The rise of new retail in China, whether warehouse clubs, hard discount, or instant retail, is diverting business from traditional retail and forcing supermarkets to reform. But there is a fact that has been overlooked: Pangdonglai, the most cited model for supermarket reform, is an LKA that opened in 1997. Of course, Pangdonglai is not unique in the industry. There are also Hebei Xinyu Lou, Northeast Beiyoute, Xiamen Yuanchu, and a large number of LKAs that, in the current retail transformation, have not been greatly impacted by the environment but instead rely on regional advantages to remain resilient. China has a number of well-developed LKAs (partial examples) The fall of big KAs and the resilience of LKAs is precisely the huge divergence occurring in traditional retail. Why does this phenomenon occur? Fundamentally, these are two questions. In the face of new retail's impact, first, why have big KAs been so greatly impacted? Second, why can LKAs still maintain business development? For the former, we can borrow a phrase from Huang Mingrui, founder of RT-Mart: Big KAs "won against all competitors but lost to the times." Historical baggage has left the big KA model with chronic ailments that are hard to eliminate, and under the impact of new retail, it is difficult to turn a big ship around, leaving only self-revolution. For the latter, LKAs, which once had almost no advantages, have long been in a highly competitive environment, always figuring out how to better meet consumer needs and ensure sales per square meter, and have thus found a path of self-growth. The impact of new retail has only changed the strong competitors from the old batch to a new batch. Historical baggage Left the big KA model with chronic ailments that are hard to eliminate The decline of big KAs did not begin with the rise of new retail, but rather the limitations of their business model gradually emerged in the new environment. In the 1990s, when France's Carrefour entered China, it was the first to bring the "slotting fee" model into the Chinese retail market. In that era when big KAs were just starting, supply was scarce and goods were in short supply. Wherever goods could be bought, business was good. Big KAs held absolute bargaining power, and power breeds rent-seeking. Gradually, the business model of "charging upstream manufacturers" became an industry rule. Summary of various fees that KAs charge brand owners, compiled by Deepseek The core logic of this business model is: by charging suppliers entry fees, barcode fees, promotion fees, and other back-end fees, it replaces the traditional retail profit model of relying on product price differences, achieving low-cost rapid expansion. In essence, it converts the physical space of retail terminals (shelves) into a financial tool, profiting by collecting "rent." The result is that suppliers, in order to compete for limited display space, are forced to pay high fees, leading to: 1) Homogeneous products piling up on shelves; 2) Product terminal prices being inflated due to various fees. This model was indeed glorious during the seller's market period, because supply was scarce, and as long as goods could be placed on shelves, efficient turnover could be achieved, and even if fees were high, sales were not affected. So in the seller's market stage, there were no adverse effects. As long as there were goods, they could sell, and everything was fine. But the biggest change now is that the retail market has shifted from a seller's market to a buyer's market, with oversupply and a complete reversal of the supplier-retailer relationship. Whether consumers buy goods depends on quality-price ratio: what is better goods, what is cheaper goods. Following the trend, whether warehouse clubs, hard discount, or instant retail, new retail has developed strongly around consumer needs. Under competition, the drawbacks of the big KA model are fully exposed. Under the impact of new retail, homogeneous products and inflated prices severely drag down terminal sales, leading to low sales per square meter for big KAs, and even with fees collected, the store model is still broken. In this situation, patching up is no longer helpful. Not to mention that adjusting the single-store model is difficult; the teams cultivated over many years, because they relied on the "charging manufacturers" model, already lack strong operational and product selection capabilities. The most typical case is Carrefour, which brought the "slotting fee" to China. After the rise of new retail models, Carrefour's sales per square meter began to decline sharply, and it eventually chose to exit the Chinese market. Therefore, for big KAs to continue to survive and develop, they can only rely on external forces and self-revolution. This is why the once-glorious KA giants, whether foreign like Metro or Chinese like RT-Mart and Yonghui, have all ended up being acquired. But even so, even Yonghui, which is currently undergoing drastic reforms, cannot cure the chronic ailments accumulated over 20 years without 3-5 years of turbulent reform. The survival path of LKAs Always centered on consumer needs Retail is a business that requires "smart every day" Big KAs are a good negative example, while LKAs are a good positive example. If in the past, under the competitive pressure of foreign KA giants like Carrefour, Metro, Walmart, and Tesco, as well as Chinese KA giants like RT-Mart and Yonghui, LKAs were forced to develop their unique survival path, then the current new retail transformation is just a change to a new batch of strong competitors, nothing more. Unlike the "scale-driven" model of big KAs, the survival logic of LKAs is more "consumer-driven." For a long time, LKAs lacked the resource advantages and scale effects of big KAs, but it is precisely this disadvantage that prompted LKAs to continuously figure out how to better serve consumers in competition, thus forming a unique competitiveness distinct from big KAs. Only by serving consumers well can there be word-of-mouth and repeat purchases, can store sales per square meter be improved, and can there be opportunities for development. So earlier than many giants, LKAs have been solving business problems around "how to provide consumers with better goods, cheaper goods, and better service experiences." By analogy, the rise of new retail itself is not difficult to find; its key is also to make industrial chain changes around how to provide consumers with cheaper goods (such as discount retail) and better goods (such as warehouse clubs). The forms are different, but the underlying logic is the same. The key is that LKAs, ahead of new retail, have already thought about and accumulated around consumer needs. Because of this, in the process of new retail's aggressive restructuring of the industrial chain, the development of LKAs has not been greatly affected and remains resilient. That is why we see many textbook cases:
Pangdonglai, which has become famous across the internet, is most widely known for its excellent shopping experience;
Yuanchu Supermarket, which has the highest proportion of PB (private brand) products in China, with a PB rate exceeding 60%;
To ensure extreme product prices, Beiyoute Supermarket established Zhenshimei Supply Chain;
... In the current environment where big KAs are retreating in China, it is precisely this group of LKAs, relying on their understanding of consumers and the establishment of regional advantages, that are providing more ideas and suggestions for China's retail industry. There is every reason to believe that under the impact of new retail, these LKAs can continue to develop sustainably. Final Thoughts The fall of big KAs and the resilience of LKAs are actually a microcosm of the retail industry's transformation from "scale-driven" to "consumer-driven." In the past retail logic, scale and channels were the key factors determining competitiveness; whoever had a larger network coverage could stand undefeated in competition. But in today's retail environment, the diversification and personalization of consumer needs have become the main theme of industry competition; whoever can truly understand consumers and serve consumers is the ultimate winner. As RT-Mart, which turned profitable in fiscal year 2025, shows, under the general environment, KAs are actively trying to change around consumers. The era of "whoever has goods makes money" is gone forever, and the new era puts forward new requirements and challenges for KAs. In the future, competition in China's retail industry will inevitably be more intense, but it is certain that whoever thinks and understands problems more from the consumer's perspective will go further. We also look forward to more LKAs, like Pangdonglai, continuing to stand out!