On November 10, 2023, Chinese snack-discount chains Busy for You and Zhao Yiming announced a strategic merger, attracting substantial industry attention.
A merger often signals that companies face pressure even when the broader sector is still expanding. In the months before the deal, intense price competition had consumed cash and placed operators under strain.
Operating pressure had already spread across the snack-discount sector.
Fierce Competition in an Early-Stage Market
Rapid change creates both strong and weak stores. Some locations continue growing, while others lose traffic and sales to nearby competitors.
Observers sometimes see one struggling store and conclude that the entire snack-discount format is declining. That conclusion is premature.
The sector was still in an early stage in 2023. After establishing a stronger presence in southern China, snack-discount chains were expanding northward, where store density remained much lower than in mature markets.
Industry forecasts cited in the article expected 22,000 to 25,000 stores by the end of 2023 and imagined a longer-term network of 100,000 to 150,000 locations.
Those forecasts were not guarantees, but they reflected the amount of market space operators believed remained available.
Competition and consolidation were therefore not signs of a finished market. The winning companies and even the final business model had not yet been determined.
Price wars, however, were damaging.
Snack discount is already a low-margin, high-volume business. Repeatedly selling below a sustainable price can hurt consumers, franchisees, manufacturers, and the chain itself.
Even leading brands faced financial pressure. As that pressure increased, the most aggressive price competition began to ease.
The Easy Startup Window Has Closed
An early-stage industry can still be a poor opportunity for an undifferentiated new entrant.
The snack-discount format remained popular, attracting established business owners with resources as well as first-time entrepreneurs.
But the easy startup window had passed. A new store using the same model and operating methods as existing chains had a low probability of building meaningful scale.
Distributors were one group considering the move.
Their conventional business was losing share to snack chains and e-commerce, while they still controlled products, relationships, and local resources. Opening snack stores appeared to be a natural transformation.
The difficulty was that a distributor's operating model and resources were not the same as those required by a retail chain. Without retail innovation, the existing advantages did not necessarily transfer.
The article estimated that fewer than 5 percent of Chinese distributors that had entered snack retail in previous years had built chains of more than one hundred stores.
That did not mean every new entrant would fail. It meant success required breaking beyond the existing model.
Imitation Cannot Overtake the Leaders
The competitive structure was beginning to take shape, but previous leaders had already shown that leadership could change.
Chains such as Wife of the Boss, Bestore, and Three Squirrels had once represented the leading snack-store model. Later entrants changed the market by improving supply chains and making a stronger price breakthrough.
Each new generation won by improving on the previous one.
A new operator cannot overtake the leaders by copying their current playbook exactly.
As the sector moves from an early stage toward higher efficiency, many capabilities still need innovation:
- category structure;
- integration of online and offline operations;
- logistics and delivery;
- private labels;
- supply-chain design.
A new entrant with a materially more efficient model may still succeed. But genuine innovation is difficult, which is why identifying the next format matters.
The Case for Community Discount Supermarkets
If the original snack-discount startup window has narrowed, where might the next opportunity appear?
One answer is the community discount supermarket.
China's offline retail formats were changing more radically than many operators expected. Some regional supermarket owners believed conventional supermarkets could eventually retain only a small share of the market.
Whether or not that most aggressive prediction proves correct, traditional supermarkets were clearly losing portions of demand to other channels.
Online commerce would capture part of that shift. Snack-discount chains would capture another part.
But supermarkets sell a much broader range of products than snack stores. A large share of displaced demand therefore needs an offline format capable of serving full-category household consumption.
That creates space for community hard-discount supermarkets offering a broad FMCG assortment.
Examples cited in the article included Tiaoma and Biyide, which operated community discount stores across more complete consumer-goods categories.
At the time, China's discount formats were still relatively small in aggregate. Compared with the scale of the overall grocery market, substantial room remained.
The article projected that China might eventually support 30 to 50 discount retailers with annual sales in the tens of billions of renminbi.
Low Entry Barriers Do Not Mean Easy Operations
Discount retail can appear accessible because starting capital is not always the decisive constraint.
Operating the model well is far more difficult. Three capabilities are especially important.
1. Organizational Capability
Every retail format depends on organization.
Site selection, assortment planning, supply-chain management, and store execution require repeatable expertise.
A store may carry thousands or tens of thousands of SKUs. If fresh food is included, complexity rises sharply. Operators need detailed product knowledge, not just broad category familiarity.
2. Strategic Capability
An entrant cannot carry a major weakness across the business and must possess at least one clear advantage.
Following competitors into a price war is not a strategy. Subsidizing unsustainable prices can damage the operator, the sector, and franchisees.
A discount retailer needs an explicit answer to where its efficiency advantage comes from and how it will remain defensible.
3. Critical Resources
Different formats require different resources.
A neighborhood store and a shopping-center store need different site relationships, supplier networks, logistics, and operating knowledge.
An operator entering a shopping center, for example, needs either direct experience and relationships or a deep understanding of how those properties operate.
Without the relevant resources and information, execution becomes much harder.
The Next Format Requires a New Capability Stack
Snack-discount retail still had growth ahead, but the opportunity was no longer as simple as opening another store using the same formula.
Community discount supermarkets represented a broader possibility because they could absorb demand across more household categories.
The opportunity would belong not to the fastest imitator, but to operators that combine organizational discipline, strategic differentiation, critical resources, full-category merchandising, and an efficient supply chain.