Once-glorious supermarket chains are sinking deeper into a quagmire of store closures. At the end of November, Carrefour closed its last store in Zhengzhou, Henan. It entered China in 1995 and was once a benchmark in the domestic retail industry; but since 2018, Carrefour has cumulatively closed over 80 stores, exiting provincial capitals including Chengdu, Hangzhou, Jinan, Zhengzhou, and Fuzhou. Other supermarkets are also in a tough spot. Yonghui, as the largest local supermarket chain, has closed over 400 stores in the past three years; Walmart has closed over 80 stores in five years; and companies such as Wumart, Hongqi, Lianhua, and Bubugao have also contracted to varying degrees. This is just a microcosm of the downturn of the entire traditional supermarket industry over the past decade. After 2012, mobile internet became increasingly prevalent, and online shopping's share of total social retail sales rose rapidly; especially after 2016, the explosive growth of agricultural product e-commerce diverted a significant portion of supermarket foot traffic and orders. According to data from Huaon Industry Research Institute, from 2010 to 2021, the annual growth rate of supermarket and hypermarket sales in China fell from 13% to about 1%, highlighting development bottlenecks. The old players in the retail track are entering their twilight, desperately seeking solutions; meanwhile, many new forces are beginning to participate in this traditional business and attempting to return to the essence of retail by learning from the 'predecessors.' Alibaba and JD.com, relying on the supply and customer base accumulated through their e-commerce businesses, launched their own online supermarkets early on and invested heavily in RT-Mart and Yonghui, respectively. Meituan, rooted in its expertise in local commerce, has also been exploring the supermarket sector. In recent years, at each quarter's earnings call, Meituan CEO Wang Xing has mentioned 'retail' more and more frequently. At the Q3 2021 results meeting, Meituan announced an upgrade of its corporate strategy to 'Retail + Technology' and introduced the concept of 'instant retail.' Over the following year, Meituan continuously learned and attempted to operate like a supermarket. Around user needs, it expanded platform SKUs, including non-high-frequency items such as home appliances, digital products, and even clothing; it also extended from cities to townships, covering more regions and consumer tiers; and it developed various fulfillment models, including 30-minute delivery and next-day delivery, for different shopping scenarios. Capabilities in supply chain, order management, warehousing and logistics, and last-mile delivery, which support front-end services, have also been improving. Now, these efforts are beginning to show results. On November 25, Meituan released its Q3 results, with instant retail business (including food delivery and Meituan Instashopping) performing strongly, with total orders exceeding 5 billion, up 16.2% year-on-year. Among them, Meituan Instashopping hit a new high of 9.7 million orders on the Qixi Festival in August, just a step away from the daily average of 10 million orders set in Q2. Meituan's instant retail SKU scale is also expanding, especially for 'bulky,' 'low-frequency,' and 'non-essential' items. According to official data, in the three days before the Qatar World Cup kicked off, Meituan not only saw a rise in hotpot delivery sales, but also a 160% year-on-year increase in electric hotpot orders; additionally, projector sales grew by 165% and speakers by 100%. From delivering food and fresh produce to flowers, medicine, phones, and even home appliances, Meituan is gradually breaking through old business boundaries, evolving toward a new type of physical supermarket that connects online and offline. This is both Meituan's farewell to the traffic-dominated internet growth model and its starting point for building the next decade's growth curve based on the real economy. Meituan's approach to supermarkets shares many fundamental principles with traditional large-scale supermarket retail. For example, Meituan started with group buying, building brand recognition among users through 'cheapness'; Walmart also started from discount stores, emphasizing good quality and low prices. After Walmart gained scale, it sought to expand product categories, with food as the spearhead; Meituan's leap from group buying to retail was bridged by food delivery, also revolving around food. In terms of backend capability building, Meituan has followed a development path similar to large supermarkets. Walmart's growth into the world's largest retailer was keyed by its powerful supply chain and warehousing and logistics system. Meituan has built the largest instant delivery system in China, and its upstream and midstream capabilities in product supply and warehousing and logistics are also being continuously developed. In terms of product categories, Meituan's three non-restaurant retail services—Instashopping, Maicai (groceries), and Youxuan (community group buying)—are already very close to large supermarkets, all focusing on daily high-frequency SKUs, supplemented by customized special categories. High-frequency supermarket SKUs mainly include fresh produce, grains and oils, alcohol and beverages, household and kitchen items, and daily necessities. Due to rigid and frequent demand, supermarkets can keep purchase prices as low as possible while improving turnover efficiency and reducing inventory days. Both Meituan and Walmart, Carrefour, etc., treat such items as top priorities. At the same time, launching private labels to reduce intermediate costs and offer cheaper specialty products is also a common supermarket practice. For example, Costco's Kirkland Signature brand covers categories like bread, coffee, nuts, clothing, and hardware, and has become a significant revenue source for the company. In fiscal 2021, this business contributed $59 billion in revenue to Costco, accounting for over 30% of total revenue. Meituan is also testing the waters. In the first half of this year, Meituan's private labels 'Xiang Dàchú' and 'Xiang Yōuxuǎn' successively launched on Meituan Maicai; the former focuses on staples and ready meals, while the latter focuses on ingredients. Compared with similar products on the platform, Xiang Dàchú and Xiang Yōuxuǎn offer better value for money. Additionally, in August this year, 'Tuanhaohuo,' under Meituan's in-store business group, was merged into Meituan Youxuan. LatePost, citing informed sources, reported that Tuanhaohuo plans to collaborate with factories to produce private-label goods, replacing some high-selling items in Meituan Youxuan to improve profit margins. However, beyond emulating Walmart and Costco, Meituan has also made some innovations with local characteristics. Taking product delivery scenarios as an example, Walmart offers home delivery, and Meituan Instashopping and Maicai can do the same. But on this basis, Meituan has also introduced next-day delivery and self-pickup services for categories with lower time sensitivity, such as rice, kitchen paper, and laundry detergent, namely Meituan Youxuan. This service model can further lower the average order value and pass savings to consumers; more importantly, it uses planned, deterministic demand to drive supply, significantly reducing pressure on the supply chain and warehousing and logistics, and improving the efficiency of the entire system. On the supply side, in addition to platform stocking and large suppliers, Meituan is also absorbing new convenience stores that combine store and warehouse. Compared with traditional convenience stores, these stores are often not street-facing, with significantly lower rent, labor, and decoration costs. After receiving platform orders, store owners quickly pick goods, and Meituan riders pick up and deliver. Compared with mom-and-pop shops, they have a larger service radius and a more complete range of categories; compared with supermarkets, they have the advantages of being small, flexible, and low-cost. With this ecosystem of convenience stores embedded in urban streets and alleys, Meituan can improve retail service coverage and response speed without massively expanding its own supply. These new approaches help improve Meituan's profitability and thus validate the long-term feasibility of transitioning to a new type of physical supermarket. In Q3 this year, Meituan's core local commerce operating profit reached 9.3 billion yuan, more than double the 4.2 billion yuan in the same period last year; the operating margin increased by 8.9 percentage points to 20.1%; the new business segment, centered on the next-day delivery supermarket, saw revenue grow 39.7% year-on-year to 16.3 billion yuan, with the operating loss rate improving to 41.6%. Although Meituan has expanded its potential profit space through instant retail and other supermarket businesses, overall, the long-term profit margin of any supermarket will return to low levels. The profit margin of a supermarket is essentially the product markup rate; theoretically, the more expensive it sells, the more it earns. But in a fully competitive market, supermarkets inevitably pass on gross margins to consumers, trading 'good quality and low price' for higher turnover and thin margins with high volume. The development history of retail giants like Walmart, Costco, and even Amazon confirms this logic. Over the past few decades, the gross profit margins of companies like Walmart, Kmart, and Costco have gradually fallen to around 10%. Costco even stipulates that the gross profit margin on all products must not exceed 14%; if it does, it requires CEO and board approval; the company's overall profit margin is about 12%-13%, lower than the 15%-25% of typical supermarkets. On the other hand, the rise of e-commerce and the impact of the pandemic have put enormous pressure on offline formats, coupled with a shift in young consumers' attitudes, who prefer to wait at home for delivery rather than go to stores to browse, traditional supermarkets' foot traffic is declining, and profitability is not optimistic. As a new type of physical supermarket, Meituan naturally cannot escape the industry trend. Facing the expectation of long-term low gross margins, what Meituan needs to do is further improve turnover, i.e., the frequency of product transactions. The determinants of this metric include price and SKU richness, but more critically, service. In an era of high integration of online and offline commerce, consumers expect supermarkets to be 'fast and stable.' Meituan currently achieves delivery within 30 minutes at the fastest, mainly thanks to millions of riders. Under backend scheduling, this vast capacity pool simultaneously handles delivery needs for food delivery and instant retail, operating day and night across more than 2,800 cities, counties, and districts nationwide. But the number of riders cannot expand indefinitely, and each rider's delivery speed cannot be infinitely increased. To go faster, only black technologies like autonomous delivery vehicles and drones can help. Taking drones as an example, as of November this year, Meituan's drones have been deployed in 5 commercial areas in China, with routes covering 18 communities and office buildings, serving nearly 20,000 households, with cumulative orders exceeding 100,000. In addition to delivering special supplies like medicine and epidemic prevention items, their main application scenarios are time-sensitive hot food and freshly cut fruit, with partners including Hefu Noodles, Tanyu Grilled Fish, Baiguoyuan, and Manner Coffee, capable of delivery within a 3-kilometer radius in 15 minutes. Compared with 'fast,' consumers' perception of 'stable' is not as strong, but achieving this experience is more difficult. 'Stable' means consumers can buy what they want at any time, avoiding stockouts, insufficient delivery capacity, and slow delivery as much as possible. Behind this is a test of comprehensive capabilities in demand forecasting, warehouse management, and logistics distribution; to achieve this, supermarkets must invest heavily in retail technology and infrastructure. For example, as early as the 1980s, Walmart launched a logistics communication satellite and, combined with GPS, linked products, trucks, suppliers, and stores into a single giant network, making the supply and sales situation of the entire retail system transparent, greatly reducing procurement and logistics costs, improving management efficiency, and laying the foundation for becoming a global retail leader. Additionally, Amazon has a vast number of delivery personnel, trucks, cargo ships, and cargo planes, and even operates its own regional air hubs. This global logistics network sends billions of packages each year and is the foundation of Amazon's retail empire. Meituan is on the same path. In Q3, Meituan's R&D investment reached 5.4 billion yuan, a large portion of which is spent on logistics and delivery. For example, for warehouse sorting scenarios, Meituan has developed intelligent warehouse robots, successively implementing technologies such as intelligent frozen product sorting lines, intelligent double-layer sorting to groups, and AMR (autonomous mobile robots), reducing sorting error rates while improving operational efficiency and warehouse utilization. With the support of this logistics system, Meituan's instant retail can achieve industry-leading delivery speeds even at a larger scale. In supermarket categories including fresh produce and groceries, Meituan Maicai's fulfillment time is equivalent to that of Dingdong Maicai and Pupu Supermarket; in all-category business, Meituan Instashopping has the best fulfillment time in the industry. Before Meituan, companies like Alibaba and JD.com had successively tried supermarket businesses, and Carrefour, Wumart, etc., also opened online channels. But overall, these attempts did not meet expectations. The reason is that most of these players have shortcomings, either limited supply chain and logistics capabilities with high costs, or a lack of O2O experience, making it impossible to drive online and offline retail formats to mutually reinforce each other. Moreover, they remain stuck in the stage of 'e-commerce doing supermarkets' or 'supermarkets doing e-commerce', with their business focus elsewhere, making it impossible to fully commit to the supermarket business. In contrast, Meituan has achieved considerable results just one year after proposing 'instant retail,' thanks to continuous push from management and two natural advantages. First, the construction of an instant delivery network. To date, Meituan has over a million active riders, building an efficient instant delivery network. Riders deliver food during lunch and dinner peak hours and deliver non-food items like daily necessities during other times. This is the biggest foundation for Meituan's extension from food delivery to instant retail. Second, local merchants. Meituan started with group buying and gradually expanded to food delivery and local life services, honing its ground promotion capabilities and accumulating merchant resources and refined operational capabilities. This provides conditions for Meituan to operate supermarkets from the supply side; especially the new convenience stores that combine store and warehouse, allowing Meituan's instant retail to expand rapidly nationwide. From these two dimensions, although Meituan shares many similarities with retail giants like Walmart and Costco, it is the first 'crowdsourced + decentralized' new type of physical supermarket. On one hand, it builds its own warehousing and logistics infrastructure and upstream supply chain systems; on the other hand, it heavily relies on riders for last-mile delivery and on countless small and medium merchants to supplement supply within the community business radius. This also means that for Meituan's instant retail to reach the next level, it must not only invest heavily in its own capabilities but also bear the responsibility of supporting the development of the entire business ecosystem. Over the past few quarters, Meituan's rider costs have been rising. In Q3 this year, Meituan's sales costs reached 44.1 billion yuan, up 24.7% from Q2, equivalent to 70.4% of revenue. Meituan stated in its earnings report that the increase in this cost was mainly due to the expansion of transaction scale and seasonal subsidies paid to riders, leading to higher per-order delivery-related costs. On the other hand, Meituan is also helping merchants with digital upgrades. For example, in early November, Meituan launched a special action for the digital development of 'China Time-honored Brands' enterprises, with Quanjude becoming one of the first participants. Meituan will provide the latter with a package of digital upgrade measures, including free delivery management, official logo certification, online brand protection, and catering retail services. Another example is Meituan's 'Little Yellow Light' plan launched last year to help pharmacies improve operational efficiency. Over the past year or more, the number of 24-hour pharmacies nationwide has expanded from 2,000 to nearly 10,000; the per-store output of 24-hour pharmacies is 8 times higher than non-24-hour pharmacies, and the conversion rate of foot traffic to transactions is 1.3 times higher. But it is clear that a series of subsidies and support for riders and merchants will ultimately translate into Meituan's operating costs and be reflected in its financial reports. In the process of transitioning to a new type of physical supermarket, Meituan must not only endure the naturally low gross margins of the supermarket format but also continuously invest in every link of the consumption chain; how to balance development and profitability will be key to whether Meituan's supermarket business can go far and steadily.