---
title: "Discount Stores Shed Their 'Near-Expiry' Label"
description: "Whether it's near-expiry or profitable hard discount, it's clear that price has become a key indicator of consumer purchasing behavior globally. These players aim to build a larger retail ecosystem."
author: "青翎"
publisher: "New Distribution"
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published: "2022-12-08"
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---

# Discount Stores Shed Their 'Near-Expiry' Label

> Whether it's near-expiry or profitable hard discount, it's clear that price has become a key indicator of consumer purchasing behavior globally. These players aim to build a larger retail ecosystem.

Whether it's near-expiry or profitable hard discount, it's clear that price has become a key indicator of consumer purchasing behavior globally. And they aim to build a larger retail ecosystem.

Mid-year, Shanghai Bengbeng Miao Technology Co., Ltd., the parent of the viral near-expiry discount brand "Prosperity Market," revealed that its business had halted, with no cash flow, and it was preparing to apply for bankruptcy.

Prior to this, Prosperity Market had been embroiled in dozens of loan disputes with suppliers, and the company had been listed as a restricted high-consumption enterprise.

The fall of Prosperity Market is not an isolated case. The near-expiry industry, which was all the rage two years ago, has entered a reshuffling phase. According to incomplete statistics from public data by Guanchao New Consumption, **as of the end of October this year, there were only 5 financing events in the near-expiry goods industry.**

Moreover, industry leaders like HotMaxx and HiBuy have begun to shed the "near-expiry" label, with near-expiry surplus goods gradually giving way to second- and third-tier products and private labels in their stores.

Prosperity Market founder Fan Zhifeng once mentioned: **"If a near-expiry food store only sells near-expiry items, it becomes the brand's sewer."** In his view, to compete for pricing power with upstream brands, one must enter the new product market, growing from a secondary channel selling surplus goods to a mainstream channel.

Today, Fan Zhifeng's theory has yet to be validated, and Prosperity Market has already fallen into bankruptcy. Whether near-expiry discount stores can successfully shed their "sewer" identity can only be answered by other players.

**Near-Expiry Discounts Sound the Knockout Round**

The near-expiry industry rose after the pandemic, but near-expiry is not a "new business."

In the world of goods, bestsellers and slow movers are twins: bestsellers sit on supermarket shelves, while slow movers circulate in wholesale markets. **Those who first scoured wholesale markets for slow-moving goods and resold them were called "daoye" (middlemen), and they were the early practitioners of the near-expiry industry.**

The pandemic accelerated industry development, with accumulated surplus stock and budget-conscious consumers leading to a proliferation of near-expiry discount stores. With capital support, the near-expiry industry moved beyond "scattered operations" and gradually developed into a scaled, chain-based format, bringing the "underground" near-expiry business into the spotlight.

However, coming into the spotlight does not mean near-expiry stores can become a stable business. **Despite strong demand and capital bets, near-expiry stores still lose to the fundamental factor of supply.**

From a supply perspective, imported goods have a cycle of several months from ordering, payment, production, shipping, to sales. Large order quantities and long cycles increase the risk of slow sales. Domestic brands are no exception; once market forecasts are wrong, a large amount of near-expiry surplus goods will emerge.

Once goods approach expiry, brands and agents, eager to clear inventory, will cut prices. The closer to the expiry date, the cheaper the price, typically 20% to 50% of the original price, and some near-expiry items may even sell below the factory price.

**It can be said that near-expiry goods are essentially the result of "errors." With the application of digitalization and intelligence in the retail industry, reducing "errors" is the trend, and "shortages" of near-expiry goods have become the norm.**

Lou Chunbin, a veteran in the near-expiry food industry, mentioned that in 2018, near-expiry foods accounted for almost 100% of his store's purchases, but by 2020, that proportion had dropped to less than 5%.

**At the same time, the influx of more outsiders has exacerbated the industry's "too many monks, too little porridge" situation.**

When Lou Chunbin first entered the industry, there were only 50 to 60 merchants nationwide purchasing near-expiry foods. After 2020, this number surged to several thousand, and online discount stores claiming to sell "near-expiry foods" numbered over ten thousand.

Tian Yun, co-founder of the near-expiry food supply platform Super Warehouse, once said that as more people enter the near-expiry food business, supply cannot keep up with increasing demand. Under supply shortage, prices naturally rise, and this price increase will inevitably pass on to consumers, so near-expiry foods are not much cheaper now.

Lou Chunbin gave an example: in the early years, he could acquire a box of 90g Danish butter cookies for 2.2 yuan, when the supermarket price was 9 yuan and near-expiry stores sold them for 4.9 yuan. The huge price difference not only brought high profits to near-expiry stores but also made consumers feel they got a bargain.

**Now, acquiring the same box of Danish butter cookies costs at least 4-5 yuan. If priced at 6-7 yuan, it's impossible to break even; at 8-9 yuan, there's almost no difference from market prices.** "When I say this industry no longer exists, I mean there are no more special-priced supplies."

More importantly, when leading brands are expanding rapidly with scale advantages and capital bets, individual merchants entering later are more likely to become "cannon fodder."

Liu Yuan, a "daoye" in the near-expiry food industry, told Guanchao New Consumption (ID: Tidesight) that it's almost impossible for individual merchants to get first-hand supplies; from manufacturer to store, there are at least 6-7 middlemen, and the further downstream, the smaller the profit.

**Unable to secure supplies, the only option is to franchise with major platforms, but the barriers to entry are not low.**

According to media reports, if you join HotMaxx through a cooperative operation, you first need to prepare an initial investment of about 800,000 to 1 million yuan, including first stocking, deposit, resource usage fees, training fees, service fees, etc. Rental, labor costs, warehousing, and logistics are borne by the franchisee.

Now, HotMaxx's "inability to save itself" has added a hint of "cutting leeks" to franchising. According to media reports from mid-year, HotMaxx still had over 500 stores at that time, but as of this writing, the number of stores shown on HotMaxx's official website has dropped to over 250, moving further away from its goal of "opening 5,000 stores in the next three years."

If major platforms are like this, "underwater" platform operators are even more mixed.

"A friend of mine in the near-expiry food business couldn't find a stable supply for over a month and finally paid 100,000 yuan to join a major platform, but even the major platform doesn't have a stable supply now," Liu Yuan said. "He had experience in snack foods, but even so, he only lasted a few months before closing up."

**Near-Expiry Declines, Hard Discount Rises**

While the near-expiry industry sees closures and shutdowns, on the other side, German hard discount brand ALDI is making great strides.

ALDI China CEO Roman Rasinger revealed in an interview with German Handelsblatt that **ALDI has accumulated extensive experience in the Chinese market and plans to continue opening hundreds of stores in China, with possibly three-digit store numbers in Shanghai alone.**

This "confidence" is not unfounded. According to data provided by ALDI, its 27 stores in China are expected to average 20 million yuan in sales this year, totaling over 500 million yuan.

In Germany, ALDI even forced Walmart to retreat, ending with a $1 billion loss. Currently, ALDI has over 10,000 stores in more than 10 countries, with annual sales exceeding $80 billion.

ALDI's success has attracted a group of Chinese "followers." **New hard discount chain brands like Zhekouniu and Aotele have risen rapidly as the near-expiry business declined, gradually developing their own business models.**

In the hard discount model, chain stores do not need to scour for near-expiry surplus goods; instead, they select limited SKUs, increase sales volume per item, and achieve low costs through scale, thereby offering extreme cost-effectiveness.

In other words, **soft discount is essentially near-expiry discount, while hard discount is essentially regular-price discount.**

To get brands to lower their prices, you have to rely on sales volume. **Scaled sales mean SKUs must be streamlined. For example, Aotele uses a buyer system to keep SKUs under 1,000, reducing procurement costs through per-item scale.** In contrast, HotMaxx under the soft discount model has over 30,000 SKUs.

Additionally, Aotele has achieved extreme price concessions. According to Liao Qingmei, partner and brand marketing general manager of Aotele, Aotele can control gross margins within 15%, while near-expiry collection stores typically have gross margins of 30%-50%.

Besides cooperating with brands, Aotele also develops private labels to make costs and pricing more controllable. According to 36Kr, Aotele relies on brand discounts for 60%, private labels for 20%, and surplus goods for 20% (with a long-term goal of private labels accounting for 50%).

**"Meticulous budgeting" is not only reflected in product selection; location is also key.** Unlike HotMaxx, which focuses on first-tier cities, Aotele has chosen the Sichuan-Chongqing region as its base, where costs are lower but consumption power is not inferior to Beijing, Shanghai, and Guangzhou. This allows Aotele to control labor and rent costs within 8% of sales, whereas in first-tier cities, this figure is often above 20%.

In specific site selection, Aotele cooperates with city shopping malls based on its understanding and judgment of commercial volume, **creating shopping scenes with inherent communication attributes, mutually attracting traffic with the commercial complex while also enhancing its bargaining power on rent.**

In terms of labor costs, Aotele typically arranges only 4-5 employees in a 200-square-meter store, uses self-checkout throughout, and relies on a digital backend system for inventory and replenishment reminders.

Aotele is not the only representative of Chinese hard discount. In fact, as the near-expiry industry changes, many players have begun adjusting strategies, switching tracks from soft discount to hard discount.

Zhekouniu, focusing on community retail scenarios, has opened over 50 stores, with 24-hour hard discount community supermarkets as its main store type and also its third-generation discount store.

As early as 2019, Zhekouniu experimented with near-expiry discount stores but decisively transformed after opening 15. Founder Ma Xintong mentioned that **the core of the near-expiry model is to provide consumers with money-saving strategies by ceding the product's life cycle, "but Zhekouniu hopes to better serve consumers by improving efficiency and reducing circulation costs."**

Near-expiry discount stores like HotMaxx and HiBuy have also begun transitioning to private labels, with near-expiry foods in stores dropping to 5%-30%. Zhu Danpeng, a Chinese food industry analyst, believes that near-expiry foods are now more of a traffic-driving tool, while second- and third-tier products with higher margins are the main business of collection stores.

**From the FMCG industry perspective, near-expiry surplus goods only account for 5%-10% of the market share. If downstream platforms can only help brands sell less than 10% of their goods, they are destined to be unable to sit at the same table as brands.**

"Relying solely on near-expiry foods is impossible because near-expiry foods are limited," Tian Yun judged. "The future transformation direction for near-expiry discount stores is regular-price discount, with near-expiry foods being just a small part."

**Can Chinese Hard Discount Learn from ALDI?**

Hard discount is a trend, but it's also a tough nut to crack.

**To be both low-priced and profitable, you have to cut costs in every aspect of operations. Those in hard discount must be savvy in both market play and accounting.**

Even ALDI, which has been in the hard discount business for over 100 years, has only opened over 30 stores in China in five years.

Behind the slow expansion is ALDI's bold reform. To adapt to the Chinese market, ALDI changed its image as a German discount supermarket for the poor, investing heavily in store and service upgrades, transforming into a "happy house" for Chinese middle-class families.

To meet Chinese consumer needs, ALDI actively lays out local products, with weekly specials, monthly limited editions, and online mall strategies well in hand. Especially through "Aujia Canteen," it offers more fresh food to facilitate nearby consumption for urban families and increase stickiness.

Beyond product selection, ALDI has also upgraded store decoration and services. Its latest 30th store is positioned as a "community supermarket," not only being friendly and convenient but also inviting young artists to paint art walls full of old Shanghai-style story elements.

Additionally, ALDI stores are equipped with user experience experts who not only introduce products and recommend pairings but also handle member recruitment and boost customer loyalty.

**To localize, early trial and error and adjustment are unavoidable hurdles, but time will yield compound interest.**

Take the U.S. market as an example: ALDI took 20 years to reach 500 stores nationwide, but in the following 20-plus years, it added over 1,500 stores.

Domestic new players are also mostly cautious. Aotele, with over 80 stores, has still not left Sichuan-Chongqing. Before entering a city, Aotele first opens a discount warehouse to gauge demand, and only after running it successfully at low cost does it enter shopping malls to open discount stores.

Zhekouniu has set its sights on Henan. In Ma Xintong's view, Henan has a unified dietary structure, high replicability, but slightly weaker competition, and is surrounded by the country's largest retail industry chain and logistics center.

In expansion, Zhekouniu has not been aggressive. While increasing density in the Zhengzhou regional market, its main store type will penetrate other areas of Henan, then gradually expand to the six central provinces.

Each region has unique advantages: Sichuan-Chongqing has strong consumption power, Henan has high population density. Small-scale trials in regional markets reflect both caution and wisdom.

**But becoming China's ALDI is not easy. The core of hard discount is price control, and the top means of price control is building private labels. ALDI took over 100 years to make private labels account for 90%, while in new hard discount stores, brand discounts and surplus goods still dominate.**

Building private labels is a slow-cooked porridge business, requiring hands-on involvement in R&D, production, quality control, inspection, and logistics. Even if you can launch private labels, standing out and competing with big brands is a challenge.

Returning to the business model, the foundation for hard discount to work is extremely high customer traffic. Whether for brands or property developers, traffic is the only bargaining chip to raise the value of hard discount stores, and maintaining traffic depends on accumulated operational capabilities.

**In the end, the hard discount business is a race against time. Only by promptly mastering operational methodologies and perfectly replicating them can you avoid falling into an endless "burning money" vortex.**

**Conclusion**

As a special branch of the retail system, the near-expiry industry has always hovered on the edge of the gray area.

**In this industry, building connections and networks is far more important than refined operations, which also determines that near-expiry cannot exist as a stable industry in the long term.**

In contrast, the operational principles of hard discount are more certain and clear: reducing costs through efficiency and scale advantages, thereby providing consumers with more cost-effective products and returning retail to its essence of small profits and quick turnover.

ALDI's development from an inconspicuous grocery store to a global benchmark of hard discount is inseparable from a century of correct choices, but more importantly, it's the survival wisdom learned from wars—**"The worse people's situation, the better our life."**

What if we reverse this sentence? Will hard discount's life get worse as people's situation improves?

The answer is not necessarily. **Consumers' eternal pursuit of cheap, good products will provide the soil for hard discount's survival.**


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