Source: Lianshang.com News (ID: lingshouzixun)
Retailers charging slotting fees was pioneered by Carrefour. After entering China in the last century, Carrefour brought its expansion model from developing countries, proposing to charge suppliers slotting fees to secure steady backend profits, enabling rapid, low-cost expansion.
That was about 25-26 years ago. Charging slotting fees gradually became a consensus among retailers, accepted by suppliers and manufacturers, and evolved into an industry rule. But times have changed. Carrefour, which was the first to charge slotting fees, is now struggling, closing stores frequently. It seems slotting fees are not an eternal talisman.
Currently, physical retailers face difficulties due to both subjective and objective reasons. One major criticism from industry insiders and outsiders is their reluctance to change, relying on slotting fees to stay in their comfort zone, hoping for a one-time solution.
Everyone knows that collecting slotting fees is easy and yields huge profits—just sign contracts and the money comes in. How large are these fees? Most retailers smile and stay silent, avoiding the topic.
A 2019 lawsuit offers a glimpse. A Beijing food company sued a retailer. After signing a contract in July 2011, the company paid a total of 1.28 million yuan in fees including entry fees, barcode fees, new store opening fees, and contract fees. By September 2012, the company's purchases totaled only 1.13 million yuan, meaning even if all goods were sold, the company would still owe the retailer over 100,000 yuan.
This seems like a joke, but such jokes happen frequently in reality. Some retailers, when settling accounts, find they not only receive no payment for goods but also owe the retailer more due to contract terms like deductions.
"Success and failure both stem from the same factor." Many retailers now depend on slotting fees for survival, but everyone knows these fees cannot sustain indefinitely.
Lawson recently announced it would abandon entry fees and account opening fees in Jiangsu, Zhejiang, and Shanghai. This caused a stir in the industry. Most praised the move, but some were worried—many retailers fear that not charging slotting fees might become the next industry rule.
Looking closely at the report, Lawson's decision was not impulsive; it was well-prepared:
First, objective conditions were met. Lawson recently achieved profitability, making it a good time to "repair the roof while the sun shines."
Second, Lawson introduced a new plan. It proposed five new reforms: new products, new categories, new technology, new services, and new models. By waiving some fees, Lawson hopes suppliers will cooperate with the "five new" initiatives, providing support beyond just fees.
Third, Lawson's business orientation changed. It shifted from "efficiency-oriented" to "effect-oriented," with decisions focusing more on long-term development rather than just improving efficiency.
Fourth, this decision was not a whim. Lawson spent about two years on preparatory work before making the fee waiver, and it is only implemented in Jiangsu, Zhejiang, and Shanghai.
Lawson is not the first company to abandon slotting fees. As early as 2003, Bubugao canceled entry fees. Its initial plan was to reduce costs and thus lower purchase prices, but after implementation, it found suppliers still quoted the same prices as with other retailers. After only six months, Bubugao had to suspend the policy.
Slotting fees are like a nice, practical coat that retailers have worn for years, accustomed to its shine and warmth. Suppliers and manufacturers have also come to see this coat as a necessity for retailers, so taking it off is not easy.
"There is a crack in everything; that's how the light gets in." Lawson saw the crack.
Lawson's decision to waive some fees is not just an individual act. It is a more suitable approach for current retail operations, following changes in industry development, retailer development, and supplier-retailer relations. Why have slotting fees been criticized for so long but still increased?
The main reason is that retailers cannot do without them. Retailers cannot maintain normal operations with front-end profits alone; backend profits are a crucial source. If backend profits were removed, many retailers would collapse and never get up.
Who actually pays for slotting fees? Suppliers are one party, but where do suppliers get the money? Mostly from manufacturers, who are the likely bearers of slotting fees. Manufacturers naturally do not bear these costs for free; they eventually factor them into product costs.
From this perspective, consumers who buy goods are the ones paying for slotting fees. This also explains why physical stores are increasingly struggling.
Physical retailers were once in a strong position, especially hypermarkets, which were once glorious, making slotting fee collection smooth.
In 2012, China Youth Daily published an article titled "The Strength of Supermarkets Created Entry Fees." As the title suggests, hypermarkets charged fees forcefully, and suppliers had no choice but to pay.
But now, once-powerful hypermarkets have lost their former glory, declining, yet they still cling to slotting fees, a relic of their strong days. Now it's even more awkward: if they let go, they might not have a tomorrow. Hypermarkets are struggling to survive in this tight spot.
Although reform is imperative, it is unrealistic to demand retailers abandon slotting fees now, because many retailers, especially hypermarkets, are still fighting for survival and dare not give up such a large income. But they cannot hold on forever; they must let go when necessary.
Warehouse clubs have recently become popular in the industry. This boom has brought industry pain: first, they compete with hypermarkets for customers, especially those without membership thresholds, further squeezing hypermarkets' customer base; second, to develop faster and secure better resources, new warehouse clubs have given up some slotting fees, making fee-charging hypermarkets even less competitive.
Whether proactive or reactive, physical retailers now need to make practical changes as soon as possible.
Due to Lawson's important position in the industry, this fee waiver has garnered unprecedented attention. The lesson for retailers should be more of a wake-up call than a shock.
The industry flows like water, constantly evolving. It will not always allow retailers to simply sign contracts and collect fees, nor will backend fees remain a reliable profit guarantee. Ultimately, success comes from operations, and good operations are built on customer traffic and consumer purchases.
Instead of focusing on suppliers' pockets, trying to take more, it's better to stay calm, focus on operations, and what should come will naturally come.
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