“This year is the worst year for the economy!” It seems that economists have used this phrase as their year-end summary every year. When the economic environment is bad, business naturally becomes harder, and at the worst of times, survival becomes the issue! The editor recommends a case from a small supermarket owner, which is real and vivid: it includes his summary and reflection, as well as changes after painful lessons. Share it with everyone for reference. Supermarkets serve people's livelihoods and best reflect their current state My 2016 year-end summary is hard to write because, although all aspects of the store have improved, sales are slightly lower than last year. Let me talk about my location—a township industrial park. I guess everyone will sigh when they see this. The difficulties faced by the real economy and manufacturing are very evident here. At the beginning of the year, manufacturing companies generally laid off many workers; some work teams were completely gone, and employees' incomes dropped significantly. The bustling three-shift system of the past no longer exists. Without overtime, grassroots employees can only earn the minimum standard, leaving little after living expenses. So, those who used to smoke Zhonghua now smoke Yuxi, and those who used to smoke Yuxi now smoke Ziyun. With the reduction in customer base and purchasing power, I also ended my streak of monthly growth after the Spring Festival month this year. Nearby supermarkets have either closed, transferred ownership, extended hours to 24/7, or added other income streams... Thus, supermarkets serve people's livelihoods and best reflect their current state. Impact on physical retail? Past performance was too poor, and money was too easy! I ended my streak of monthly growth after the Spring Festival month, and sales in certain categories hit a dead end. So it wasn't until I reached the final dead end that I realized the primary reason physical retail now cries out at the slightest impact is—our own poor performance and the too-good days of the past! Take my instant noodles, for example. In the second half of last year, because Kangshifu unilaterally raised prices and customers didn't accept it, it was basically a monopoly by Master Kong. Each time I stocked up in large quantities—20 boxes with one free—sales were good, and life was comfortable. So why did it completely hit a dead end after the Spring Festival? First, the loyal customers I had painstakingly cultivated mostly left. Second, the few new workers didn't come to my store initially, because my location is the worst. Since instant noodles are all Master Kong or Kangshifu at the same price, why would they go out of their way to come to me? Anyway, the reasons were all objective, not my fault. I didn't think from the category perspective: how many types of instant noodles (vermicelli, rice noodles) are there in the world, and which ones do my customers need? I didn't think from the customer's perspective: if they always eat Master Kong, Kangshifu, or Baijia Vermicelli, what would attract their desire to buy? I didn't think from the industry perspective: what is the differentiation between my store and others? Counterattack from the brink: Treating instant noodles as a showcase of regional delicacies So by March and April, I was extremely anxious. The stock I bought before the Spring Festival—I gave the ones with good dates to friends and ate the bad ones myself, especially the dry-mixed noodles, which I ended up eating for over a month because I lost the young demographic. After enduring for months under pressure, I made up my mind to completely start over. I treated instant noodles like snacks, aiming for the level of “A Bite of China,” and before I knew it, I became the strongest in the local area. If it weren't for the pressure of the dead end, I would still be like everyone else, with only Kangshifu and Master Kong, plus Baijia Vermicelli at a low level. If I hadn't made up my mind to turn customers' instant noodle purchases into an experience of enjoying various regional delicacies, making customers marvel at the variety—more than big supermarkets (I have just one shelf with six layers; is it possible to have more than a big supermarket with over a dozen shelves?) Otherwise, my instant noodles would really be dead; I'd just need to display two items: Laotan Sauerkraut and Braised Beef. And even if I died, I wouldn't blame my own poor performance but rather the timing, location, and people. So if I really have to blame something, it's the past market environment that was too good and money too easy. Chronic disease of physical supermarkets: Say goodbye to the homogenization of “a thousand stores with the same face,” and don't blame e-commerce This year, among the hundreds of stores I visited in Chongqing, the decoration is increasingly exquisite, some so high-end that small players like us can only look and sigh. Price wars are intensifying, and discount supermarkets like Yipin Fresh have appeared. But in terms of products, none impressed me. “A thousand stores with the same face” is a chronic disease of physical supermarkets. Don't blame e-commerce; on the contrary, the emergence of e-commerce makes it easier for us physical stores to differentiate. How can we treat our benefactor as an enemy? Even the largest hypermarket has only 30,000 SKUs, but e-commerce platforms now offer millions of product choices. Even for small stores like ours with fewer than 3,000 SKUs, if you can't differentiate, that's your problem. In 2016, the most closures or transfers of physical stores were undoubtedly in the restaurant industry, but have you seen any of them cutting prices, even up to the day before closing? So I believe that the high homogenization of “a thousand stores with the same face” is the primary issue for physical stores, especially small supermarkets and convenience stores. Three suggestions for small stores in 2017: Now for 2017, the situation here will be even more severe. Starting in January, workers have been leaving one by one, most won't return, and some temporary rental families will gradually move into resettlement communities. Competition will intensify: first, the life-and-death price war within the industry; second, other industries see the supermarket and convenience store sector as the safest entrepreneurial field in an economic downturn.
First, create differentiation and change the situation of “a thousand stores with the same face.”
Second, do well and refine every category you operate, transitioning from amateur to professional.
Third, have a sense of the trade area and jointly build the local trade area. Here I'll focus on the third point, as it seems no one has mentioned it before. In our traditional thinking, peers are competitors, and the closer they are, the greater the threat. This is indeed true for large supermarkets with complete product ranges, but now commercial properties are getting smaller. In a small trade area, there is no major anchor store; it's all small shops. Everyone is a small store with incomplete products. Therefore, don't treat the small shops around you as competitors but as partners. Together, we should actively seek differentiation, meet customers' comprehensive needs, and keep customers in our small trade area rather than letting them flow to the core large trade area outside for one-stop shopping and bulk purchases. In my view, my store (a food-enhanced convenience supermarket) and a certain supermarket on the same road (a general merchandise-enhanced convenience supermarket), a hardware store, and a grocery store form a whole, constituting the small trade area of our production team. Therefore, after pre-opening market research, I didn't follow the standard configuration but basically gave up non-food categories except daily chemicals and paper products. When customers have needs, I direct them to stores that sell those items. Although on the surface I seem to be pushing customers to competitors, in reality, I'm keeping them in our trade area, preventing loss. Ultimately, customers in this trade area know which store to go to for which item. Would you rather have customers buy food at my store, hardware and daily necessities next door, or have them go to the town center or Yonghui Supermarket for one item and come back with a cartload? Finally, I personally suggest that everyone read more books by Japanese peers, because they have come out of the economic environment we are about to experience, and their summaries and insights have more practical reference value for us. -END-