---
title: "How to Seek Breakthroughs Amidst a Once-in-Thirty-Years Retail Generational Shift?"
description: "A once-in-thirty-years retail generational shift has arrived. How can traditional channels transform? How can manufacturers and distributors seize the dividends of category restructuring? At the 10th China FMCG Conference, Zhang Xinzhao, founding partner of Qicheng Capital, systematically dissected the paradigm shift in the retail industry from 'supply-driven' to 'demand-driven' from an investment perspective, and proposed breakthrough paths for the next decade. New Distribution has distilled Mr. Zhang's core viewpoints into this article for our readers (with some deletions)."
author: "张鑫钊"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-04-01"
language: "en"
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# How to Seek Breakthroughs Amidst a Once-in-Thirty-Years Retail Generational Shift?

> A once-in-thirty-years retail generational shift has arrived. How can traditional channels transform? How can manufacturers and distributors seize the dividends of category restructuring? At the 10th China FMCG Conference, Zhang Xinzhao, founding partner of Qicheng Capital, systematically dissected the paradigm shift in the retail industry from 'supply-driven' to 'demand-driven' from an investment perspective, and proposed breakthrough paths for the next decade. New Distribution has distilled Mr. Zhang's core viewpoints into this article for our readers (with some deletions).

A once-in-thirty-years retail generational shift has arrived. How can traditional channels transform? How can manufacturers and distributors seize the dividends of category restructuring?
At the 10th China FMCG Conference, Zhang Xinzhao, founding partner of Qicheng Capital, systematically dissected the paradigm shift in the retail industry from 'supply-driven' to 'demand-driven' from an investment perspective, and proposed breakthrough paths for the next decade.
New Distribution has distilled Mr. Zhang's core viewpoints into this article for our readers (with some deletions).
**The Essence of Retail Generational Shift:**
**From 'Seller Hegemony' to 'Buyer Agency'**
Since 2017, Qicheng Capital has systematically invested in a series of 'category killer' formats in areas such as fresh produce, convenience stores, hotpot ingredients, leisure snacks, and hard discount. The underlying logic of this investment strategy is the prediction that 'large comprehensive supermarkets will be fragmented by verticalized and specialized formats,' a judgment that has been validated in practice.
Its essence is the inevitable result of generational change in the retail industry: in the era of stock competition, the traditional supply-centric 'seller's market' logic has failed, and the consumer demand-centric 'buyer's market' logic is restructuring the industry landscape.
Thirty years ago, Carrefour opened its first store in Chongqing; now it has completely withdrawn from the Chinese market, marking the significant challenges faced by the hypermarket format. Recent developments show that Yonghui's board has sold some of its stores to a regional supermarket leader, further confirming the industry's transformation.
Meanwhile, the high-end retail path that relied on consumption upgrading has been significantly hindered, while small formats such as discount stores and community stores are rising rapidly. Regional supermarkets represented by Pang Dong Lai have successfully revived foot traffic in traditional stores through systematic reforms such as product mix adjustments and supply chain optimization, providing a practical model for industry transformation.
What is the essence of these phenomena?
The industry is currently at the end of the old cycle and the beginning of a new one. The most core change lies in the reconstruction of the circulation order of consumer goods: the deep distribution system of the past thirty years, dominated by brand owners and fragmented between upstream and downstream, is being replaced by a 'production-retail alliance' (deep collaboration between production and retail ends) driven by efficient retail.
The 'big brand, big single product, big channel + deep distribution' model formed over the past two decades was essentially an inevitable choice in an era of supply shortage.
Recall that thirty years ago, China was in a stage of material scarcity. Brand owners, such as Yili and Nongfu Spring, had to simultaneously undertake the triple roles of production capacity, channel construction, and mind-share occupation, achieving a full-chain value loop through 'supply creating demand.' This paradigm was highly efficient during the era of scarce goods and became the success code of the golden age of the FMCG industry.
The underlying logic of this change stems from the supply surplus accumulated through thirty years of industrialization. Consumers have completed basic material satisfaction, moving from nothing to something, and demand has shifted to refinement and personalization, forcing the industry's value creation path to shift from 'supply-driven' to 'demand-pulled.'
Based on market changes, Qicheng Capital has distilled the 'precision store' model (precise product selection + scenario-based operations), which essentially enters niche markets through the combination of product and effect.
This strategy has successful precedents overseas. In the 1980s and 1990s, developed economies had already entered the buyer's era. For example, Trader Joe's precisely targeted the emerging post-WWII American college student group—highly educated but with limited income—by creating differentiated categories such as imported foods like affordable wine and niche snacks, building a unique competitive advantage.
Japan's 7-Eleven launched private-label fresh food (rice balls, bento) comparable to restaurant quality, offering high cost-performance solutions at convenience store prices, redefining the value of 'convenience.'
**Price Dimension → Algorithm Dimension**
When did China's retail transformation begin?
China's retail transformation began in 2016 and has continued to deepen through three stages: community-oriented in 2016, discount-oriented in 2019, and manufacturing-oriented in 2022; algorithmization is still evolving, and key nodes have not yet fully emerged.
First, the community trend.
In 2015, the first wave of new city construction entered maturity, with a large number of high-density residential communities emerging, while the supply of ground-floor commercial space was severely insufficient.
Demand for community commerce of 50-300 square meters surged, giving rise to a unique Chinese model—unlike Japan's single-family houses or European and American detached homes, China's hundreds of thousands of high-density communities formed a natural 'hotbed for small stores.' A 60-square-meter community store can achieve annual sales of 2 million yuan, and the success of the profit model has driven mom-and-pop stores to rapidly transform into chains.
Second, discounting: value reconstruction beneath the low-price surface.
The essence of discounting is not simply a price war, but creating real value for consumers through industrial chain optimization, logistics efficiency improvement, raw material cost control, and streamlining processing links. Its core is to become the consumer's 'buyer agent'—helping retailers use professional product selection capabilities to filter quality goods, rather than relying solely on low-price competition.
Third, manufacturing: deep co-creation between retailers and manufacturers.
Represented by Sam's Club, retailers are accelerating the development of private labels (accounting for over 30% of sales), with the essence being to establish long-term cooperation with upstream manufacturers to jointly develop differentiated products. This differs from the asset-heavy model of building own factories; instead, it uses data to feed back into production, such as convenience stores customizing short-shelf-life foods based on sales data.
Fourth, algorithmization.
In its early stages, this was reflected in live-streaming e-commerce where influencers created emotional value through content.
In offline retail, it manifests as scenario-based displays, such as snack discount stores using 'bulk display piles' to create visual impact.
Qicheng Capital believes that in the next three years, retail competition will upgrade from the 'price dimension' to the 'algorithm dimension,' creating premium space through precise matching of demand.
Under market changes, where are the opportunities?
The essence of change is that the industry is undergoing a reshuffle and reconstruction—breaking the old equilibrium and establishing a new order dominated by efficiency.
But industry reshuffling is not a threat; by embracing the efficiency revolution, one can become an irreplaceable node in the new ecosystem.
Referring to Japan's path, we can predict:
> First, half of China's 7 million retail outlets will be eliminated.
>
> Second, the chain rate will continue to increase (currently less than 20%).
>
> Third, in the next decade, stores will evolve toward high efficiency, gradually forming four main formats: community stores, discount stores, warehouse stores, and hybrid stores.
**Breakthrough Paths for Manufacturers and Distributors:**
**Becoming 'Category Solution Service Providers'**
The retail industry is undergoing a quiet category revolution—the shelf logic previously divided by product attributes is being replaced by consumers' real life scenario needs.
Convenience stores are starting to sell freshly baked bread, coffee shops are selling milk tea, and braised food shops are also selling appetizers and instant meal sets. Behind these phenomena is the same logic: whoever can seamlessly integrate into consumers' life scenarios can redefine the category.
The future category kings will definitely be 'transformers' that can both break through in a single point to create ultimate experiences and break boundaries to integrate into diverse scenarios.
It could be a 60-square-meter community convenience store using a fresh food section to retain breakfast customers, a 300-square-meter discount supermarket conquering housewives with bulk packs, or a 5,000-square-meter Sam's Club sticking with middle-class families through 'restaurant-grade tasting + warehouse-style retail'—different formats are essentially solving the same problem: using precise 'product combinations' to fully capture the complete needs of a specific group of people.
In the past three years, new formats have emerged every 3-5 months: fresh produce stores venturing into baking, coffee shops embedding into convenience store shelves, pharmacies starting to sell health light meals... These experiments are all testing the infinite possibilities of 'retail+'.
The blurrier the boundaries, the clearer the opportunities.
The future retail landscape of China is destined to be an arena of 'a group of specialists'—convenience stores, community discount stores, warehouse supermarkets, and other formats, like precise gears, each fitting into the demand gaps of different customer groups.
For example, Xinjiayi has precisely positioned itself to capture niche consumers.
First, it avoids Luckin's main battlefield of 15 yuan, using 8-12 yuan freshly ground coffee + breakfast set combos to lock in commuting office workers; then it introduces small bottles of craft beer paired with braised snacks, turning the convenience store into a 'late-night tavern' for young people; with on-site squeezing and short-shelf-life packaging, it uses 'visible freshness' to win over mothers from supermarkets.
When 1-yuan instant coffee, 15-yuan Luckin, and 30-yuan Starbucks appear on the same street, it's a victory for consumption stratification, just like the apparel industry has both Uniqlo and Hermès.
How to precisely find your customer base?
When dividing consumer groups by payment ability and willingness to pay, there are pioneer customers willing to pay for design, young groups willing to overspend for emotional premium, rational middle-class seeking cost-performance, and essential-needs groups focused on low prices. Each quadrant requires a unique solution, such as using limited-edition co-branded products to satisfy trend-seekers, or using bare-pack large packs to win over budget-conscious housewives.
As the industry changes, the future role of distributors is also undergoing a fundamental shift. When retailers begin cross-border integration, the value of distributors is no longer simply distribution, but becoming 'scenario designers' connecting upstream and downstream.
This requires distributors to have three capabilities: understanding the retailer's target customer group, understanding the category's scenario pain points, and outputting complete solutions.
Ultimately, only those distributors who can clearly articulate 'what problems my products solve for whom' will find a survival fulcrum in the new equilibrium.


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