Source | New Retail ID | ixinlingshou Author | Lianshang.com Editorial Department
Recently, there have been reports that Freshippo's Chaohesuan NB is preparing for franchising, moving from self-operated hard discount to franchise hard discount. The author learned from sources close to Freshippo that the trial franchising of Chaohesuan NB has ended, and it will officially start this month. Chaohesuan NB has established a dedicated franchise department internally to fully promote the franchise business, shifting from the previous self-operated hard discount model to a franchise hard discount model. This strategic transformation is not only an important measure for Freshippo to respond to changes in the retail market but also a key step in realizing its "thousand-store plan." However, as of now, Chaohesuan NB has not officially disclosed specific details.
Strategic Transformation: The Inevitable Choice from Self-Operation to Franchising At the same time, the performance of the hard discount format is becoming increasingly prominent. According to NielsenIQ data, the compound annual growth rate of China's hard discount format will reach 5.6% in the next decade, far exceeding the 2.5% of hypermarkets and even slightly higher than the 5.5% of convenience stores. This data undoubtedly strengthens Freshippo's determination to focus on the hard discount track. From a financial perspective, Freshippo also faces certain profitability pressures. Although Freshippo's GMV exceeded 75 billion yuan in fiscal year 2025, achieving positive adjusted EBITA for the first time in a full year, for Alibaba Group, Freshippo still needs to contribute greater value. Against the backdrop of divesting traditional retail assets such as Intime Department Store, Freshippo carries the hope of Alibaba's retail business transformation. Opening up the franchise model and rapidly expanding through asset-light operations is undoubtedly an effective way for Freshippo to achieve economies of scale and enhance profitability.
Franchise Model: Low Threshold and Multi-Dimensional Support in Parallel The franchise model designed by Freshippo for Chaohesuan NB demonstrates great flexibility and attractiveness. According to information obtained by the author, prospective franchisees can choose between two franchise methods: The first is independent cooperation, which involves leasing a store to open a Chaohesuan NB self-pickup store; the second is cross-industry cooperation, which involves adding the Chaohesuan NB project to an existing store to achieve business increment. To ensure the success of the franchise model, Freshippo provides strong support in supply chain, digital operations, and other aspects. The proportion of private label products in Chaohesuan NB has reached 60%, ensuring product cost-effectiveness through direct factory connections, bare-price procurement, and independent pricing. This model not only brings higher gross margin space for franchisees but also helps maintain the brand's price competitiveness. In supply chain construction, Freshippo has drawn on SHEIN's successful experience, establishing a three-tier supply chain system and accelerating brand OEMization to continuously launch new products. Freshippo also digitizes demand data, enabling the supply chain to adapt to consumption trends agilely and at low cost. This strong supply chain capability provides franchisees with stable and reliable supply guarantees. Digital operations are another major advantage of Freshippo. Chaohesuan NB plans to fully launch on Taobao Flash Purchase in September 2025, fully embracing instant retail. This means franchisees can leverage Taobao's traffic advantages to expand online sales channels and increase store sales. At the same time, Freshippo's digital system can provide franchisees with precise data analysis and operational guidance, helping them optimize product structure and marketing strategies. In addition, Freshippo is exploring a new retail model—"1 store + N warehouses." In this model, the main store is responsible for user experience, brand awareness, and in-store scenarios, while front warehouses focus on delivery efficiency and density expansion. Franchisees can leverage this model to achieve integrated online and offline development, improving operational efficiency and user satisfaction.
Market Prospects: The Golden Age of the Hard Discount Track Chaohesuan NB's decision to open franchising at this time coincides with the golden development period of China's hard discount format. The "2025 China Retail Industry Outlook" points out that the scale of China's hard discount market exceeded 200 billion yuan in 2024. Compared with the international market, there is still significant room for growth in domestic hard discount retail. According to a Bain & Company research report, the penetration rate of the hard discount market in Germany is 42%, in Japan 31%, while the current domestic penetration rate is only 8%. This huge market potential mainly stems from changes in consumer demand. According to a report by the China Consumers Association, in 2025, cost-effectiveness has become the primary concern for consumers, with over 70% of people expecting "good quality without high prices." While luxury goods market sales decline, discount retail channels such as outlet malls continue to grow, reflecting consumers' increasingly rational consumption attitudes. The core reason why the hard discount model can meet consumer needs lies in its ultimate cost control capability. Unlike traditional "budget supermarkets" or "discount supermarkets" that mainly rely on irregular promotional activities or near-expiry product discounts, hard discount supermarkets significantly reduce operating costs by streamlining SKUs and optimizing supply chains, thereby providing consumers with continuous high-cost-performance product choices. Taking Chaohesuan NB as an example, its SKU count is controlled at around 1,500-2,000 items. By selecting 1-2 best-selling products in each category, it achieves large-scale procurement and efficient turnover. This model not only reduces procurement costs but also reduces consumer choice difficulty and improves shopping efficiency. In the context of the rapid development of instant retail, the hard discount format has added new growth momentum. The profit space created by hard discount, while giving way to consumers, also allows retailers more flexibility to engage in businesses that incur additional operating costs but also bring incremental revenue, such as instant retail. After Chaohesuan NB launches on Taobao Flash Purchase, it is expected to leverage Alibaba's ecosystem advantages to further expand market share. From the competitive landscape, although internet giants such as Meituan and JD.com have entered the hard discount track, Chaohesuan NB still has strong competitiveness due to its first-mover advantage and Freshippo's brand influence. Currently, there is a certain degree of differentiated competition among major players in the hard discount format. For example, JD.com mainly focuses on northern cities like Zhuozhou and Suqian; Chaohesuan NB focuses on its advantageous markets in Jiangsu, Zhejiang, and Shanghai; Meituan's Happy Monkey first targets first-tier cities like Hangzhou and Beijing. This regional competitive landscape provides a relatively relaxed market environment for Chaohesuan NB's franchise expansion.
Challenges and Responses: The Difficulty of Balancing Scale and Quality Although the franchise model of Chaohesuan NB has broad prospects, it still faces many challenges in the actual promotion process. One major risk of the franchise model is the difficulty in ensuring consistency in operational quality. Franchisees are profit-oriented and may compromise on product quality and service levels, thereby affecting the brand image. To address this challenge, Freshippo needs to establish a strict franchise management system. This includes qualification review of franchisees, systematic training support, and regular supervision and inspection. Freshippo can also use digital means to monitor the operational data of franchise stores in real time, promptly identifying and resolving issues. In addition, establishing reasonable incentive and exit mechanisms can also encourage franchisees to operate in a standardized manner. The sustainability of the profit model is another major challenge. Although the threshold for Chaohesuan NB franchising is relatively low, the actual profitability of franchisees remains to be seen. To improve franchisee profitability, Freshippo needs to continue efforts in supply chain optimization, category management, and marketing support. By expanding procurement scale to further reduce costs, leaving more profit space for franchisees; optimizing product structure according to consumption characteristics in different regions to increase single-store sales; leveraging Freshippo's brand advantages and marketing resources to drive traffic and promotions for franchise stores. The sinking of supply chain capabilities is also a major test for Chaohesuan NB. As franchise stores expand to third- and fourth-tier cities and township markets, how to ensure supply chain efficiency while controlling costs has become a problem that Freshippo must solve. Freshippo can consider cooperating with regional distributors, leveraging their localized resource advantages to compensate for its own supply chain deficiencies in lower-tier markets. At the same time, gradually establish regional warehousing centers to improve product distribution efficiency. During rapid expansion, Chaohesuan NB also needs to be wary of the problem of "franchise without control." If control over franchise stores is not in place, it is easy to lead to inconsistent operational standards across stores, affecting the brand image. Freshippo needs to find a balance between standardized management and the initiative of franchisees, ensuring brand consistency while fully leveraging the local advantages of franchisees. In addition, as more players enter the hard discount track, market competition will become increasingly fierce. Chaohesuan NB needs to continuously innovate and maintain differentiated advantages. This includes continuously developing private label products, optimizing store experience, and exploring new service models. For example, Freshippo can leverage its advantages in the fresh food sector to introduce more high-quality fresh products to Chaohesuan NB, forming differentiated competition.
Future Outlook: From the Thousand-Store Plan to Industry Reshaping The franchise expansion of Chaohesuan NB is not only related to Freshippo's own development but may also have a profound impact on the entire hard discount retail industry. If the franchise model of Chaohesuan NB succeeds, it is likely to trigger a chain reaction within the industry. Other hard discount brands may follow suit, accelerating franchise expansion, thereby promoting the rapid development of the entire hard discount format. This will not only change the competitive landscape of China's retail industry but also bring more benefits to consumers. In the long run, the franchise model of Chaohesuan NB is also expected to promote the digital transformation of the retail industry. Leveraging Freshippo's technological advantages and Alibaba's ecosystem resources, Chaohesuan NB franchise stores will become important nodes in digital retail. This can not only improve the operational efficiency of individual stores but also accumulate massive consumer data, providing support for precision marketing and supply chain optimization. The franchise expansion of Chaohesuan NB will also provide new opportunities for small and medium-sized entrepreneurs. The low-threshold, strong-support franchise model allows more people to participate in the wave of hard discount retail. This not only helps solve employment issues but also promotes the optimal allocation of retail resources and the balanced development of the retail industry. However, to realize these beautiful visions, Chaohesuan NB still needs to remain clear-headed during rapid expansion. How to find a balance between scale and quality, how to ensure the profitability of franchisees, and how to cope with increasingly fierce market competition are all issues that Chaohesuan NB needs to continuously explore and solve in its future development. For Freshippo, the franchise model of Chaohesuan NB is an important step in its strategic focus. From testing eight formats in four years to focusing on Freshippo Fresh and Chaohesuan NB in its tenth year, Freshippo's strategy is becoming increasingly clear. Through the franchise expansion of Chaohesuan NB, Freshippo is expected to establish a leading advantage in the hard discount track and inject new vitality into Alibaba's retail business. Overall, Chaohesuan NB's establishment of a franchise department and preparation for franchising is an important measure for Freshippo to adapt to changes in the retail market and respond to competitive challenges. This strategic transformation faces both many opportunities and many challenges. If successfully promoted, Chaohesuan NB is expected to become a leading brand in China's hard discount retail, bringing consumers more high-cost-performance choices and contributing to the innovative development of the entire retail industry. In this feast of hard discount, whether Chaohesuan NB can laugh last, let us wait and see.