Editor's note: This article is based on the speech by Mr. Tan Zhiwang, a senior consumer investor, at the Snack and Discount Store Theme Forum of the 5th China FMCG Conference. It has been organized into an article for our readers (with some deletions and modifications). A watershed in the retail industry: the rise of snack stores 2020 marked a watershed in China's retail industry. Before that, traditional retail and traditional e-commerce dominated. After 2020, changes occurred simultaneously online and offline, with bulk snack stores being just one branch of this major transformation. Online, new e-commerce platforms like Pinduoduo and Douyin rose, despite controversy, bringing consumers more choices and convenience. Offline, various formats such as bulk snack stores, membership discount stores, community discount stores, and brand discount stores (like outlet malls and Xunwushe) flourished. What is the difference between bulk snack stores and Pinduoduo? In fact, many seemingly unrelated things share the same underlying logic when they change. Bulk snack stores are the offline version of Pinduoduo. Both attract consumers by improving efficiency and offering products with a certain quality-price ratio, reflecting the significant changes in China's economy and consumers, as well as infrastructure development. In the past, due to insufficient technology, lack of SaaS services, and necessary infrastructure support, bulk snack stores could not achieve large-scale development. Now that conditions are mature, they have developed rapidly. The development of snack stores is inevitable Many people are pessimistic about the development of snack stores, but they have still grown, and facts are more convincing than opinions. Everyone living in this world sees two worlds: the objective real world and the subjective world in their minds. Do not try to turn the objective real world into the subjective world. For example, if you don't like spicy strips and milk tea, you cannot deny that many others like them. China is one of the countries with the richest retail formats, largely due to its huge population. The stratification of Chinese consumers is also very obvious; different people have different consumption needs and preferences, leading to the diversity and development of retail formats. Discount stores have also completed localization in China, presenting different categories according to consumer needs. We can temporarily display discount stores with different positioning in a four-quadrant chart to understand their characteristics and target consumers:

  1. High income + full category: e.g., Sam's Club
  2. Middle income + multi-category: e.g., Outlets
  3. Mass market + narrow category: e.g., Snack Cabin
  4. Mass market + multi-category: Xiaohongdao, Tiaoma In addition, some discount store formats have not yet grown or are not well known, such as Xunwushe, which is positioned more for the mass market and can fill gaps in the current market. Discount stores with different positioning meet the needs of different consumers. When investing or starting a business, to succeed, you must pay attention to the needs and preferences of the target consumer group, rather than being influenced by subjective opinions. For example, although some think milk tea is unhealthy, for a milk tea shop targeting young women, as long as their target consumers are willing to buy, it can operate successfully. Often, our opinions don't matter; facts matter most! Whether you agree or accept it, the prosperity of snack stores is an undeniable fact. This trend is not only domestic but also worldwide; it is a law, an unchangeable reality, and an inevitable trend. The huge opportunity of a chain with ten thousand stores Bulk snack stores are expected to develop into chains with ten thousand stores. We can analyze this from three keywords. 1. Township market This is the first supermarket chain in Chinese history to achieve large-scale sinking into township markets. Such supermarkets did not exist before; it opened up China's vast county and township markets. Previously, the largest offline scale for retail enterprises could only reach 100 billion yuan, unable to break this limit. 2. Cross-regional In 2021, snack stores had already achieved cross-regional operations. Some people are still debating whether snack stores can operate cross-regionally, but this is no longer a problem; they have long achieved it. 3. Price killer Although people are averse to price wars, in fact, most retail channel changes appear in the image of price killers. Starting from the internet, Taobao, Tmall, JD.com, Pinduoduo, and Douyin have all attracted consumers by lowering prices. Offline channels are the same; changes inevitably appear in the image of price killers. Looking back to the past, looking forward to the future Many people care about the future of bulk snack stores, and to see the future, we need to look back at history. In the past few years, the development of bulk snack stores has followed two major logics. The first is the change in category structure, from low frequency to high frequency. Over time, these small stores have become larger because they continuously adapt to market demand changes, shifting focus from medium-low frequency products to high-frequency products, such as commonly consumed water, milk, and baked bread. Additionally, a few bulk snack stores now sell fruits and ingredients, which also has its logic. Although attempts may encounter failures and setbacks, repeated attempts are made, but the logic is clear; it requires time to accumulate success, possibly five, ten, or even twenty years, but this does not affect its development direction. Another major logic is pricing, from high to low, from no quality-price ratio to having quality-price ratio; this is an inevitable process. Some believe that bulk snack stores have not returned to the essence of retail, but I hold the opposite view, believing that bulk snack stores are precisely returning to the essence of retail. Retailers should not occupy suppliers' payment cycles. Some propose collecting payments to the company first and then delaying payment to franchisees by a month, which is disrespectful to partners, taking advantage of them through payment cycles. Returning to the essence, we should focus on improving efficiency. Improving efficiency cannot stop at words; we must push ourselves to consider whether we can not collect payments from suppliers, not delay supplier payment cycles, or even not return goods. To achieve these, we must improve product capabilities. If product capabilities are insufficient, even if all pressure is concentrated on our own stores and warehouses, we cannot sell products. How will bulk snack stores develop in the future? ******First, in the future, bulk snack stores will bloom in a hundred flowers. All retail is a long-distance race, not a sprint. The pricing of bulk snack stores is already very low, so further price wars are meaningless. Behind all price wars, merchants hope to quickly end the battle and achieve monopoly. However, complete monopoly is impossible in retail because retail is a scale effect, not a network effect. Only network effects can achieve one dominant player, while scale effects cannot make any single enterprise dominant. In online e-commerce, there are Alibaba, JD.com, Pinduoduo, etc., precisely because e-commerce can never achieve one dominant player, so there are still entrepreneurial opportunities in e-commerce. This is even more true for bulk snack stores. We once tried to predict the future direction of bulk snack stores and finally found that the best benchmark is pharmacies. Pharmacies have the highest degree of homogeneity, and China has five brands with ten thousand stores, and countless brands with a thousand stores. Future bulk snack stores will also bloom in a hundred flowers. Second, the integration of online and offline is undoubtedly a future trend. Currently, bulk snack stores mainly operate offline and have not yet ventured into the online field. From a longer-term perspective, the online market can also develop; instant delivery, live streaming sales, and community group buying are all viable options. For bulk snack stores, opening offline stores is currently the simplest and higher-return method. Because most enterprises will first choose to start with simple businesses, and when they can no longer succeed with simple businesses, they will gradually expand to complex businesses, such as online. Third, bulk snack stores and discount stores will inevitably develop private label businesses in the future. Currently, they have not yet ventured into private labels mainly because opening physical stores can easily generate profits. When physical store development hits bottlenecks, building a supply chain will become an inevitable choice. Business evolution and industry changes have certain regularities; as long as you master these underlying laws, you can accurately predict future changes. For example, in 2021, when we invested in and participated in creating snack stores, we conducted simulations and predicted which competitors would enter the market, such as Liangpin Shop and Three Squirrels, and also foresaw competition from convenience stores. Finally, I would like to give you some advice, which only represents my personal views: Nowadays, opinions on snack stores are still divided. In fact, when a trend forms, we should embrace change rather than resist it, because resistance is meaningless. When change has occurred, we should become beneficiaries of change rather than victims, actively conforming to the trend. PS: At this forum, New Distribution exclusively released the "China Snack Hard Discount White Paper (FMCG Industry Insights 2023)". The full version of the white paper is nearly 80 pages. Through detailed data, rich charts, and concise text, it allows you to understand the past, present, and future of snack hard discount in the shortest time. From the perspective of the industry chain and long cycle, re-examine the current and future development. In the complex surface, clarify the context, see the essence, discern trends, and seize opportunities. Welcome to add WeChat to contact. Add WeChat to obtain the white paper. Attached: Outline of the full version of "China Snack Hard Discount White Paper (FMCG Industry Insights 2023)" PS: Friends interested in the on-site speech content can follow the recent push of the "New Distribution" WeChat official account. We will organize and publish all guests' speeches for our readers. Click Read the original text to see more of the 5th China FMCG Conference and the 1st China FMCG Distributor Conference...