan, a year-on-year increase of about 70%. From the results of various companies seeking self-rescue, the road to self-rescue is destined not to be smooth, and may even involve repeated trial and error and setbacks. **But the cost of trial and error will be high, because there are only two results in front of supermarket companies: either find a transformation path that fits the company's current situation and survive; or remain unchanged or fail to find a suitable transformation path and be eliminated!** **Final words:** Domestic new channels are emerging one after another, continuously eroding the customer traffic of traditional supermarkets. The business model of traditional supermarkets is too outdated and is gradually becoming unworkable in the face of changes in the times. **But traditional supermarkets will not completely disappear; the market still needs this form.** In order to keep up with the changes of the times, traditional supermarkets need to seek a self-rescue path suitable for their own development, continuously integrate new models, and keep pace with the times. For example, opening mini stores, warehouse stores, and integrating with online e-commerce are all self-rescue paths that can be referenced. Supermarkets such as Jiajiayue and Yonghui have already achieved staged success on the road to self-rescue.
However, these measures are not the ultimate solution, and new channels will continue to emerge in the future. Therefore, traditional supermarkets need to maintain sensitivity and be ready to meet the challenges of new changes at any time.


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