---
title: "At the 10-Year Mark: A Middle-Aged Retailer Discusses the Past, Present, and Future of FMCG Retail"
description: "Having entered the industry in 2003, the author has 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 past decade and looking ahead to the next, the author suddenly realizes that the present may be the starting point of a major transformation, and that 10 years from now, hypermarkets may be scarce or even extinct. The unexpected changes of the next decade are actually inevitable, and FMCG retailers will have many stories to tell in this transformation."
author: "张陈勇"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-04-25"
language: "en"
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# At the 10-Year Mark: A Middle-Aged Retailer Discusses the Past, Present, and Future of FMCG Retail

> Having entered the industry in 2003, the author has 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 past decade and looking ahead to the next, the author suddenly realizes that the present may be the starting point of a major transformation, and that 10 years from now, hypermarkets may be scarce or even extinct. The unexpected changes of the next decade are actually inevitable, and FMCG retailers will have many stories to tell in this transformation.

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 past decade and looking ahead to the next, **I suddenly realize that the present may be the starting point of a major transformation, and that 10 years from now, hypermarkets may be scarce or even extinct.** The unexpected changes of the next decade are actually inevitable, and FMCG retailers will have many stories to tell in this transformation.
**Yesterday: FMCG Retail a Decade Ago – High-Speed Growth and Territory Dominance**
A decade ago, in 2006, I had been in the retail industry for 3 years, working in operations for a supermarket chain 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, opening 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 fresh produce self-operation would turn it into a dark horse. At that time, fresh produce in hypermarkets was mainly operated through joint ventures. However, when Yonghui opened new stores, 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 was already emerging 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 drove 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 quite famous, but 10 years later, traditional small chain supermarkets find it hard to survive. Now, Wuhan Zhongbai has partnered with Lawson to gradually transform 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 hypermarkets, not specialty stores.
**2006 was the era of hypermarkets and Suning Appliance racing ahead, dominating 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 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 stores, Renrenle closed 11 stores, and Lotte Mart closed 5 stores. According to Lianshang.com statistics, major domestic supermarkets and department stores closed 201 stores in 2014 and 138 stores in 2015. The situation in 2016 is not expected to improve, and even retail giants like Xinyijia are on the verge of bankruptcy.
The reasons for hypermarket closures are as follows:
**1) E-commerce impact:** Hypermarkets are characterized by a wide range of products 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, and when these profitable categories were impacted, they turned from profit to loss.
**2) Rising costs:** The rapid development of hypermarkets occurred from 2000 to 2010, with lease contracts typically signed for 5 or 10 years. In 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:** With rising per capita income, consumer demand shifted from "having" to "having more" and then to "having the best." Hypermarkets are characterized by a wide range of products, but consumers increasingly value "convenience" and "curated selection." More and more consumers prefer category specialty stores (mother-and-baby, snacks, fruits, alcohol, etc.), diverting sales away from hypermarkets.
As consumer income rises, the demand for "convenience" and "curated selection" becomes 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 no unexpected events occur, convenience stores will continue to grow rapidly. The advent of China's aging society will further promote the development and popularization of convenience stores.
The key to success in the supermarket industry has shifted from "territory dominance" to "fine 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.
**1) Online Supermarkets**
Tmall Supermarket launched its "Double 20 Billion" plan, JD.com acquired Yihaodian and launched a 1 billion yuan promotion plan, and Suning Supermarket launched its "30 Billion Nanjing Plan" and the upcoming Super New Year Shopping 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 (regardless of new or old customers) in Nanjing in 2016, the focus of the money-burning war has shifted from ride-hailing to online supermarkets.
E-commerce platforms regard online supermarkets as an important weapon for acquiring new customers and activating old ones. For Tmall, Suning, and JD.com, the purpose of operating online supermarkets is not to make a profit, and they can tolerate a certain degree of loss. The high-frequency nature of supermarket categories can increase the density of last-mile orders and reduce the overall delivery costs of the e-commerce platform.
Currently, there is a noteworthy phenomenon in online supermarkets: many brand owners are changing their product packaging to suit the characteristics of online supermarkets, launching customized large packages to guide and cultivate customers' habit of stocking up. Large packages 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.**
**2) 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 for our lives."**
The first Hema Fresh store has 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 speculate that Alibaba's promotion of "New Retail" this year, and its abandonment of 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 company, saying that each order costs dozens of yuan to deliver. 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 achieve profitability.
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, as gross profit can cover fulfillment costs. Third, the model still has room for optimization; new Hema stores have increased back-end warehouse space and adjusted product categories. Fourth, the future imagination space is large; once the store network is completed in a city, covering the entire city with online delivery, this network can load many businesses.
I believe that O2O supermarkets may evolve into a form of **"urban large warehouse + central large store + community small store + open platform," forming a closed loop with tiered stores and an APP, meeting consumers' needs for convenient shopping, one-stop family shopping, stock-up shopping, and long-tail shopping, keeping consumers within the closed loop.**
**3) WeChat Business**
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 developing downlines and pressuring inventory. There are two breakthroughs.
The first breakthrough is to achieve low traffic costs. The fulfillment costs of WeChat business are the same as those of Taobao merchants. If WeChat business can achieve lower traffic costs than Taobao merchants, then WeChat business 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 – 35% Probability**
If, in 10 years, online supermarkets still hold 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. Various specialty stores will be exquisite and detailed, forming community commerce.
Hypermarkets will move to the suburbs and adopt membership models. Consumers will shop at hypermarkets less frequently, but the average order value will increase. More warehouse-style supermarkets like Sam's Club will emerge.
**2. Rise of Online Supermarkets – 30% Probability**
Within 10 years, autonomous driving should become widespread. Combined with artificial intelligence and warehousing, the fulfillment costs of online supermarkets will decrease. The costs of online supermarket warehouses, trunk lines, and last-mile delivery are in a ratio of 2:1:1. The cost of last-mile delivery will decrease as order density increases. If the order density of the last mile exceeds a certain threshold, parcel stations may emerge to further reduce last-mile costs and improve the experience.
At the same time, brand owners will change product specifications and packaging according to the characteristics of online supermarkets, increasing the average order value. Online supermarkets may ultimately reduce fulfillment costs while increasing average order value, 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 this point, the entire FMCG retail landscape will become a new pattern: 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 – 35% Probability**
In the business world, there is a rule called **"high frequency eats low frequency."** Why do consumers no longer buy ordinary digital cameras and MP3 players? 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 exceed 100,000 per day. At this point, the APP and delivery network become traffic entry points, enabling the development of many businesses. On the basis of Taobao, Tmall, Alipay, Cainiao Network, cloud computing, and Tmall Supermarket were developed. Similarly, on the basis of O2O supermarkets, it is possible to 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 of convenient shopping, fresh shopping, one-stop shopping, and long-tail shopping, maximizing the principle of "high frequency eats low frequency."
**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 an FMCG retail transformation.** "Change" is the only constant theme. The chain supermarkets we take for granted were born only a few decades ago. Ultimately, the transformation or extinction of supermarkets is inevitable, but the breakthrough point still needs to be sought and practiced by retailers.
As retailers, we must understand change, adapt to change, and only then can we maximize our self-worth. Learning, practicing, thinking, summarizing, and writing can form systematic cognition, enabling more accurate predictions of the future and allowing us to lead or follow change. Regarding the direction of retail channel transformation and breakthrough points, what are your views? Welcome to communicate with me.
Source: O2O Toutiao (ID: o2otoutiao)
Tips will be paid 400-2000 yuan once adopted.
**China FMCG + Internet Professional New Media**
**Dedicated to FMCG Manufacturers' Transformation and Upgrading and Channel Digitalization Solutions**


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