Post-90s white-collar worker Xiaoyu invited friends over for lunch on a weekend. Waking up at 9:30, she considered the time and effort of going out to buy groceries, so she used a food delivery platform to order vegetables, meat, fruit, and drinks from a nearby supermarket. The app showed the order would arrive in about 29 minutes. In the supermarket, the system alert "You have a new delivery order, please handle it promptly"—once common in restaurants—sounded. Pickers bagged, weighed, scanned, and packed items according to the list, handing them to delivery riders through a dedicated channel. Half an hour later, the ingredients arrived on time. This model, where traditional supermarkets integrate online delivery to meet immediate consumer needs, is the popular "instant retail." It emerged because traditional supermarkets' offline-centric business model is struggling. In recent years, except for special periods, fewer people shop in supermarkets daily. Large supermarkets generally face weak growth, severe sales declines, and lack of momentum. After over 20 years of development in China, traditional retail leaders are collectively stuck in the offline quadrant. Behind this are the pandemic's impact, e-commerce competition, changing consumption habits of young people, and the limitations of traditional supermarkets. However, while consumption habits have shifted, the demand for immediate consumption persists. Embracing instant retail and transforming supermarkets into store-warehouse hybrids is becoming the mainstream strategy for breakthrough. Warehouse-style membership stores and cloud warehouses are also possible directions. Additionally, adding services and experiences (doing more) and integrating logistics and warehousing to reduce costs (doing less) are potential solutions. The future supermarket is being redefined.

01

Traditional Supermarkets Trapped Offline

Traditional supermarkets and convenience stores, being close to consumers and meeting immediate needs within a few kilometers, were once the main channels for purchasing fresh produce and daily necessities. However, due to e-commerce growth, pandemic effects, and rigid supermarket models, fewer people are visiting supermarkets. Before 2021, Xin Xin, an internet professional in Beijing, was a heavy supermarket shopper. "I basically went to the supermarket every Saturday morning, bringing my own canvas bag to stock up for the week." She often bought beef, yogurt, rice noodles, assorted meatballs, snacks, and drinks. The experience was immersive; she listened to music with earphones while picking items, enjoying the freshness and relative cheapness of the produce. "It was a weekly activity that didn't cost much and brought me joy." However, a problem was that she often bought too much to carry, and with the pandemic recurring, going out became a psychological burden. Later, she discovered other channels offering supermarket items with home delivery, so she started using Meituan Maicai, Miss Fresh, Dingdong Maicai, and Duodian. Now, she hasn't visited a supermarket in over a year. Her last two visits were unpleasant; she argued with people cutting in line at checkout. "With the internet so advanced, I shouldn't have to endure that at a physical checkout; I can avoid it by shopping online." Moreover, supermarkets no longer bring her joy; the displays are outdated, and she can imagine what's on each shelf, unlike online channels offering new and interesting products. Young people who avoid supermarkets are turning to alternative channels. Xiaoyu used to buy paper products and cleaning supplies at supermarkets, but she now handles these through traditional e-commerce, stocking up during promotions. For vegetables and fruit, she uses Meituan Maicai, JD Daojia, and Hema. Although she doesn't like visiting supermarkets, she still needs daily items like yogurt, milk, bread, and fruit. "If supermarket shopping could be like ordering takeout, with delivery within 30 minutes, I'd accept it." According to Euromonitor, China's supermarket market exceeded 3 trillion yuan in 2021, but overall growth is weak, with a CAGR of only 2.6% from 2018 to 2021, and hypermarkets saw a CAGR of -0.4%. Supermarket performance is also poor. On July 20, the China Chain Store & Franchise Association's "2021 China Supermarket TOP100" showed that 62 companies, including Yonghui and RT-Mart (ranked 2nd and 3rd), experienced negative sales growth, nearly double the previous year. With fewer customers, slow inventory turnover, and declining performance, supermarkets lack momentum. Bai Lian Think Tank founder Zhuang Shuai explained that the pandemic and the supermarkets' own issues are reasons. Supermarkets have developed for over 20 years with unchanged store layouts and displays, not matching young people's shopping experience and needs. Their operating systems are outdated, with little innovation. Now, there are many alternative shopping methods, including traditional e-commerce and half-hour delivery front-warehouse models. Lian Shang Net senior advisor Wang Guoping noted that the top players in the supermarket industry are not doing well, each for different reasons. "Some blindly chase concepts like Super Species without truly managing supply chains, staff, or services; they boom at opening but quickly fall into losses. Some do warehouse membership stores by just changing shelves and stacking larger packages, but the core is curated products to save time; many revamped stores still have too many choices. Others prefer quick money in real estate or consumer loans rather than upgrading the supermarket industry." Practitioners are being forced to actively seek change.

02

Instant Retail and Store-Warehouse Integration: New Breakthrough Paths

The solutions for supermarket breakthroughs are being forged by practitioners. Transforming through instant retail seems to be a mainstream answer. Lawson, a long-standing convenience store chain, has been on Meituan and other platforms since 2018, with platform sales accounting for 10% of its total. Moreover, the overlap between online and offline customers is less than 10%, meaning most online orders are incremental. Local convenience store chain Meiyijia has seen over 100% annual growth in instant retail platform orders over the past three years. After hitting offline bottlenecks, Jiameilegou founder opened over 20 new convenience stores on Meituan since 2020, and instant retail orders now exceed offline sales. Top supermarkets are also uniformly deploying online-to-home services. Since May this year, Walmart's Sam's Club has opened cloud warehouses in Shanghai and Wuxi, offering "one-hour express delivery" for high-repurchase items ordered online. In 2021, Carrefour opened two warehouse membership stores in Shanghai. Yonghui has tried store-warehouse integration and membership warehouse stores, and cooperates with Meituan Shanshan and JD Daojia. Zhuang Shuai believes instant retail's greatest value is convenience—delivery within half an hour to meet immediate needs. Additionally, because it connects with physical stores, trust is higher, and returns/exchanges are easier. Recently opened stores have considered instant retail delivery, creating dedicated rider lanes where riders can pick up orders directly. Some practitioners have innovated with a warehouse-plus-community model. In mid-2021, Yi Ming opened an 800-square-meter supermarket in Beijing's Chaoyang District, with rent at 4.5 yuan per square meter, and total investment of about 940,000 yuan including shelves, freezers, and initial stock. The large store had high costs, no price advantage, and a vicious cycle: fresh produce didn't sell, turnover slowed, items became stale, and fewer people came. After six months, she closed it, losing over 700,000 yuan. After closing, she still had six or seven WeChat groups, so she started a community business with a 100-square-meter warehouse near the community, promoting fresh produce and daily necessities, and delivering on order. "Our prices are 10%-20% cheaper than nearby supermarkets, fresh, and we deliver. We serve people within 500-600 meters, and for farther corporate orders, we use instant delivery platforms," Yi Ming told Shenran. After success, she expanded to other Beijing areas, now running five warehouses. "We recruit stay-at-home moms or active residents as part-time sales, while our staff handle sorting and delivery. Each warehouse has four sorting/delivery staff and one or two community operators." She revealed that the Baiziwan community in Chaoyang generated 170,000 yuan in revenue in August, with net profit of 10,000-20,000 yuan. Now, home delivery has become the "second growth curve" for almost all traditional supermarkets. Introducing instant retail, upgrading to store-warehouse integration, or becoming warehouse membership stores or cloud warehouses, some "turn the big ship around" by shrinking store size, or use warehouse-plus-community models. Some choose self-delivery, but more join platforms like Meituan for instant retail. Meituan Shanshan, extended from food delivery, has been well tested and validated in technology and local merchant services. The track has shifted to supermarkets, where large and medium supermarkets, convenience stores, and grocery stores can benefit from instant retail platforms. Data shows that from January to July 2022, online orders for brand supermarkets and convenience stores on Meituan grew 39% year-on-year, and merchant numbers grew 20%. Instant retail with 30-minute delivery extends and enhances the convenience capability of traditional retail supermarkets. This allows users to get needed items efficiently, and supermarkets expand from fixed points covering 500-1000 meters to 3-5 kilometers, gaining incremental online customers. This expands reach, improves turnover efficiency and store value, and more precisely meets consumer needs.

03

Redefining Supermarkets

As a consumer, Xin Xin hopes future offline supermarkets are more streamlined, with simpler entrances and exits. "I'll still compare prices online; offline shouldn't be much more expensive. Also, if supermarkets offer instant retail with reasonable delivery fees, I'd accept it." With users accepting and practitioners actively engaging, the supermarket industry still has significant space. Wang Guoping points out three major directions for breakthrough: First, the efficiency route. This includes instant retail, store-warehouse integration, and warehouse membership stores. Instant retail greatly improves delivery time, while warehouse membership stores like Costco and Sam's Club curate products to improve shopping efficiency. Second, adding services and experiences to existing supermarkets. "For example, early Super Species, many revamped 'internet-famous' wet markets, supermarket-plus-food courts, and some supermarkets combined with commercial streets or cultural tourism projects, changing purposeful consumption into browsing consumption. But the challenge is cost control." Another direction is cost reduction. He notes that store costs are hard to reduce further. Currently, the highest costs in the retail industry are in logistics and warehousing—at the origin, transportation, and warehousing/distribution ends. Every small improvement can reduce costs, such as building city-level warehouses or sharing warehousing and distribution for produce and daily necessities, thereby improving gross margins. The first half of the supermarket industry was about large, self-service stores. Now, changing user habits and industry shifts are forcing transformation. Meituan data shows traditional retail supermarkets are seizing instant retail opportunities to accelerate recovery, and compared globally, China's retail supermarket industry, focused on faster local service, is rebounding. In the future, as more supermarkets open, individual stores will have fewer customers. Practitioners must target their desired customer segments. Previously, the industry served all customer groups with mass procurement and distribution. Now, it's better to specialize, go deep, and serve the population within three kilometers. Wang Guoping gives an example: a supermarket can choose to sell ordinary grapes bought at 3 yuan for 9 yuan, or premium grapes at 20 yuan for 50 yuan, depending on its customer base. Understanding customer characteristics saves time and builds loyalty. He also mentions that the supermarket industry is still in a primitive management state. Early supermarkets had stores, warehouses, and offices upstairs. Now, many companies have established operations centers and headquarters, and institutional changes may bring dividends from management reform. Supermarket owner Yi Ming plans to adopt a membership system where users can recharge for discounts, increasing loyalty. "Next, I want to introduce smart lockers so people can pick up items 24/7." According to several industry insiders, in the future, large supermarkets will still exist but in fewer numbers, while more medium and small supermarkets with complete categories will emerge. Additionally, the store-warehouse integration model combined with instant retail, which suits young people, will have more growth potential. "The retail industry is usually viewed over a ten-year cycle; the future depends on which models survive. It's clear that Meituan Shanshan has reached significant scale, and its flywheel is spinning. Under the Matthew effect, it can drive many offline supermarkets and convenience stores to innovate and improve," says Zhuang Shuai. Wang Guoping predicts that as top supermarkets decline, their talent will combine with new models, and in a few years, we may see a new supermarket ranking. As instant consumption expands, diverse formats will become the norm. Supermarkets can be in bustling business districts, on community streets, or even break away from physical displays, putting shelves entirely "into consumers' phones." For future supermarkets, no one discusses whether to go online; the key challenge is leveraging all scenarios and channels to meet consumer needs in product selection, experience, and convenience. Cover image from Unsplash. At the request of interviewees, Xin Xin, Xiaoyu, and Yi Ming are pseudonyms.

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