The closures of Shanghai City Supermarket and Hubei Fudi Supermarket have once again sounded an alarm for the retail industry. A new round of chain supermarket eliminations may primarily target service-oriented retail brands deeply rooted in regional markets.
After more than 30 years of development, the Chinese chain supermarket industry has seen industry hotspots shift from hypermarkets to fresh food supermarkets, and in recent years to membership stores and discount stores, with accelerating iteration speed and continuous knockout competitions.
What kind of retail does the future consumer market need? To this end, the industry is constantly exploring. JD.com has long summarized it as 'more, faster, better, and cheaper.'
Hema and other merchants have been laying out their supply chains to increase the proportion of private-label products with better offerings; PUPU, Little Elephant Supermarket, and other front-warehouse players pursue ultimate delivery efficiency; and in recent years, the industry's hottest discount stores and bulk snack stores always surprise with their prices. These are all just focusing on these core points.
Who can become the next generation's 'Retail Light'?
A New Wave of Supermarket Closures?
On April 16, Shanghai residents who appreciate refined living suddenly discovered that Shanghai City Supermarket (CITY SHOP), where they often shopped, suddenly announced its closure.
Public information shows that City Supermarket was founded in the 1990s and 'is renowned in Shanghai for offering gourmet foods from around the world.' Due to its positioning as a high-end imported boutique supermarket, its stores such as Mall Store, Jinqiao Store, Lianyang Store, and Tianshan Store are all located in Shanghai's 'high-end residential areas.'
In 2008, Shanghai City Supermarket expanded beyond Shanghai, opening its first Beijing store in Liangmaqiao, and in 2013, the Beijing Parkview Green store opened. However, these two stores did not last long, and later it still had only 9 stores in Shanghai.
A notice dated April 15 stated, 'In recent years, Shanghai City Supermarket has been struggling to operate, and despite various self-rescue measures, it is still unsustainable! The company has now resolved to dissolve, and from April 16, all store operations will cease.' Within a few days, its official website displayed '403 Forbidden.'
At the end of 2018, City Supermarket's Dapuqiao Riyueguang Store had a dispute with the property owner, and normal operations were temporarily hindered. After the issue was resolved, on the first day of 2019, Shanghai City Supermarket made a high-profile announcement claiming, 'With these three treasures, City Supermarket can definitely survive another 500 years,' attracting more attention from Shanghai residents. The three treasures refer to the decade-old signature roast chicken, the popular sesame egg rolls, and the low-calorie staple Lafabing.
Unexpectedly, just five years later, Shanghai residents quickly abandoned these viral products, and Shanghai City Supermarket could only lament, 'Borrowing another 500 years from heaven.'
Similarly, a few days ago, Fudi Supermarket, headquartered in Xiantao, Hubei, was also caught up in rumors that 'almost all its stores had closed.'
Fudi Supermarket is not an unknown entity. In 2002, Fudi Supermarket opened its first store in Yanglinwei Town, Xiantao City, and subsequently established outlets in townships across more than ten surrounding cities and counties, becoming the largest township chain supermarket in the Jianghan Plain.
By 2011, it had over 500 stores, and at its peak, it employed over 10,000 people, ranking among the '2021 Top 100 Private Enterprises in Hubei.' Based on the threshold for the list, its 2020 operating revenue was at least 3 billion yuan.
On April 6, in response to related rumors, a notice stamped by Fudi Company and the local Commerce Bureau stated, 'Due to transformation and development not meeting expectations, the company has encountered operational difficulties, leading to some disputes and conflicts.'
The dramatic changes in the consumption environment and fierce market competition, especially the impact of O2O platforms such as Hema, Little Elephant Supermarket, and PUPU, have put increasing pressure on offline retail.
The closure of Shanghai City Supermarket and the disputes at Fudi Supermarket will not be the end of the chain supermarket operational crisis; they are likely the beginning of a new wave of closures. Moreover, many of these brands may not even make the news, leaving only a white flag of 'shop for transfer.'
Chinese chain supermarkets have been turbulent for over 30 years. During this period, several iterations have also formed a protracted knockout competition. In this wave after wave of supermarket closures, regional service-oriented supermarkets that were originally far from the fray are gradually unable to hold on. Why is this?
The Iteration History of Chain Supermarkets
In 1990, China's first supermarket, Meijia Supermarket, was born in Humen Town, Dongguan, Guangdong. The following year, Lianhua Supermarket was founded in Shanghai. In 1992, China Resources Vanguard, Hong Kong's third-largest supermarket group, opened its first store in Shenzhen. The industrial atmosphere for Chinese chain supermarkets gradually took shape.
After several years of cultivation, the Chinese chain supermarket industry finally experienced a major explosion around 1995.
That year, Carrefour opened its first store in China in Beijing; Li Binlan founded Xinyijia in Shenzhen; the first Jiajiayue supermarket opened; Zhang Xuansong opened a supermarket called 'Gule Weili' in Xiamen, which was the predecessor of Yonghui Superstores; Wang Tian opened the first Better Life supermarket in his hometown of Xiangtan, Hunan; and Walmart's negotiations to enter China were basically finalized, with its store opening the following year...
Therefore, influenced by Carrefour, Walmart, and China Resources Vanguard, the early Chinese chain supermarket industry was extremely enthusiastic about the hypermarket model. Hypermarkets delivered a dimensionality reduction strike against traditional grocery stores, quickly attracting consumers.
Many post-70s and post-80s generations should remember the shock they felt when first entering a hypermarket. The oversized store space, dazzling array of goods, and self-service shopping with carts were refreshing.
However, after the golden decade driven by the commercial real estate boom, the expansion risks of the hypermarket model began to emerge. Some imitators whose capabilities couldn't keep up began to fall behind, forming a wave of chain supermarket closures. A typical example is Xinyijia.
Back then, Li Binlan left Wanjia Chain and founded Xinyijia in Shenzhen—a new Wanjia. The company once ranked among the TOP 10 in China's chain supermarket industry, and Li was called the 'Iron Lady' of retail.
Starting in 2008, Xinyijia experienced a nationwide wave of store closures, its capital chain broke in 2016, and it officially went bankrupt in 2017.
Li Binlan's former employer, Wanjia Chain, was divested by Wang Shi from Vanke and sold to China Resources Vanguard, forming China Resources Vanguard, which once firmly held the top position in China's chain supermarkets, achieving a different fate.
As the traditional hypermarket model came under pressure, a group of innovators quickly stood out by leveraging their fresh food advantages. Among them, the best were Yonghui in the south and Jiajiayue in the north. With this advantage, Yonghui rapidly rose, once entering the top three in chain supermarkets and becoming the youngest listed company in the industry.
However, the moat of the fresh food category is relatively limited and was quickly replicated industry-wide. Yonghui Superstores, the epitome of the fresh food model, fell into business difficulties due to its aggressive transformation to new retail, struggling for several years before barely recovering.
In those years, the survival status of national chain supermarkets was far worse than that of regional brands, with the most typical examples being Hongqi Chain and Jiajiayue. Those national chain supermarkets that focused on first- and second-tier cities simply couldn't survive without background and financial resources.
Now, even regional service-oriented chain supermarkets like Shanghai City Supermarket and Fudi Supermarket are beginning to struggle. The retail industry can't help but lament: where should it go?
What Kind of Retail Does the Market Need?
No matter how the market environment fluctuates or how the retail industry transforms, consumers' shopping needs have always existed. Moreover, with socio-economic development, total demand continues to trend upward.
Whether it's traditional chain supermarkets or the currently popular O2O platforms, they have long become one of the infrastructures of urban services.
The core of the retail industry has shifted from basic need satisfaction to in-depth service experience. In this endless pursuit of improvement, consumers always look forward to the emergence of a 'Retail Light' in their minds. This label once belonged to Carrefour and Walmart, later to Yonghui Superstores, and now it's attached to Pangdonglai.
Why is Pangdonglai so highly acclaimed? Actually, there's no secret. Regional focus; extreme service; supply chain; price advantage; employee co-construction mechanism.
Regionalization in retail helps improve operational efficiency and control costs, while increasing store density within the region helps strengthen brand voice.
There are too many examples of Pangdonglai's extreme service and good treatment of employees.
Building product advantages based on the supply chain not only cultivates traffic-driving products but also deeply binds users. Such private-label products include Pangdonglai's big mooncakes, craft wheat beer, and Free Love liquor.
In terms of pricing, Pangdonglai adopts a cost-plus fixed gross margin model, similar to membership supermarkets like Costco—although Pangdonglai has not emphasized 'membership' in concept and fee structure, it has essentially formed a membership supermarket business model.
These points, viewed in isolation, are not novel. Achieving just one or two of them is enough to establish a firm foothold in the retail market. Pangdonglai has managed to achieve all of these points, making it the hottest retail miracle at present.
However, what out-of-town consumers care most about is whether Pangdonglai's continuous external assistance in recent years can actually be effective, that is, whether Pangdonglai's model can be replicated.
If none of the above business highlights can be achieved—neither clear regional and business positioning, nor product and service awareness, nor price advantages for consumers and incentive mechanisms for employees—then it can be classified as a traditional supermarket, which truly has little reason to exist.
In the future retail market, differentiation will not only be reflected in scale, but differences in business models will also become increasingly clear.
Either sell ultimate efficiency, such as Hema, PUPU, and Little Elephant Supermarket. When you want to have hotpot and beer at home, your needs can be fulfilled within half an hour. This is also the reason why community convenience stores can continue to exist, but their development has long departed from the concept of traditional supermarkets. The service nature of convenience stores will also become increasingly comprehensive.
Or sell scenario-based services, such as membership supermarkets that particularly stimulate shopping desire, and Pangdonglai, which is called a six-star scenic spot.
Besides these, will there be a third route?
Recommended Reading