---
title: "Better Life Supermarket 'Stops'"
description: "Recently, regional retail giant Better Life has had to initiate a contraction strategy after years of aggressive expansion. In a report responding to abnormal stock market movements, the company announced major strategic adjustments, including exiting the Sichuan market entirely from Q4 2022, concentrating its Jiangxi market share to Xinyu, Pingxiang, and Yichun, and closing underperforming stores in Hunan and Guangxi. The overall closure losses are estimated at 300-500 million yuan."
author: "孟祥飞"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-01-13"
language: "en"
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---

# Better Life Supermarket 'Stops'

> Recently, regional retail giant Better Life has had to initiate a contraction strategy after years of aggressive expansion. In a report responding to abnormal stock market movements, the company announced major strategic adjustments, including exiting the Sichuan market entirely from Q4 2022, concentrating its Jiangxi market share to Xinyu, Pingxiang, and Yichun, and closing underperforming stores in Hunan and Guangxi. The overall closure losses are estimated at 300-500 million yuan.

Recently, regional retail giant Better Life has had to initiate a contraction strategy after years of aggressive expansion.

In a report responding to abnormal stock market movements, Better Life Commercial Chain stated that the company's strategy will undergo major adjustments. The main action in the supermarket segment is to cut loss-making disadvantaged regions. Starting from Q4 2022, it will orderly exit the Sichuan market through closures and mergers, concentrate its Jiangxi market share to Xinyu, Pingxiang, and Yichun, and simultaneously close inefficient and loss-making stores in Hunan and Guangxi provinces.

Overall, this closure action will close almost all stores outside Hunan with low revenue or losses. It is estimated that this contraction will result in closure losses of approximately 300-500 million yuan.

Better Life is not alone; this cold wind of closures and contractions has swept across the entire supermarket industry, causing a major upheaval in physical retail. The collapse of Better Life serves as a warning bell for the entire physical retail industry.

Defeat is like a landslide. Better Life, once a leading regional retail giant in central and western China and the first private supermarket stock, has now fallen from grace. But Better Life's retreat will not be the last; the contraction wave in physical retail may intensify, and the future will bring even greater compression challenges for physical retail.

**Three Waves of Store Closures in the Supermarket Industry**

Better Life is not an isolated case. In the 2021 financial reports of 15 listed supermarket companies, the vast majority suffered overall losses. Industry benchmark Yonghui Superstores lost nearly 4 billion yuan, while most others barely survived, with dismal profits. All companies saw negative year-on-year growth in net profit, with Renrenle's decline exceeding 2500%.

Carrefour closed a total of 80 stores in mainland China from 2018 to the end of 2021, and this year closed its last store in Henan, completely exiting the Henan market. China Resources Vanguard closed nearly 501 stores nationwide in 2020 alone, followed by over 800 closures in 2021. The development of Hualian Supermarket is also not optimistic, with 148 stores closed cumulatively in 2020, and the number of closures has been increasing since then.

Yonghui Superstores, a representative of traditional supermarkets, reported a net profit plunge of 98.51% in its latest profit report. The former 'No. 1 supermarket' is now in decline, with its market value dropping to less than 34 billion yuan. From the data on store closures, the traditional supermarket format seems to have reached an irreparable point, and the entire supermarket industry is shrouded in a fog of retreat.

But this cold wind did not start this year, nor did this wave of closures suddenly emerge. Looking at the timeline, from internal and external forces, local supermarkets faced a survival battle as early as 2004 when China relaxed foreign investment access, and foreign chain supermarkets such as Walmart and RT-Mart entered the domestic market in large numbers.

However, at that time, it was competition from the same period, same species, and same format. The number of large supermarkets was still growing steadily. Moreover, due to the entry of external forces, under the 'catfish effect', it indirectly stimulated the survival of the fittest in local supermarkets' services and overall operating systems, leaving behind quality local supermarket enterprises such as China Resources Vanguard and Century Mart, and pushing the development of large Chinese chain supermarkets into a new high-speed expansion phase. At that time, people even considered visiting large supermarkets a fashionable urban activity, and the supermarket industry was in a 'golden age'.

But then, with the booming development of e-commerce, physical supermarkets faced their first real major setback. The growth of customer traffic and revenue in large chain supermarkets began to stagnate, hitting a bottleneck that was hard to cross, and the first wave of store closures began.

In 2014, department store brands such as Parkson, Zhongdu, Wangfujing, and Marks & Spencer closed over 200 stores. By 2015, Wanda Department Stores closed more than 40 stores. In 2017, Intime Department Store was sold to Alibaba. In 2019, Wanda Department Store was sold to Suning. Since department store economies are mostly bundled with supermarket economies, the basement floor of a large comprehensive shopping mall is definitely a large chain supermarket. The closure of department stores often affects the terminal supermarkets within the same micro-economy.

Previously, large supermarkets relied on replicating mature supermarket formats from highly competitive first- and second-tier city markets to third- and fourth-tier markets and less competitive cities, exploiting a time difference to enjoy the dividends of lower-tier markets and continuously explore existing markets. However, after the new e-commerce platform Pinduoduo forcibly broke through the barriers of Taobao and JD.com to attack lower-tier markets, the elegy for large supermarkets began.

But while physical supermarkets were engaged in a fierce battle with e-commerce, the mask era starting in 2020 dealt a head-on blow to all physical supermarkets. Almost all large supermarkets saw their revenue halved, triggering a second wave of store closures, which was more intense than the arrival of e-commerce and even shook the entire supermarket industry.

Better Life is a good example, and this is what we can see. In places we cannot see, since the mask era, 90 million self-employed individuals in China have faced closure crises. In 2020, 3.1 million were deregistered; in 2021, nearly 10 million self-employed businesses closed or deregistered. Although only some of these were small and medium-sized supermarkets, physical supermarkets suffered a heavy blow in both scale and overall industry development. Some enterprises faced additional difficulties, while others were directly knocked down and gradually withdrew from the market. According to relevant data, in 2021, among 13 listed supermarket companies, only 2 achieved growth in both net profit and revenue, 11 saw net profit decline, and the 13 companies closed over 100 stores in total during the year.

**The Rapidly Losing New Middle Class**

In addition to the overall market cooling pushing physical supermarkets into the 'elimination round', the proliferation of membership-based supermarkets has also begun to compete with physical supermarkets for the main customer base—the new middle class. Membership-based supermarkets entered the Chinese market long ago. As early as 1996, Sam's Club opened its first store in Shenzhen, unveiling the 'membership era' in the domestic retail market.

However, for over a decade, it remained lukewarm. The domestic membership model was mainly led by Sam's, and it was difficult to form scale and momentum in market feedback and model replication. It wasn't until 2019, when Costco opened in Minhang District, Shanghai, that a wave of membership store replication was triggered.

Subsequently, more retail enterprises, and even internet companies, began to pay attention to membership-based supermarkets, and the domestic membership supermarket industry welcomed its first wave of store openings. In 2021, Hema opened 10 new X Membership Stores within the year; Sam's also began to accelerate its expansion; and new brands like fudi membership stores emerged in clusters.

In addition, these large membership stores also triggered a wave of development of small and medium-sized warehouse stores. Third- and fourth-tier markets were also steadily promoting various warehouse stores and discount stores, which directly led to a sharp decline in customer traffic for physical supermarkets. Many large supermarkets even fell into a vicious cycle of relying on discount activities and promotions to survive.

Metro, which entered the Chinese market almost at the same time as Sam's, also began to turn its attention to the C-end. According to public data, as of August 2022, Metro membership stores had 22 locations in China, covering cities such as Beijing, Chengdu, Nanjing, Qingdao, and Dalian.

The popularity of membership-based supermarkets is not an accidental phenomenon, because this business model, imported from Europe and America, conforms to the laws of GDP development. First, when per capita GDP reaches a certain level, the hard discount model of membership stores will gradually be accepted. Second, in recent years, it has been evident that the development of physical supermarkets has gradually peaked and even begun to show signs of decline. Membership stores, with precise membership management, can better manage the user lifecycle, grasp user data and target groups, and in turn improve supply chain construction capabilities.

The popularity of membership-based supermarkets can also be partly attributed to the massive exposure from social e-commerce and interest-based e-commerce platforms like Xiaohongshu and Douyin. The 'check-in trend' sparked by some influencers quickly popularized this new supermarket format. In contrast, ordinary large supermarkets rarely experience such viral check-in photo opportunities. Additionally, most products in warehouse membership stores are large packages, providing a good place for family bulk purchases. Coupled with guaranteed quality, the gap between these membership stores and ordinary supermarkets continues to widen. According to the '2021 New Middle Class Insights Report', when consumption behavior occurs, 86% of the new middle class pay more attention to product quality.

Today's new middle class is practicing a 'new frugalism', re-examining the sense of gain from purchases amid high-quality consumption. Since the mask era, there have been many voices about consumption downgrading, but the booming scene of warehouse membership stores is a powerful rebuttal to such voices. On one hand, the new middle class is flocking to membership supermarkets; on the other hand, they are accelerating their escape from ordinary large supermarkets. Young people, in pursuit of trends, also prefer membership supermarkets that showcase a petty bourgeois lifestyle. Ordinary supermarkets have been reduced to discount and promotion areas crowded with middle-aged and elderly people. With one increasing and the other decreasing, ordinary supermarkets are falling while adhering to tradition.

Of course, some traditional supermarkets are still tenaciously striving to survive, attempting to directly replicate the membership supermarket format as a last-ditch effort. In May 2022, Yonghui opened its first warehouse store in Fuzhou, and four other warehouse stores were also put on the opening agenda. In June, fudi opened its first warehouse membership store in Beijing. In September, Beijing Hualian opened its first membership store in Lanzhou. In October, Carrefour China opened its first membership store in Shanghai. In October this year, Carrefour China CEO Tian Rui even made a bold statement: 'In the next three years, Carrefour will expand 100 paid membership stores in first-tier and new first-tier cities.'

This trend-following model replication directly triggered the 'war' among membership stores. However, transforming into a membership supermarket is not as simple as imagined. The competitive landscape of the new format has already formed. Choosing to enter now makes it difficult to have innovative appeal. If it's just a superficial change without substance, there will be no competitiveness. Finally, the market capacity for membership supermarkets is also limited. If everyone rushes in, they may end up with nothing.

**Guard Your 'One Acre of Land'**

On one hand, membership warehouse stores are at their peak; on the other hand, traditional supermarkets are in a cold winter of decline. Despite industry benchmarks like Pangdonglai standing firm, during the turbulent period of market reshuffling, apart from contraction and self-rescue, no one can offer a second spring or a one-size-fits-all solution for supermarket development.

Since this year, not only physical supermarkets but also the once-strong community group buying platforms have been closing and merging under the atmosphere of cost reduction and efficiency improvement. Especially the recent two rounds of contraction at Xingsheng Youxuan have even shown a trend of shrinking into the largest local group. Although some voices initially questioned that the decline of physical supermarkets was largely impacted by community group buying, it can only be said that this was the last straw. The hard times for physical supermarkets are still ahead.

Starting from Hunan, Better Life once carved out a territory in central and western China, but it moved too fast and now has to retreat. In fact, the key market for large supermarkets has never been to expand outward; the local and regional business field is what should be guarded most. Examples abound: Pangdonglai in Xinxiang, Henan, has made a name for itself nationwide with high-quality service from a fourth-tier city. Since its founding over a decade ago, it has stuck to Xuchang and Xinxiang, and has even become a proud landmark for local residents. Dazhang Supermarket in Luoyang, Henan, has also been deeply cultivating the western Henan market for many years, with branches in various county-level markets in Luoyang, relying on a good reputation to take root, and only in recent years has it opened a few branches in Zhengzhou.

Therefore, blindly pursuing scale is not the primary direction for physical supermarket development; otherwise, they may end up returning to where they started. Although many new retail formats are competing on the same stage, physical supermarkets will not disappear in the short term. Deeply cultivating the local market and doing regional and local operations well is the best outcome.

Currently, the physical economy is still in a recovery period. Although there are difficulties, the supermarket market still exists. Whether to break the traditional operating structure from within or reshape the image from outside, the transformation path for supermarkets still needs exploration.


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