---
title: "China's Retail Industry in 2022: Hope and Survival"
description: "Before hope arrives, one must first survive. In the third year of the COVID-19 pandemic, many retail enterprises maintained cautious optimism. \"Hope and survival\" is the keyword for 2022 in the eyes of Li Yanchuan, chairman of Chaoshifa. He believes 2022 should be better than 2021, as some experts suggest it may be the last harsh winter of the pandemic."
author: "楚勿留香"
publisher: "New Distribution"
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published: "2022-04-01"
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# China's Retail Industry in 2022: Hope and Survival

> Before hope arrives, one must first survive. In the third year of the COVID-19 pandemic, many retail enterprises maintained cautious optimism. "Hope and survival" is the keyword for 2022 in the eyes of Li Yanchuan, chairman of Chaoshifa. He believes 2022 should be better than 2021, as some experts suggest it may be the last harsh winter of the pandemic.

Before hope arrives, one must first survive.

**Survival**

In the third year of the COVID-19 pandemic, many retail enterprises maintained a cautiously optimistic attitude.

"Hope and survival" is the keyword for 2022 in the eyes of Li Yanchuan, chairman of Chaoshifa. He believes that 2022 should be better than 2021. As some experts have said, 2022 may be the last harsh winter of this pandemic.

Li Yanchuan's judgment is not unfounded, because the retail market during the 2022 New Year holiday was better than expected.

"Because some physical stores have already realized the problems and begun to make adjustments, including online expansion and digital upgrades," Li Yanchuan told Lingshou. "If the pandemic has truly become normalized, I think the market recovery will come."

Liu Yihua, chairman of Shouhang Supermarket, believes that 2022 will definitely be difficult, but the overall trend will improve.

Liu Yihua has three reasons for judging it difficult:

First, the overall domestic and international economic situation and the instability of the pandemic will affect the real economy to varying degrees. Residents' overall income and consumer confidence index cannot recover quickly in a short period, which will inevitably cause some consumers to tighten their spending.

Second, although community group buying seems to have subsided on the surface, some capital is still eager to move, which will still have a certain impact on overall sales.

Third, the impact of rising prices is also relatively large, which will inevitably lead to a decline in gross profit margins. At the same time, as far as Beijing is concerned, the decline in population will inevitably affect customer traffic.

The judgment that the overall trend in 2022 will improve is because, in the face of difficulties, some enterprises that adjust their products quickly and have high operational efficiency will perform well in 2022.

Even though competition among physical supermarkets is still intensifying, the wave of store closures will not have much impact on overall sales.

Similarly, Tian Jianzhong, chairman of Green City Supermarket, also holds a cautiously optimistic attitude.

Tian Jianzhong believes that the development of any industry cannot be separated from the influence of macroeconomic policies.

The Central Economic Work Conference held in December 2021 re-emphasized "economic construction as the center," "stability first," "proactive fiscal policy," "prudent monetary policy," and a new interpretation of "carbon neutrality and carbon peak," which greatly boosted market confidence.

Second, after years of transformation and hard work, the retail industry has gained some experience. Coupled with regulatory authorities' crackdown on internet economy chaos, a relatively relaxed development environment has been created for physical retail.

Third, when bad news is exhausted, good news comes; things turn around when they reach extremes. This is a law.

In Tian Jianzhong's view, in the past few years, the retail industry has been in a downturn, the market has shrunk, and the pressure of property costs and labor costs has been effectively released. For Green City Supermarket, the operating pressure in 2022 mainly comes from improving its own retail skills.

Another company rooted in the Shandong market, Shenghao Supermarket, is also full of confidence in 2022. Du Haozhi, general manager of Shenghao Commercial, is optimistic about the overall development of the retail industry in 2022.

First, the pandemic has become normalized. Shenghao has made adjustments and changes in operating and sales strategies, which have been somewhat validated. Second, relevant national regulatory policies are favorable to physical stores.

In 2022, Shenghao Supermarket will make great efforts to optimize its supply chain and reduce operating costs.

For example, it will continue to improve the product supply chain, negotiate direct supply from sources and direct procurement from bases, compress intermediate links, and launch high-quality, low-price good products. At the same time, it will conduct product operations based on the needs of core store customers.

Du Haozhi said that for key areas of focus, stores will be opened at appropriate times, combining large and small formats to form scale advantages. "But we must also see the pressure of the overall environment, and we still need to maintain a relatively cautious attitude. Let's survive first."

Li Yanchuan emphasized that in any adversity, retail enterprises must find their own direction for upward or development, such as finding new sales growth points, or being able to analyze themselves thoroughly, analyze the entire industry well, and analyze customers well, and meet customers' needs.

"This is what we must do well in the next two years," Li Yanchuan said.

**Adjustment and Response**

To cope with the impact of the pandemic, Chaoshifa mainly did two things in 2021: first, control costs and slow down the pace of store openings; second, adjust stores, including product structure.

Li Yanchuan emphasized that these adjustments are soft adjustments without closing stores, such as making the product structure more matched with target customer groups and adding some higher-margin products like dine-in options.

Take Chaoshifa's Xueyuan Road store as an example. Because there are many students there, the store increased ready-to-eat categories suitable for young people.

In addition, it worked with suppliers to deeply develop 3R category products that cater to customer needs, such as tendon and brain meat, lamb spine hot pot, and braised oxtail developed with Yueshengzhai. It also worked with bakery brands to develop bread with reduced sugar, salt, and oil, and desserts with animal cream.

"For products developed with suppliers, we organized employees and cadres to taste them together. After several rounds of adjustments and comparisons, we finally determined products with better taste, more appropriate packaging sizes, and healthier ingredients," Li Yanchuan said.

These deeply developed products have become bestsellers this year. For example, the Yueshengzhai series of four items sold over 2.26 million yuan in four months, and the bread series of four items sold 1.63 million yuan in five months. "With sales volume, manufacturers are also very willing to cooperate with us."

In addition, there are weekend and monthly competition big items. Every weekend, Chaoshifa launches three cost-effective products: big brands, good quality, and low prices.

In 2022, Chaoshifa's focus remains on product adjustment and cost savings.

In fact, Chaoshifa has been making its budget for more than two months, starting from late October 2021, and it is now basically completed. At the same time, it has set basic expected growth targets for sales and profits.

"We have also had some discussions on how to achieve these goals. Among them, an important part is institutional reform, including changes from organizational structure to departmental functions, as well as decentralization, simplification, and cost control," Li Yanchuan said.

In 2022, Chaoshifa's strategic direction will not undergo major adjustments. For now, it must do what needs to be done well.

Shouhang Supermarket, which also deeply cultivates the Beijing market, is also actively adjusting to the pandemic and has achieved good results.

In 2021, Shouhang Supermarket's sales reached 1.6 billion yuan. Although it decreased compared to 2020, compared to 2019, sales increased by 2.5%, and gross profit also improved.

Liu Yihua said that in 2021, Shouhang Supermarket optimized its product structure and upgraded its supply channels, especially reshaping the fresh produce supply chain. Second, around the 52 weeks of festivals, solar terms, and seasonal changes, product marketing was proposal-based, with a focus on key items. Finally, it strengthened online-offline integration, introducing third-party home delivery services on the basis of continuing to strengthen group buying business.

Facing the current economic situation, more traditional retailers are adopting conservative development strategies: on the one hand, re-examining their own model and efficiency issues; on the other hand, how traditional entities embrace the consumption methods cultivated by new retail and establish a service system that is more efficient, more experiential, and more demonstrative than traditional e-commerce will become an important part of online-offline integration.

"To be precise, these have just begun, so it can also be called a first year," Liu Yihua said.

Liu Yihua emphasized that the pandemic has promoted the rapid development of home delivery business. Original retail enterprises need to restructure a business model suitable for the future. "In 2022, Shouhang Supermarket will continue to adhere to direct sourcing of fresh produce from origins, insist on walking on two legs with online and offline, and on the basis of doing well in store operations, make up for the shortcomings of online group buying and home delivery."

In Liu Yihua's view, at a time when many things are changing, we must see what remains unchanged. The fundamental core has two points:

First, supply chain integration and efficiency improvement.

Customer needs are constantly changing, and changing faster and faster. It requires your supply chain to respond efficiently. Competition is becoming increasingly fierce, requiring your supply chain to control costs lower and lower.

Second, improvement of overall operational efficiency.

Whether customers buy offline, through online group buying, or have goods delivered home, the efficiency of the entire operational process is the ultimate competition among enterprises.

"When overall demand remains unchanged and the number of suppliers increases, enterprises with low efficiency will inevitably be eliminated in large numbers," Liu Yihua said.

As a supermarket rooted in the regional market, Green City Supermarket will continue to adhere to a customer-centric approach in 2022, focusing on customers, doing well in products, building a good team, renovating stores, and improving on-site management. At the same time, it will accelerate online-offline integration and continue to provide customers with high cost-performance products and services.

Tian Jianzhong, chairman of Green City Supermarket, said that retail enterprises should leverage their own advantages and do well in on-site management.

Because the strength of traditional retail is store on-site management and category management, providing customers with valuable products and services remains the focus of work.

"We are land animals, without the genes of birds. We must never put our main energy on birds. We should do things we are familiar with, leverage our strengths, and satisfy customers' in-store experience."

Tian Jianzhong said, "Online-offline integrated development is an inevitable trend. We should actively use third-party platforms and self-built mini-programs, but not invest too much. We should not regard online as a burden for physical stores, but as a supplementary channel for physical retail."

To embrace online, Green City Supermarket established a professional company as early as 2015 - Henan Xiandaojia E-commerce Co., Ltd.

In the first three years, it only did home delivery business. Since 2019, Green City Supermarket has also started community group buying business.

**Tian Jianzhong emphasized that Green City Supermarket regards community group buying as a supplementary channel for store marketing and an important entrance to meet consumers at different levels. "Due to the pandemic last year, compared with last year, group buying sales have declined overall this year, but home delivery sales have doubled."**

Under pressure and challenges, some formats in the retail industry still have opportunities.

**Which formats have more opportunities?**

"The industry is reshuffling. Players with low efficiency and unstable product quality are out. Big companies' community group buying survives with traffic and supply chain advantages. Small and beautiful players will have living space," Liu Yihua judged the development trend of the retail industry.

Liu Yihua emphasized that Shouhang Supermarket is also doing community groups. Currently, it has 700 community groups with 150,000 people, and sales account for about 4% of the company's total sales. At the same time, Liu Yihua said he is optimistic about three formats: community fresh food, convenience stores, and specialty stores.

Community fresh food is physically close to customers and high-frequency, but requires high supply chain capabilities and relatively low industry standardization. Convenience stores have opportunities because they carry more life and work scenarios. Specialty stores have strong specialization, precise positioning, and streamlined, distinctive, and novel products, so specialty stores generate high repurchase and high stickiness.

In Liu Yihua's view, the core competitiveness of future retail enterprises is not the difference between physical and non-physical, because there are good and bad physical stores, and there are also good and bad non-physical ones. It is more reflected in the dimension of individual differences among enterprises.

**"Online has developed on the basis of physical entities. It is just a different external form, but its essence has not departed. With the adjustment of national policies, online and offline will inevitably survive in a fairer competitive environment," Liu Yihua said.**

For Shouhang Supermarket, it is important to maintain its own strategic focus, persist in the direction of category construction, do a good job in product group planning in the field of target customer segmentation, form a joint force across categories, and continuously innovate on these foundations.

Liu Yihua said that grafting the formats that Shouhang Supermarket focuses on into a new service system and occupying a certain market share in the regional market still has great hope. "In the accumulation of these capabilities, we have walked a bit slowly, but the foundation is solid."

These will become the foundation for Shouhang Supermarket's rapid development in the future.

Liu Yihua also frankly said that in the future, it is necessary to break through the bottleneck of home delivery business, achieve synchronized online and offline development, and provide customers with comprehensive and convenient services.

Tian Jianzhong, chairman of Green City Supermarket, also favors formats such as community fresh food stores, supermarkets, convenience stores, and specialty stores, but he emphasized that he has never been optimistic about online money-burning businesses.

"When you cannot change the outside world, you must seek your own breakthrough," Tian Jianzhong said. **The core competitiveness of future physical retail still comes from store efficiency, specifically reflected in logistics distribution efficiency, store product turnover rate, and sell-through rate. This is the product management capability of physical retail.**

In addition, physical retail should also strengthen the medium-food category, because in the future, customers will rely more and more on medium food. Tian Jianzhong believes that Green City Supermarket's core competitive advantage is the team's adaptability and resilience. Similarly, Green City Supermarket also faces the problem of seeking its own breakthrough.

"The challenge facing Green City Supermarket is the sedimentation after its own transformation and the team's continuous innovation ability in the future. The continuous improvement of employee management skills and operational skills is still a bottleneck that needs to be broken through in the future," Tian Jianzhong said.

In 2022, the retail industry has both dangers and opportunities. As Li Yanchuan, chairman of Chaoshifa, said, "Hope and survival."

But the key is, before hope arrives, one must first survive.

Source: Lingshou (ID: lingshouke) Author: Chuwu Liuxiang

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