Source | Lao Zhang Talks Retail When Lao Zhang received the call from Lu, his tone was straightforward but tinged with anxiety. This veteran, who had spent ten years in the traditional trading industry, had nearly 300 million yuan in annual revenue. By all accounts, he should have been "coasting to victory," but in early 2024, he and his team plunged into the wave of instant retail, setting up lightning warehouses. In less than two years, they had 43 stores across multiple cities. On the surface, it looked like a decent track record, but Lu was increasingly uneasy. "Teacher Zhang, in the last two months, the competition has been brutal. Stores that were profitable are now mostly losing money." He laid out his predicament clearly over the phone. This call was less a consultation and more a real-time debrief and plea for help from a hands-on transformer fighting on the front lines.
The Advance and the Foreshadowing:
From Traditional Trading to 43 Lightning Warehouses
Lu's transformation path mirrors that of many traditional distributors. In early 2024, using a "one-pallet of goods" approach, they joined a branded lightning warehouse and saw good results. Leveraging years of accumulated ground resources and networks, Lu secured the provincial agency for the brand. From February 2024, the pace of store openings accelerated sharply, reaching 43 stores, with 25 self-operated and 18 franchised. The model was clear: self-operated stores used a "fixed salary + profit sharing" scheme, keeping store managers motivated and turnover low; operations were split with the brand—local snacks and FMCG were managed in-house, while general merchandise was handled by the brand. The product mix was primarily general merchandise and daily necessities shipped from the brand's central warehouse, with nearly 10,000 SKUs but shallow inventory, following a "wide but shallow" strategy. Until mid-October, this approach worked well, and most stores that had passed the ramp-up phase were profitable. Lu felt they were on the right track.
The Cold Winter and the Cracks:
When the Tide Goes Out, Problems Surface
Change came abruptly. In October, the northern chill seemed to freeze growth. Some previously profitable stores began showing deficits. Lu summarized several "knives" cutting into profits:
- Rising winter delivery costs: This is an eternal pain for instant retail in the north.
- Platform rule "tweaks": For example, "magic price" promotions changed from a limit of one item per customer to multiple, directly reducing per-order gross margin.
- The war spreads to general merchandise: Previously, competition was mainly on FMCG, but now even general merchandise and daily necessities, which had relatively higher margins, are seeing price wars. This is a fatal blow for them, as their product mix is primarily general merchandise.
- Declining order volume: Average store orders dropped from over 10,000 on the platform to 7,000–8,000. A deeper unease stems from doubts about the partner's capabilities. "When it comes to a tough battle, I feel the (brand's) capabilities are lacking," Lu admitted. What worries him more is that some well-known "volume kings" in the industry have not yet entered the province on a large scale, but it's rumored that Squirrel Convenience will soon arrive, and the real hard fight may still be ahead. Additionally, relying on the brand for the product mix means they can't control product markups or logistics costs; relying on them for operations means there's always a layer of separation in terms of refinement and local adaptation. Each month, they pay only a 3% operation fee, but including product markups, the brand takes over 10,000 yuan per store per month, meaning over 600,000 yuan in profit flows out monthly across 43 stores.
Breaking the Deadlock and Recommendations:
Taking Control of Your Own Destiny
Facing Lu's predicament, Lao Zhang offered several suggestions:
1. Go Independent: Build Your Own "Headquarters"
This is the most core and decisive step. The reasoning is practical: The economics make sense: The hundreds of thousands paid monthly to the brand would be enough to build a more elite and localized operations team. Operations can be more refined: Lightning warehouse operations are highly regional; a southern brand's headquarters operations can hardly deeply understand the consumption habits and category preferences of the Northeast market. Managing it yourself allows faster response and a more accurate product mix. Seize the initiative for development: Breaking free from brand constraints allows you to develop your own brand, franchise, and expand supply chain business, with greater room for imagination. This move "at least won't make things worse."
2. Solving the Talent Shortage: From "Accompanied Running" to "Self-Driven"
Lu's concern is realistic: There is a scarcity of instant retail operations talent in the north, and recruited food delivery BD staff struggle to transition, lacking understanding of product mix and product weight logic. To address this, a "consultant accompaniment" model is proposed. This involves senior operations staff from top brands providing daily online meetings and full-process follow-up to help Lu's team build headquarters operations capability from scratch. The focus is not on doing it for them but on "teaching" and "system transplantation," with monthly fees and controllable trial costs. This is essentially using knowledge payment to buy valuable growth time and avoid the cost of pitfalls.
3. Prudently Handle Platform "Alignment" and Deepen Supply Chain Value
A bigger opportunity may lie in Lu's old line of work—the supply chain. He is already a large-scale distributor. The next step could be to leverage the stable demand from his 43 stores to enter the general merchandise and daily necessities supply chain. Lightning warehouse owners suffer from the pain of sourcing general merchandise: unstable links on 1688 and Pinduoduo, goods not matching descriptions, and troublesome after-sales. If he can provide a stable, reliable supply chain solution with operational support (such as main images and search terms), it would build a deep moat. Initially, he can start small with high-frequency bestsellers and gradually customize, though there is a risk of inventory pressure with general merchandise, but once successful, it becomes a core barrier.
4. Upgrade Traditional Distribution Thinking: Become a "Dedicated Service Provider" for Lightning Warehouses
As a traditional distributor, Lu's strengths lie in warehousing and distribution hardware and local networks. He can go further by reshaping services around the unique pain points of lightning warehouses: Product customization: Focus on platform bestseller lists and coupon products, and collaborate with brands to customize exclusive models for lightning warehouses. Service upgrades: Provide 24-hour night delivery (lightning warehouses are less busy at night) and solve delivery issues to negative floors. Digital empowerment: Transform existing digital warehousing management capabilities into value-added services for lightning warehouse clients.
Enlightenment:
The Common Gateway for Transformers
Lu's story is far from unique. It reveals the typical path of a traditional industry player entering a new track: initial resource-driven growth → hitting bottlenecks and discovering problems in external dependencies → facing the choice of whether to make heavy asset investments and build core capabilities. His confusion lies in seeing the real money flowing out monthly and feeling the constraints of being controlled by others, yet fearing the risks of building his own team and the talent challenges. The key to breaking the deadlock is precisely to calculate the long-term accounts and dare to use short-term paid learning (consultant accompaniment) and strategic investment (building a headquarters, deepening the supply chain) to exchange for long-term independence and richer profit margins. Competition in instant retail has entered the mid-game, and the inevitable path is from "expanding scale" to "refining details," from "relying on franchising" to "building internal strength." This conversation offers no silver bullet, only the process of a hands-on practitioner gradually clarifying direction and weighing trade-offs in a complex situation. And this may be a reference worth considering for all those trudging through the deep waters of transformation. **【Moving Toward the C-End】******The 11th China FMCG ConferenceTime: March 16-18, 2026Location: Chengdu, China**