---
title: "\"Generic\" Snack Discount Stores Sweep Townships"
description: "Wang Hua, a former designer, opened a snack discount store in a small township in Shandong, but business has been poor, with daily sales around 700 yuan and a 16% gross margin, leading to losses. He regrets joining the franchise, as the initial investment was nearly 90,000 yuan, and the prices are not competitive compared to county-level stores. The article also discusses the rapid expansion of snack discount stores in county towns and townships, their low-price strategies, and the challenges they face."
author: "晴山"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2024-07-14"
language: "en"
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---

# "Generic" Snack Discount Stores Sweep Townships

> Wang Hua, a former designer, opened a snack discount store in a small township in Shandong, but business has been poor, with daily sales around 700 yuan and a 16% gross margin, leading to losses. He regrets joining the franchise, as the initial investment was nearly 90,000 yuan, and the prices are not competitive compared to county-level stores. The article also discusses the rapid expansion of snack discount stores in county towns and townships, their low-price strategies, and the challenges they face.

**"Generic" Sweeps Townships**

"It's been over a month since opening, but now I'm thinking of transferring the store or converting it into a restaurant or something." Last month, Wang Hua (pseudonym) joined a snack discount brand in a small township in Shandong, but business has never been good since opening, forcing him to consider alternatives. Wang Hua, born in the 1980s, previously worked as a designer in a first-tier city. In the second half of last year, his company cut costs and optimized staff, and he was among those laid off. After receiving compensation, he didn't rush to find a new job but returned to his hometown. Wang Hua said that after staying in his hometown for over half a year, he wanted to find something to do. Seeing that snack discount stores were booming in the county town, with several like Zhao Yiming and Haoxianglai opening consecutively and seemingly doing well, he got the idea to open one himself.

"The county town is already saturated, and only townships don't have much competition, so I thought of opening a store in a township to try." Wang Hua said. "I chose this brand because they said no franchise fee, high profits, and a full range of products." He added that the location he liked was near a middle school with many students, so he decided to join the brand. After opening, business wasn't as good as those discount snack stores in the county town. Now he sells about 700 yuan a day with a gross margin of about 16%. After deducting monthly rent of 1,700 yuan, wages for two employees at 2,300 yuan each per month, plus utilities, it's clearly a loss-making business. "Interestingly, after my store opened, two more snack stores opened in this small town, but they are also generic brands," Wang Hua said. The other two stores have a fresh food section in addition to snacks, and during the opening period, they gave away watermelons and vegetables with purchases over 30 yuan. He guessed they use fresh food to attract customers, and their business is clearly better than his store that only sells discount snacks. What makes Wang Hua regret joining this brand even more is that although they said no franchise fee, he had to purchase goods, materials, and shelves from the headquarters. "The first batch of goods from the headquarters cost 30,000 yuan, and materials and shelves cost 60,000 yuan, totaling nearly 90,000 yuan," Wang Hua said. Now he sees that the selling prices are not cheap. For example, a certain brand of beverage sells for 3.2 yuan at Zhao Yiming in the county town, but his purchase price from the headquarters is 3.4 yuan. "Even if the profit margin is low, I can't sell below the purchase price of 3.4 yuan. Although it's called a discount store, it doesn't have a price advantage," Wang Hua said helplessly. Now the leading discount snack brands are competing fiercely in county towns, while generic brands compete in townships.

**Big Logos in County Towns**

In the past two years, eye-catching big logos and cost-effective snack supplies have made various discount stores the "star" shops in county towns. On commercial streets in many county towns and townships, discount stores like Snacks Very Busy, Snacks Youming, and Zhao Yiming Snacks have sprung up like mushrooms. In these stores, you can buy Nongfu Spring for 1.1 yuan, Wanglaoji for 2.8 yuan, Lay's potato chips for 2.9 yuan, and snack packs for a few cents each. Compared to supermarkets and convenience stores, products in discount stores are on average 20%-30% cheaper. At the beginning of this year, data from Meituan showed that since New Year's Day, searches for "snack discount stores" increased by 393.7% year-on-year, and comments increased by 250.0%. During the same period, transaction volume on the platform increased by 517.6%, orders by 232.5%, and users by 241.2% compared to the same period last year. These snack stores, spread across county towns, use open franchising, direct factory connections, and cut out middlemen to capture the mass snack market with low prices. For example, last year, "Snacks Very Busy" opened an average of 200 stores per month, with over 50% of its stores in lower-tier markets; "Zhao Yiming Snacks" expanded at a rate of up to 300 stores per month, with franchise locations reaching as deep as county-level cities and townships, showing huge growth potential. Since last year, various snack discount brands like Zhao Yiming Snacks, Laiyoupin, Snacks Very Busy, Tangchao Snacks, Snacks Youxuan, and Ai Snacks have spread rapidly across the country, blooming in lower-tier cities. A netizen from a county in Anhui Province said that since the end of 2022, in his small county with a permanent population of just over 600,000, more than a dozen branded snack discount stores have opened, including Laiyoupin and Haoxianglai. A county-level consumer in Guangxi said that in the past two years, more than a dozen branded snack discount stores suddenly appeared locally, and even brands like Zhao Yiming and Snacks Very Busy, which already have prices lower than other supermarkets, often run store-wide 60%-80% discount promotions.

In addition to opening stores aggressively in lower-tier markets to increase density, snack discount brands also use surprisingly similar strategies. That is, "more and cheaper": snack discount stores typically have thousands of SKUs and focus on low prices. Taking Laiyoupin as an example, the store sells 268ml Nestle Smooth Latte Coffee and 250ml Red Bull for 4.5 yuan and 4.9 yuan respectively, both lower than the distributor's unified guidance price of 6 yuan, and they are not near-expiry products but fresh-date products. This pricing strategy is highly attractive to county consumers who are very price-sensitive. At the same time, some consumers on social media have reported that local snack discount stores engage in price wars, selling out shelves and causing checkout lines to wait over 30 minutes. In terms of prices, according to comprehensive media reports, discount snack stores sell products about 20%-30% cheaper than traditional channels, but their gross margins remain at 18%-20%. In terms of profit margins, Huaxi Securities estimates that the store-level profit margin for Snacks Very Busy is around 6%-8%; Zhao Yiming's net profit margins in 2022 and the first half of 2023 were 3.2% and 2.7%, respectively. While maintaining low prices, they still retain some profit space.

**Low-Price Offensive**

Snack discount stores, with their "simple and crude" low-price offensive, have quickly taken over the market that used to belong to stores like Liangpin Shop and Baicaowei, and have also forced many convenience stores and small supermarkets to close. At the same time, they have caused a strong sense of crisis among retail giants. At that time, Hou Yi, former CEO of Hema, said on his social media: "Discount stores like Hi-Tego and HotMaxx are opening next to or across from Hema Fresh stores. Their prices are one-third cheaper than ours, and our heavily invested stores are seeing sharp sales declines, becoming experience and display stores for branded products."

**To meet the challenge, retail giants themselves have started discount transformations.** Hema announced a "comprehensive discount" transformation; Yonghui Superstores adopted a gradual change by adding "authentic discount stores" in its stores; traditional snack store company Liangpin Shop also launched a large-scale price reduction. The pressure of price cuts and discounts has been passed on to upstream suppliers, and the original "supplier-retailer relationship" seems to have become tense. The entire retail industry is transforming and reforming around price cuts, discounts, special supplies, and private labels.

In the view of consumer investor Tan Zhiwang, every country, based on its market environment and economic development, will give rise to representative discount store brands. Snack discount stores are a unique discount store model in the Chinese market. Its uniqueness lies in the fact that it is rooted in China's food industry's sufficient and surplus production capacity, as well as a huge consumer base and vast lower-tier market potential. "The Chinese market is too big, with too many people. Cutting off a portion of product demand from a portion of the population can support a business format," Tan Zhiwang said. Under huge demand, any class, market, population, or category can be divided into different discount store forms.

From the discount model perspective, in the past three years, the market and capital have focused more on the "hard discount" model. This model optimizes the supply chain by directly sourcing from manufacturers or making OEM products, thereby reducing intermediate links, lowering operating costs, and ultimately achieving low prices. Under this model, Sam's Club and Costco have achieved high growth in the Chinese market. In addition, various snack discount stores that have emerged in recent years, such as HotMaxx and Hi-Tego, initially focused on "near-expiry food" and have "evolved" from a soft discount model to a hard discount model. Snacks Very Busy and Zhao Yiming have removed the intermediate distributor link in their business models, directly sourcing from manufacturers, and creating low-price product combinations to lower overall prices. At the same time, they attract a large number of individual entrepreneurs through franchising, rapidly expanding stores and using scale as a lever to mobilize more resources. In other words, snack discount stores only have offline channels, and their development logic lies in attracting franchisees to enter and quickly open stores. Franchisees share the operational and financial risks, making the business model lighter and saving many marketing costs.

Behind the booming snack discount store business, there are also some cold thoughts: with the rapidly saturating county and township markets, is joining a snack discount store still a good business next?

(Original work by Lingvo Media)

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