Last week, I visited Tianjin and had an in-depth conversation with a local discount retail founder. They started in retail by selling near-expiry surplus goods, later transitioning to hard discount warehouse stores and gradually developing a replicable model. Over the past three years, through franchising, their stores expanded to over 100, with total sales exceeding 1 billion yuan. Many friends have been communicating with me recently, including distributor bosses and traditional retailers. They say, discount stores are an inevitable trend that must be faced; rather than watching business be taken away, it's better to enter the game yourself. But how exactly to do it? They have no idea. Are there any practical cases to study? Yes. Jinbaibai, positioned as a warehouse discount supermarket, is a valuable reference. I had an in-depth exchange with founder Shi Jianwei, who shared Jinbaibai's development history, store model, and the supply chain operations behind it. Next, I'll share the core content of our discussion with you. This will surely provide important inspiration for distributors with supply chain advantages and traditional retail enterprises. The name Jinbaibai is unfamiliar to many, even those in the discount retail industry. Mr. Shi told me that in the first two years of opening stores, they focused on refining the store model and building the supply chain, without much effort on the chain brand. The name Jinbaibai was adopted last year: "Jin" is the surname of founder Mr. Jin, and "Baibai" is a Tianjin colloquial term for uncle. Mr. Jin initially ran an export business and, based on supply chain resources, opened a discount store selling clothing surplus. This store gradually transitioned to mainly selling food and beverages. In 2020, Mr. Shi opened a second store following this concept, shifting from soft discount (near-expiry surplus) to hard discount, maintaining low prices but selling genuine products. Two conditions ensured a smooth transition:
First, Tianjin is a northern goods distribution hub with developed logistics and abundant upstream supply.
Second, the pandemic outbreak at that time put inventory pressure on distributors, who were willing to supply at low prices. Mr. Shi's second store marked Jinbaibai's entry into hard discount. Now, Mr. Jin and Mr. Shi each manage one store: Mr. Jin's Dongli store has annual sales of 20 million yuan with 6 employees; Mr. Shi's Dasi store has annual sales of 11 million yuan with 3 employees. During the three pandemic years, the founding team continuously refined product selection, operations, and supply chain, accumulating a replicable model. This model is simply summarized as 3511: A store with 3 employees, 500 square meters, an investment of 1 million yuan (70% for goods), and achieving annual profit of 1 million yuan in the mature stage (6 months to 1 year). Such numbers are unimaginable for traditional retail. Mr. Shi told me this was gradually accumulated over three years, including matching in product selection, location, operations, and supply chain. Many people come to inspect and exchange ideas, and they maintain a very open attitude, sharing Jinbaibai's business logic. Retail business, simply broken down, is: what goods to assemble, at what price, where to sell, and to whom. First, look at product assembly. For discount stores, finding category advantages is key. Snack discount stores mainly leverage the advantage of the snack vertical category. Jinbaibai focuses on three major categories: alcoholic beverages, snacks, and tea. These three categories are the main source of profit, though the store also includes condiments and grain & oil as supplementary categories. The total SKU count is around 4,000. To highlight category advantages, product richness should be about 3 times that of competitive scenarios. For example, there are over 300 SKUs in beverages and over 3,000 in snacks (compared to over 1,000 in snack discount stores). Jinbaibai only sells large-pack, room-temperature standard products, which have low storage costs and low wastage. Another low is low staff maintenance cost; each employee can manage over a thousand SKUs. Jinbaibai stores have several "don'ts": No cigarettes: small size and high value increase security and equipment costs.
No fresh non-standard products: this increases wastage and labor/equipment costs.
No low-temperature products: daily maintenance and shelf-life management costs are high. Some stores have freezers for beverages to meet immediate needs of shoppers and passersby. What price to set? Store-level gross margin is around 20% for beverages, 12-15% for snacks, and about 18% overall. Prices can be 20-30% cheaper than traditional supermarkets, with a rich product selection, locking in customer groups. Where to sell and to whom? The basic condition for opening a Jinbaibai store is a population of 100,000 within 3-5 kilometers. Location logic: Choose a poor location in a good business district to ensure traffic while reducing rent costs. A good business district means enough consumers within a few kilometers and convenient driving; a poor location means easy parking and low rent. Jinbaibai customers span all age groups. Alcohol and tea create good customer stickiness, and foot traffic is very stable. Combined with snacks, it creates a scenario for family shopping, typically lasting half an hour, with an average transaction value exceeding 100 yuan. These are the basic framework, the front-end presentation, and the back-end supply chain, which also differ greatly from traditional retail. The store's presentation can be described as "crude." Entering the store, the first impression is like a "rural market held indoors." Products are stacked on the floor, handwritten price tags, wall slogans like "Prices back to pre-liberation, never raise prices," no ceiling, and the space shows no trace of renovation. But these are all effective practices accumulated over time. For example, this design makes customers feel the "cheapness" upon entry, and handwritten price tags confirm that feeling, stimulating purchase desire. Another example: products displayed on shelves are easily scanned, but cardboard boxes on the floor require customers to bend down slightly to pick up and inspect, increasing dwell time and conversion rates. Selling products cheaply and saving customers money must be perceived by customers. Such stores rely not on natural foot traffic but more on targeted traffic. Therefore, in the early stages, various operational methods are used, such as Douyin live streaming and Xiaohongshu seeding, to attract the first batch of customers. Once customers have a shopping experience here, they are willing to return and actively recommend to friends and family. Another benefit of focusing on targeted traffic is that stores are less dependent on location than traditional retail, so there's no worry about landlords raising rents when business improves, increasing costs. Of course, customers come for low prices, but product quality is a prerequisite, making the back-end supply chain very important. In the supply chain, Jinbaibai's approach is to fully leverage suppliers' resource capabilities and reduce friction. Jinbaibai has no central warehouse. Store owners order through Jinbaibai's B2B ordering system, and suppliers deliver directly to stores, including stacking and display work. Jinbaibai also has no procurement staff; suppliers take responsibility for product selection. Jinbaibai only controls quality, not selection. This reduces procurement labor costs and eliminates the negotiation process between suppliers and buyers. Currently, Jinbaibai has over 60 suppliers, mostly converted from early distributors who supplied Jinbaibai. These suppliers are often brand distributors, but for Jinbaibai, they are service providers. They add about 10 percentage points to the factory price for stores, essentially earning a service fee. Jinbaibai has a strict rule: all stores must pay service providers in cash, and Jinbaibai strictly controls the number of service providers—60 when there was one store, and still 60 now. These measures ensure they can profit from each store, making them more proactive in delivery, after-sales, and handling slow-moving inventory. As volume grows, Jinbaibai directly negotiates with upstream manufacturers, but transactions still go through service providers. With guaranteed sales and cash settlement, service providers are willing to grow with Jinbaibai; the better the cooperation, the greater the returns. Headquarters provides operational guidance in the early stages, and later management is limited to the transaction process between stores and service providers. In other words, Jinbaibai's B2B ordering system carries the headquarters' management function. So Teacher Lian Jie said, Jinbaibai is actually a B2B platform disguised as a supermarket. Final Thoughts Jinbaibai's case not only provides a sample of the hard discount model but also shows us a new role for distributors: becoming service providers for hard discount chains, or extending downstream to try discount retail locally. Mr. Shi told me that many Jinbaibai franchisees are distributors because they are familiar with products and have warehouses that can be directly converted into discount warehouses. Of course, hard discount is not a retail format but a business model. It involves category mix, operations, location, customer positioning, etc. Exploring from 0 to 1 is costly, so it's necessary to see more, learn more, and research more. Due to space limitations, I cannot detail all of Jinbaibai's practical experience and insightful thinking. On December 5-7, 2023, New Distribution will host the first China FMCG Hard Discount Conference in Zhengzhou. This two-day conference is the industry's first focused on the hard discount theme.