---
title: "Exclusive Report | 36% of Community Retailers Plan to Transform into Discount Supermarkets, Accelerating FMCG Industry Chain Changes"
description: "In 2023, the bulk snack industry developed rapidly. While everyone was discussing this format around 'low prices,' New Distribution conducted extensive research and in-depth analysis, releasing the 'China Snack Hard Discount White Paper (FMCG Industry Insights 2023)' in October 2023, systematically explaining the underlying logic behind industry changes. In the past nearly a year, discount retail has become the focus of retail transformation, and hard discount has become an important force disrupting the order of the FMCG industry chain, involving not only snacks but also more FMCG categories."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-08-17"
language: "en"
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# Exclusive Report | 36% of Community Retailers Plan to Transform into Discount Supermarkets, Accelerating FMCG Industry Chain Changes

> In 2023, the bulk snack industry developed rapidly. While everyone was discussing this format around 'low prices,' New Distribution conducted extensive research and in-depth analysis, releasing the 'China Snack Hard Discount White Paper (FMCG Industry Insights 2023)' in October 2023, systematically explaining the underlying logic behind industry changes. In the past nearly a year, discount retail has become the focus of retail transformation, and hard discount has become an important force disrupting the order of the FMCG industry chain, involving not only snacks but also more FMCG categories.

In 2023, the bulk snack industry developed rapidly. While everyone was discussing this format around 'low prices,' New Distribution conducted extensive research and in-depth analysis, releasing the 'China Snack Hard Discount White Paper (FMCG Industry Insights 2023)' in October 2023, systematically explaining the underlying logic behind industry changes.
In the past nearly a year, discount retail has become the focus of retail transformation, and hard discount has become an important force disrupting the order of the FMCG industry chain, involving not only snacks but also more FMCG categories.
How should we understand hard discount? What does it really mean for the industry?
**On August 21, at the FMCG Hard Discount Conference,** New Distribution, together with Lemon, will release the **'China Hard Discount Development Report (FMCG Industry Insights 2024)'** (hereinafter referred to as the Report).
This report provides an in-depth and systematic analysis of the concept of hard discount, sorts out the current state of different hard discount models in China, and offers forward-looking insights into the transformation of the FMCG industry chain behind the development of hard discount, helping different roles in the industry chain objectively understand industry trends and meet challenges.
#### **Community Retail Transforms into Multi-category Discount Supermarkets**
In this report, we surveyed nearly 200 community retail chain enterprises, of which 73% are located in lower-tier markets (third-tier cities and below, including county towns and township markets), 68% have fewer than 100 stores, 18% have between 100 and 300 stores, and 47% operate only within their own city.
**With the snack discount store landscape largely settled, multi-category discount supermarkets have become the new industry trend.**
Facing the impact of discount retail on traditional retail, 36% of community retailers are planning transformation. Among the transformation directions, 90% of community retailers intend to transform into multi-category discount supermarkets; in terms of path selection, 73% said they are willing to start on their own.
According to survey data, the top three obstacles to transformation are: **1. Difficulty in determining and optimizing product mix; 2. Lack of operational talent; 3. Inability to find suitable supply chain resources.**
Compared to snack stores, discount supermarkets involve more categories, and are more complex in terms of store format determination, product mix, and vertical integration of the supply chain.
It is foreseeable that discount supermarkets will develop more slowly than snack stores, but due to their diverse categories, their impact on the industry will be broader.
#### **Daily Chemical, Personal Care, and Alcoholic Beverages Become Key Focus Categories**
Compared to traditional retail, bulk and white-label products are the main categories in snack discount stores.
According to the survey, in 35% of snack systems, white-label products account for more than 50% of total sales. In 67% of snack systems, bulk food accounts for more than 50% of total sales. The price band of 10-15 yuan per 500g is the best-selling.
Discount supermarkets differ significantly from snack stores in product structure. Food and beverages are the basic categories, and 37% of discount supermarkets said non-food sales account for more than 50%. Among these discount supermarkets, the main non-food categories are: **1. Daily chemical and personal care; 2. Alcoholic beverages; 3. Condiments, etc.**
Compared to snacks, these categories have lower consumption frequency. Coupled with the fact that discount supermarkets generally have fewer stores, their development speed will not be as fast as snack stores. These products in discount supermarkets will rely more on third-party supply chain resources rather than upstream manufacturers. Distributors deeply involved in these categories should actively pay attention to industry changes and seek development opportunities.
#### **Some Distributors Continue to Expand Scale**
An important feature of discount retail is direct sourcing from upstream, but in fact, it is impossible for discount retail in China to achieve 100% elimination of distributors. In many cases, distributors are indispensable.
According to the survey, 43% of snack systems and 41% of discount supermarkets have less than half of their direct sourcing from upstream.
Distributors are indispensable, and 88% of snack systems and 78% of discount supermarkets are not opposed to cooperating with distributors and are willing to do so. The main reasons are: **1. Comprehensive service, saving effort compared to direct sourcing; 2. Flexible minimum order quantities; 3. Complete product range.**
Overall, the development of discount stores is certainly squeezing the living space of distributors. Smaller distributors may exit the market because their break-even point is breached. However, some distributors, due to their scale advantages, actively seek cooperation with discount channels and gain market share from peers, leading to continuous expansion of their scale.
#### **Brands Should Actively Respond to Changes in Distribution Order**
The current changes in retail formats represented by snack stores and discount supermarkets are essentially a transformation of the FMCG distribution order.
Discount chains will increase the supply of factory brands through vertical integration, while traditional retail will also try to attract consumers by adjusting product mix and streamlining SKUs.
This means that some products currently on shelves will lose their living space, mainly second- and third-tier brands, those without industry chain advantages, especially those without manufacturing capabilities.
A batch of factories with manufacturing capabilities will gain growth opportunities in this wave of change. For FMCG brands, traditional channel models will face great challenges.
Will the promotion methods of advertising in the air, arming ground forces, and providing enough ammunition to occupy terminal shelves and displays still work when traditional supermarkets with backend models either die or transform?
What is certain is that the retail era of opening stores, placing shelves, and letting whoever can pay the fee have their products listed and make money is over.
In the past, the relationship between brands and channels was confrontational; in the future, it will be ecological. Brands must understand the essence of industry changes and actively embrace the industry trends behind hard discount.
Due to space limitations, this article only shows part of the report. The complete industry report is divided into four parts:
> 1. Systematically explain the logic of hard discount and industry transformation
>
> 2. Review the current context and landscape of China's hard discount industry
>
> 3. Analyze the product management logic and survey data of hard discount
>
> 4. Elaborate on the challenges and opportunities for all parties in the industry chain transformation
Finally, the report includes a 'Directory of Discount Retail Chains.'
**This report will be first released at the 6th China FMCG Conference & the 3rd China FMCG Hard Discount Conference & the 3rd China FMCG Distributor Conference, held from August 20-22, 2024.**


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