---
title: "Can Meituan's Lightning Warehouse Solve the Supply-Demand Mismatch in the FMCG Industry?"
description: "In the post-pandemic era, consumer behavior and shopping patterns have undergone dramatic changes, eliminating some small and medium-sized merchants while forcing others to actively seek transformation through internet-based business models. Internet giants are naturally not missing out on the offline retail pie, with Alibaba and Meituan having long divided the online market for offline dining through food delivery, while newcomers like Douyin, JD.com, and Pinduoduo are forced to compete through local life services, flash delivery, and 48-hour express delivery."
author: "君子不器"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2022-07-12"
language: "en"
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# Can Meituan's Lightning Warehouse Solve the Supply-Demand Mismatch in the FMCG Industry?

> In the post-pandemic era, consumer behavior and shopping patterns have undergone dramatic changes, eliminating some small and medium-sized merchants while forcing others to actively seek transformation through internet-based business models. Internet giants are naturally not missing out on the offline retail pie, with Alibaba and Meituan having long divided the online market for offline dining through food delivery, while newcomers like Douyin, JD.com, and Pinduoduo are forced to compete through local life services, flash delivery, and 48-hour express delivery.

In the post-pandemic era, consumer behavior and shopping patterns have begun to undergo earth-shaking changes. These changes are eliminating some small and medium-sized merchants while also forcing more of them to actively seek change, attempting to transform traditional business and operational models through the internet.
Internet giants naturally will not miss out on the big pie of offline retail. Alibaba and Meituan early on divided the online market for offline dining through food delivery, while up-and-comers like Douyin, JD.com, and Pinduoduo have had to compete for scraps from the giants through local life services, flash delivery, and 48-hour express delivery.
**As the pandemic evolves, users' loyalty to offline channels has weakened, and their shopping focus has gradually shifted to "good" and "fast."** Meituan Flash Shopping's analysis of user search behavior found that **a large number of online users' product needs cannot be met by existing offline supply. In the instant retail market, there is a "supply-demand mismatch."**
This mismatch is reflected not only in the timing of product supply but also in the spatial distribution of supply. Looking at the current instant retail formats in the industry, they either rely on offline physical retail businesses such as supermarkets and convenience stores as "warehouses," where after consumers place orders, merchants deliver products to them; or they rely on a large number of front warehouses, using their own delivery capacity to meet consumers' immediate consumption needs.
The flaw in these two models is that whether it's offline supermarkets, convenience stores, or front warehouses, their space is limited, which means the quantity of products they can store and operate is also limited. Especially for long-tail categories like daily chemicals, personal care, and general merchandise, convenience stores and front warehouses carry very few of these items. Current front warehouses mainly focus on fresh produce, and the limitations of their product range need no further elaboration.
Additionally, in terms of time, supermarkets and some convenience store brands mostly operate during the day. For young consumers with vibrant night lives, the nighttime instant retail market is nearly blank.
**It is precisely by recognizing this mismatch in time and space between supply and demand that Meituan has begun to vigorously develop an innovative front warehouse e-commerce project targeting daily necessities, FMCG, and pet supplies—Meituan Lightning Warehouse.** As of June 2022, the Meituan Lightning Warehouse project has covered more than 100 cities nationwide.
Image: The store manager of Su Tun Supermarket is picking goods.
The giants' continuous investment in the instant retail market reflects what changes in the market? Is Meituan Lightning Warehouse the optimal solution for physical business transformation? For brand owners and retail enterprises, what opportunities lie within?
**01 New Changes in Consumer Shopping in the Post-Pandemic Era**
In the third year of the pandemic, offline physical businesses have encountered unprecedented impact. Whether it's traditional offline retail giants like Walmart, IKEA, and RT-Mart, or new consumer representatives like Haidilao, Hema, Nayuki, and Sexy Tea, all have begun to shrink their store counts to varying degrees. Although economic order has begun to recover across the country, the impact of the pandemic on consumer behavior has not dissipated.
According to McKinsey's latest report, "Four Trend Changes in Chinese Consumers Amid the Pandemic," due to lockdowns, store closures, and reduced willingness to interact with salespeople or service staff during the pandemic, the growth of online channels is accelerating, and consumers are spending more time, energy, and money online.
Data shows that at the peak of the pandemic, about 74% of consumers bought more groceries online, and 21% of consumers increased their online spending.
At the same time, consumers are increasingly demanding faster delivery. Unlike traditional e-commerce, which often takes 3-5 days or even longer, nearly 60% of post-90s consumers hope to receive goods on the same day they order, and the proportion of post-80s consumers who want same-day delivery is as high as 85%.
Data source: McKinsey
Another point worth noting is that due to the pandemic, consumers' loyalty to offline channels is weakening. Consumers are beginning to try new products and brands, which will undoubtedly bring greater impact to brand owners and retail enterprises that rely mainly on offline channels.
Clearly, in the post-pandemic era, **people's shopping focus has shifted to "good" and "fast," and "what you think is what you get" has become the most important factor for consumers, especially the younger generation.** This makes it easy to understand why giants are rushing to invest in the "instant retail" battlefield.
**02 Meituan Seizes the Instant Retail Market**
Data source: China Merchants Securities
Public data shows that from 2019 to 2020, the scale of China's instant retail market grew from 83 billion yuan to 151 billion yuan, and by the end of 2021, this figure had grown to 228 billion yuan. With the gradual improvement of infrastructure and the gradual increase in consumer acceptance, the scale of China's instant retail market will reach 1.194 trillion yuan by 2025.
Such a large market pie naturally attracts the layout of giants. On the crowded instant retail track, internet companies currently enter in three main ways:
**The first is the platform-delivery model**, where after consumers place orders on the platform, the platform uses social delivery capacity to deliver goods from stores to the door. This model is mostly based on offline stores, with the platform serving as an information aggregation site and not owning the goods. Typical examples include Meituan, Ele.me, and Dada.
**The second is the self-operated delivery model**, where consumers place orders on the merchant's own platform, and goods are delivered from the store to the consumer by self-owned or third-party delivery capacity. The platform owns the goods and is mostly based on offline stores, with the store in front and the warehouse in the back. Typical examples include Taoxianda and Hema.
**The third model is the self-operated front warehouse model**, which uses dense front warehouses for product storage. The platform owns the goods and uses its own delivery capacity for order delivery. Typical examples include Dingdong Maicai and Miss Fresh, mostly fresh food e-commerce.
Meituan Lightning Warehouse is similar to the self-operated front warehouse model, but it no longer focuses on fresh produce. Instead, it focuses on FMCG, daily necessities, pet beauty, mother and baby products, and some long-tail items. It is positioned as a 24-hour online convenience store, and the warehouses are mostly social warehousing resources, built by merchants rather than owned by Meituan.
The Meituan Lightning Warehouse model actually had its prototype in Meituan Waimai. In response to the increasing online demand for food delivery, some restaurant stores began to accept only online delivery orders and no longer accept offline dine-in orders. This way, the restaurant's location no longer needed to be in bustling commercial districts, and the store area could be greatly reduced, lowering rental costs while increasing operating profits.
Similarly, Meituan Lightning Warehouse does not accept offline orders, so location becomes less important. In terms of product categories, it does not need to focus on fast-moving items like beverages and snacks as core products. The number of SKUs can break through to 3,000-5,000, far exceeding the operating limit of about 1,500 SKUs in offline convenience stores.
Compared with fresh food front warehouse e-commerce platforms like Dingdong Maicai and Miss Fresh, Meituan Lightning Warehouse mainly operates FMCG and general merchandise, greatly reducing the significant losses caused by fresh food operations. At the same time, standard products like FMCG and general merchandise are easy to store and have extremely high profit margins, which not only reduces operating costs for partner merchants but also greatly improves operating profits.
As an early adopter of Meituan Lightning Warehouse, the convenience store brand Dolphin Buy, although founded in 2019, has expanded its business to cities like Chengdu, Beijing, and Hangzhou within just a few years. Through cooperation with Meituan Lightning Warehouse, Dolphin Buy has also seen the future of super convenience stores. Talking about the reasons for cooperating with Meituan Lightning Warehouse, Dolphin Buy founder Cheng Cheng shared his thoughts on the next generation of super convenience stores.
"Super convenience stores have two core characteristics: first, they are new brands in near-field retail, and second, they offer ultimate convenience. Young consumers' planned consumption is weakening, replaced by increasing immediate consumption needs. Due to limitations in operating time and space, convenience stores and supermarkets cannot meet this part of immediate consumption demand, so a new retail format is needed to carry this demand."
Cheng Cheng stated that Meituan Lightning Warehouse, based on the platform's infrastructure and digital operation capabilities, can not only help merchants quickly build a retail system driven by demand insight and demand, but also empower merchants with the platform's professional insights and industry understanding of the retail industry, thereby enhancing merchants' operational capabilities and improving operational efficiency.
Similarly, pet supply chain brand Xingzai Pet also saw new market opportunities brought by the Meituan Lightning Warehouse project. As a veteran in the e-commerce industry, Xingzai Pet has experienced the development, prosperity, and gradual stabilization of traditional e-commerce. Facing the Meituan Lightning Warehouse model focused on local life, Xingzai Pet deeply understands what this means.
"The pet industry is a special industry with a limited but extremely precise target audience, and the average order value is relatively high. The conversion rate of pet e-commerce in traditional e-commerce is often around 5%-10%, which is already very high in the traditional e-commerce field. Through cooperation with Meituan Lightning Warehouse's pet front warehouse, the conversion rate can reach about 20%-40%, and more importantly, the repurchase rate can reach about 60%-80%."
In the view of Lu Xu, General Manager of Operations at Xingzai Pet, the pain point and need of users is convenience. Through cooperation with Meituan Lightning Warehouse, it can maximize the satisfaction of consumers' pursuit of convenience, while also improving the operating profit of products. This has become an important reason for Xingzai Pet's continued cooperation with Meituan Lightning Warehouse.
Relying on Meituan's online user base of nearly 700 million and over 5 million social delivery capacity, Meituan Lightning Warehouse not only breaks the spatial limitation of the traditional 5km living circle of retail stores but also breaks the time limitation of store operations, constituting an incomparable advantage over traditional retail stores.
In 2021, Meituan upgraded its strategy from Food+Platform to Retail+Technology, indicating that Meituan no longer positions itself as a food delivery and life services company but has further expanded its products and services to a broader retail field. The deeper value and significance lie in Meituan's hope to reconstruct the temporal and spatial relationships between supply and demand through technological means, bridge the mismatch between supply and demand, and thereby create value for merchants and consumers.
Consumer needs are diverse. Meituan, positioned as a retail technology company, is clearly not enough to serve consumers only through offline life services, food delivery, and hotel and travel businesses. Meituan Lightning Warehouse undoubtedly provides Meituan with a new solution that can not only meet consumer needs 24 hours a day but also provide consumers with more refined products and services. **Meituan Lightning Warehouse cleverly uses the front warehouse model to solve the supply-demand problem behind the increasing immediate needs of users.**
**03 Meituan Lightning Warehouse Reconstructs a New Instant Retail Ecosystem**
In the post-pandemic era, everything-to-doorstep has become a new demand, and timeliness has become a key factor for enterprises to win in the new retail era. The Meituan Lightning Warehouse model provides brand owners and retail enterprises with a new way to position themselves in the market.
For brand owners, in the past, to enter a prefecture-level city, they needed to first recruit distributors, then invest huge entry fees and marketing expenses to be placed in supermarkets and stores. Now, through Meituan Lightning Warehouse's partner merchants, they can easily reach consumers.
In addition, since consumer behavior occurs online, consumers' search behavior, shopping paths, and behavioral preferences become traceable, allowing brand owners to make more refined marketing and product placement investments.
For retail enterprises, participating in the Meituan Lightning Warehouse project means a change and upgrade in business philosophy and operation methods. Traditional offline retail enterprises rely on physical space, where the quality of location and foot traffic directly determine business performance. Limited operating area restricts the number of products, and expensive rent becomes the key constraint on store profitability.
The Meituan Lightning Warehouse model returns the initiative of store operations to retailers. The core of a convenience store lies not only in meeting consumers' diverse needs but also in meeting them anytime, anywhere. This requires stores to carry as many products as possible and also means efficient matching between products and demand.
Through Meituan's specially developed operating system, which continuously optimizes the products carried, the operational efficiency of project partner merchants will be greatly optimized and improved.
Undoubtedly, **instant retail has become a new pursuit for consumers**, and a large number of small and medium-sized business opportunities and brand merchants are beginning to explore the instant retail track. In the mismatch and adaptation between demand and supply, Meituan's Lightning Warehouse has become an indispensable infrastructure in the new ecosystem.


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