△Add friend and note "inspection" to register. Having entered the industry in 2003, I have worked in FMCG retail for 13 years, including 5 years in offline supermarkets and 8 years in e-commerce retail (including O2O). Reflecting on the retail landscape 10 years ago and projecting 10 years ahead, I suddenly realize that the present may be the starting point of a major transformation. Perhaps in 10 years, hypermarkets will be scarce or even extinct. The surprises of 10 years from now will actually be logical, and how many stories will FMCG retail professionals have in this transformation? Yesterday: FMCG Retail a Decade Ago – High-Speed Growth and Dominance by Territory Ten years ago, in 2006, I had already been in the retail industry for 3 years, working in operations for a chain supermarket in Chongqing. The mainstream FMCG channels back then were chain hypermarkets, independent supermarkets, night markets, street stalls, and 2-yuan stores. 2006 was the golden age of hypermarkets. Foreign supermarkets like Walmart and Carrefour were aggressively expanding, while regional supermarkets such as Zhongbai Warehouse, Suguo Mart, Wumart, and Chongqing Department Store Supermarket were emerging strongly. Carrefour entered Chongqing in 1997 and opened the city's first hypermarket. In the following years, any employee who had worked at Carrefour could directly become a section chief or supervisor at other supermarkets. Carrefour became the "Whampoa Military Academy" for Chongqing supermarket professionals, and young people at that time were proud to enter the supermarket industry. In 2006, Yonghui Supermarket had just entered Chongqing two years earlier, and it was not yet apparent that its self-operated fresh produce would turn it into a dark horse. At that time, fresh produce in hypermarkets was mainly operated through joint ventures. However, whenever a new Yonghui store opened, many Chongqing residents would spread the word that Yonghui's eggs and apples were very cheap. In 2006, the phenomenon of big fish eating small fish had already appeared in the hypermarket sector. Large supermarkets were opening more and more stores at an increasing pace, and some small chain supermarkets began to close down. Some of my senior colleagues formed consulting teams to help wealthy locals in small cities open supermarkets. Their high income and opportunities to travel made me, a newcomer, very envious. In 2006, per capita income was low, and there was no soil for Japanese-style convenience stores. Independent supermarkets and hypermarkets were both growing rapidly. People from Lishui organized groups to open supermarkets across the country, which also spurred locals to open many independent supermarkets. In 2006, various places also saw the emergence of small chain supermarkets (with small floor areas). Chongqing's Shifenli Supermarket was somewhat famous, but 10 years later, traditional small chain supermarkets find it hard to survive. Now, Wuhan Zhongbai has partnered with Lawson to gradually convert small supermarkets into Japanese-style convenience stores. In 2006, night markets and street stalls were more numerous than today, as city appearance management was not as strict. Consumers were more price-sensitive, and 2-yuan stores and night markets were spread throughout the city. In 2006, there were few specialty stores. Hypermarkets were more impressive in consumers' minds, and for purchasing mother-and-baby products, alcohol, and gifts, the first choice was a hypermarket, not a specialty store. 2006 was an era of hypermarkets and Suning Appliance racing ahead, dominating by territory. Large supermarkets, medium and small supermarkets, and night market vendors formed the main retail channels for FMCG. Today's Retail Landscape: Innovation Sprouts, Fine-Tuned Operations Looking at FMCG retail today, although supermarkets remain the primary channel, hypermarkets are already on the decline. Japanese-style convenience stores and specialty stores are rising, and online supermarkets and O2O supermarkets have emerged. 1. Hypermarkets, Convenience Stores, Specialty Stores In recent years, supermarkets, department stores, and brand specialty stores have been hardest hit by store closures. In 2015 alone, Lianhua Supermarket closed 612 stores (including small stores), Carrefour closed 18, Renrenle closed 11, and Lotte Mart closed 5. According to statistics from Lianshang.com, major domestic supermarkets and department stores closed 201 stores in 2014 and 138 in 2015. The situation in 2016 is not expected to improve, and even retail giants like New Yijia are on the verge of bankruptcy. The reasons for hypermarket closures include: 1. E-commerce impact: Hypermarkets are characterized by a wide assortment and low prices, which are also the core competitiveness of e-commerce. Especially in non-food categories, e-commerce offers far greater variety and lower prices than hypermarkets. Hypermarkets previously made most of their profits from non-food categories; with these profitable categories under attack, they have turned from profitable to loss-making. 2. Rising costs: The rapid development of hypermarkets occurred from 2000 to 2010, typically with 5- or 10-year lease contracts. By 2016, many hypermarket leases expired, and the real estate boom drove rents up sharply. Additionally, labor and tax costs increased, making it difficult for hypermarkets to remain profitable. 3. Changing consumers: As per capita income rises, consumer demand shifts from "having" to "having more" and then to "having the best." Hypermarkets are characterized by a wide assortment, but consumer needs are gradually changing, with greater emphasis on "convenience" and "curated selection." More and more consumers prefer category specialty stores (mother-and-baby, snacks, fruits, alcohol, etc.), which diverts sales away from hypermarkets. With rising incomes, the demand for "convenience" and "curated selection" has become prominent, driving the rapid development of convenience stores and specialty stores. Convenience stores have seen a compound annual growth rate of over 17% in recent years, ranking first among traditional retail formats. Many independent supermarkets are also changing their image to look more like Japanese-style convenience stores. Currently, convenience stores still hold a relatively small market share compared to supermarkets, but in Japan, convenience stores have become the number one retail format. If nothing unexpected happens, convenience stores will continue to grow rapidly, and the advent of an aging society in China will further promote their development and penetration. The key to success in the supermarket industry has shifted from "dominating by territory" to "fine-tuned operations." Yonghui with its self-operated fresh produce, RT-Mart with its emphasis on SOP and integrated operations and procurement, and FamilyMart with its excellent customer experience are clearly more competitive. 2. New FMCG Channels Currently, new channels have emerged in FMCG retail, including online supermarkets, O2O supermarkets (such as Hema Fresh), and WeChat businesses (micro-commerce). 01. Online Supermarkets Tmall Supermarket launched its "Double 2 Billion" plan, JD.com acquired Yihaodian and launched a 1 billion yuan promotion, and Suning Supermarket launched its "3 Billion Nanjing Strategy" and is about to launch a super New Year's goods festival. Starting with Tmall Supermarket distributing 50-yuan new customer coupons in Beijing in 2015, and developing to Suning Supermarket distributing 100-yuan shopping coupons (for both new and existing customers) in Nanjing in 2016, the hot area of the money-burning war has shifted from ride-hailing to online supermarkets. E-commerce platforms regard online supermarkets as an important weapon to acquire new customers and activate existing ones. For Tmall, Suning, and JD.com, the purpose of operating online supermarkets is not profit; they can tolerate a certain level of losses. The high-frequency nature of supermarket categories can increase the density of last-mile orders, reducing the overall delivery cost for e-commerce platforms. A noteworthy phenomenon in online supermarkets is that many brands are changing their packaging to suit the characteristics of online supermarkets, launching customized large-pack products to guide and cultivate customers' habit of stocking up. Large-pack products not only differentiate from offline channels but also reduce e-commerce packaging and delivery costs, increase average order value, and lower the proportion of delivery costs. As customized products increase and consumers develop the habit of stocking up on online supermarkets, online supermarkets may become a mainstream FMCG retail channel in the future. 02. O2O Supermarkets In my opinion, O2O supermarkets (such as Hema Fresh) may also become a mainstream channel in the future. Hema Fresh opened its first store in early 2016, and by the end of the year, it had opened 6-10 stores in Shanghai, while also entering Beijing and South China. According to Hema Fresh founder Hou Yi, "The model is mature; we are running at full speed." The first Hema Fresh store has an average of over 4,000 online orders per day, with an average order value of 70 yuan. This is the confidence behind Hou Yi's claim that the model is mature. I suspect that Alibaba's push for "New Retail" this year, abandoning the term "e-commerce," is due to the confidence that Hema Fresh's achievements have given Ma Yun. Some peers still view Hema Fresh as a traditional fresh e-commerce, saying that each delivery costs dozens of yuan. In fact, Hema Fresh only delivers within a 5-kilometer radius of its stores, with the fastest delivery in 30 minutes. Each delivery person can deliver 40-50 orders per day, with a delivery cost of 5-8 yuan per order. For Hema Fresh, with an average order value of 70 yuan and a gross margin of 20%, online orders can be profitable. I am optimistic about the Hema Fresh model for three reasons: First, the order volume is large, with over 4,000 online orders per store, and these are normal consumer demands. Second, the data model can be profitable, with gross profit covering fulfillment costs. Third, the model still has room for optimization; new Hema stores have increased back-of-house area and adjusted product categories. Fourth, the future imagination space is large: once store layout is completed in a city, online delivery can cover the entire city, and this network can load many businesses. I believe that O2O supermarkets may evolve into a form of "city warehouse + central large store + community small store + open platform," with tiered stores and an APP forming a closed loop, meeting consumers' needs for convenient shopping, one-stop family shopping, stock-up shopping, and long-tail shopping, keeping consumers within the closed loop. 03. WeChat Business (Micro-commerce) Finally, let's talk about WeChat business. Compared with online supermarkets and O2O supermarkets, the prospects for WeChat business are still unclear. For WeChat business to develop healthily, it must abandon the methods of recruiting people and pressuring inventory. There are two breakthroughs. The first breakthrough is to achieve low traffic costs. The fulfillment cost of WeChat business is the same as that of Taobao merchants. If WeChat business can achieve lower traffic costs than Taobao merchants, then it may become a mainstream shopping channel. To reduce traffic costs, it is necessary to build a social channel brand, not just rely on high commission mechanisms for agents. The second breakthrough for WeChat business is not to start from reducing traffic costs, but from increasing product premium. Traditional brands rely on location, store image, advertising, etc., to build brand image. WeChat business uses social channels to spread the brand. If it fully understands the characteristics of social channels and uses new methods to build brand image, it may also develop enough fans to form a brand premium. Tomorrow: Will the FMCG Retail Landscape Change in 10 Years? Today's retail trends determine the future retail landscape. What will the FMCG retail landscape look like in 10 years? There should be three possibilities: 1. Continuation of Current Trends – Probability 35% If, in 10 years, online supermarkets still have a relatively low market share, and if O2O supermarkets (like Hema Fresh) do not become a mainstream retail format, then the FMCG retail landscape will be similar to that of Japan today. Convenience stores may become the number one retail format, fresh fruit specialty stores and premium fresh supermarkets will be the first choice for fresh shopping, and various specialty stores will be exquisite and delicate, forming community commerce. Hypermarkets will become suburbanized and membership-based. Consumers will shop at hypermarkets less frequently, but the average transaction value will increase. There will be more warehouse clubs like Sam's Club. 2. Rise of Online Supermarkets – Probability 30% Within 10 years, autonomous driving should be widespread. Combined with AI and warehousing, the fulfillment cost of online supermarkets will decrease. The cost structure of online supermarkets for warehouse, line-haul, and last-mile is 2:1:1. The last-mile delivery cost will decrease as order density increases. If the last-mile order density exceeds a certain threshold, parcel stations may emerge to further reduce last-mile costs and improve the experience. At the same time, brands will adjust product specifications and packaging according to the characteristics of online supermarkets, increasing average order value. Online supermarkets may eventually increase average order value while reducing fulfillment costs, enhancing competitiveness, and becoming the first platform for one-stop shopping (except for mass fresh produce) and stock-up shopping. In this scenario, hypermarkets will be eliminated. At that point, the entire FMCG retail landscape will become: convenient shopping goes to convenience stores, fresh shopping goes to specialty stores, one-stop shopping and stock-up shopping go to online supermarkets, and long-tail shopping goes to e-commerce platforms. Hypermarkets will become an obsolete retail format. 3. O2O Supermarkets Become Closed-Loop Platforms – Probability 35% In the business world, there is a rule called "high-frequency eats low-frequency." Why don't consumers buy ordinary digital cameras and MP3 players now? Because high-frequency smartphones have replaced them. Suppose an O2O supermarket opens 15 stores in a city, covering all urban areas. Due to the high frequency of fresh produce shopping, online orders alone could exceed 100,000 per day. At that point, the APP and delivery network become a traffic entry point, enabling many businesses. Just as Taobao gave rise to Tmall, Alipay, Cainiao Network, Cloud Computing, and Tmall Supermarket, similarly, on top of O2O supermarkets, it may develop food delivery channels, express delivery networks, cross-industry alliances, combined with community stores to offer ultra-fast delivery, combined with central warehouses to offer half-day delivery, and open platforms. At this point, O2O supermarkets (like the Hema model) may become a high-frequency shopping platform, forming a three-dimensional store network of "central warehouse + central store + community store," combined with online supermarkets and open platforms, keeping consumers in a closed loop, becoming the mainstream FMCG retail channel, fully meeting the needs for convenient shopping, fresh shopping, one-stop shopping, and long-tail shopping, taking "high-frequency eats low-frequency" to the extreme. Summary The so-called "strategy" is to stand in the future and look at the present. This article speculates on three possible future retail landscapes. Currently, we may be at the starting point of FMCG retail transformation. "Change" is the only constant theme. The chain supermarkets we take for granted were born only a few decades ago. Ultimately, supermarkets will either change or disappear, but the breakthrough point still needs to be sought and practiced by retail professionals. As retail professionals, we must understand change and adapt to it to maximize our self-worth. Learning, practicing, thinking, summarizing, and writing are necessary to form systematic cognition, to predict the future more accurately, and to lead or follow change. Regarding the direction of retail channel transformation and the breakthrough point, what are your views? Welcome to communicate with me. 10th B-end E-commerce Inspection – "From Products to Scenes" Event Time: December 10-13 Event Locations: Wuhu, Nanjing, Changsha Event Schedule:
Morning of Dec 10: Visit Three Squirrels Headquarters + Investment Food Store
Afternoon of Dec 10: Visit Nanjing Squirrel Small Store
Evening of Dec 10: Visit Nanjing Master Gao Beer Workshop Store
All day Dec 11: Nanjing-Changsha, or free arrangement
Morning of Dec 12: Community Group Buying Exchange Salon
Afternoon of Dec 12: Koala Selection Hero League Launch Event
Evening of Dec 12 to early morning of Dec 13: On-site inspection of Koala Selection Logistics Center – This time period is the peak sorting period in the warehouse, allowing direct observation and learning of the back-end operation process of community group buying e-commerce Distributor friends who are interested are welcome to join us to learn and inspect on-site: Organization Format 1. Expert Exchange Salon**************2. Company Visit
- On-site Explanation
- One-on-One Communication**************5. Actual Market Case Visit Friends who want to participate If you are interested in a particular day's content, you can register separately Long press this QR code or click "Read Original" to register in one click! Add friend and note your intention. -END-