Source: Kaiman 4000 (ID: kaiman4000)
Under the impact of the pandemic and the叠加冲击 of various new retail formats, large chain supermarkets have been retreating as the norm.
In recent years, the closure and withdrawal of large traditional supermarket giants have been common. There is a pattern in the pace of retreat: first foreign supermarkets, then non-local supermarkets, and finally local supermarkets.
Local player Yonghui lost 2.178 billion yuan in the first three quarters of 2021, a 207% increase. During the same period, Suning lost 7.568 billion yuan, up 1483.29%.
The collapse of foreign KA (Key Accounts) is even more pronounced. French Carrefour, British Tesco, and American Walmart have all accelerated their withdrawal from the Chinese market in recent years.
In the past nine years, Walmart has closed 150 stores in China. According to the "2020 China Supermarket Top 100" released in July 2021, Walmart China has fallen out of the top three, achieving its lowest ranking since entering China.
Expert Analysis
Chen Liping, a professor at Capital University of Economics and Business, has thoroughly analyzed the deep reasons for the decline of traditional supermarket chains. The main profit model of traditional hypermarkets is to earn profits by charging channel fees and setting payment terms.
Retailers collect about 40% of the gross profit from suppliers through front-end and back-end fees, and the remaining 60% is returned to suppliers after about 90 days. Retailers use the cash flow from this 90-day payment period to open new stores, set up micro-loan companies, and even develop real estate.
In other words, retailers use suppliers' funds to develop their own businesses, and as their businesses grow, they charge more entry fees. This is typical game theory behavior.
In this process, suppliers, to protect their own interests, inevitably pass on costs to consumers through higher product prices, resulting in inflated retail prices.
For retailers, since they transfer risk to suppliers and use others' money to develop their own business, in exchange, they lose control over product management, pricing, and even service rights.
This ultimately leads to two outcomes: first, the supermarket's ability to attract customers gradually declines, and foot traffic drops; second, high-quality suppliers flee the hypermarket, leading to store hollowing out. The two interact and create a vicious cycle. In the current fiercely competitive environment, this model is unsustainable.
The main internal cause of the decline of the supermarket format is user change as the engine, while external competition is the accelerator. Supermarkets, as riders of China's retail productivity revolution in the 1990s, have been impacted and even subverted by newer generations of retail. This multi-force joint siege on supermarket chains is deepening.
Note: From 2016 to 2020, e-commerce penetration increased from 12.6% to 24.9%; during the same five-year period, offline retail saw almost zero growth!
Multi-Force Siege
Four Routes of Forces Siege Large Supermarkets
1. "Army": Warehouse stores, community convenience stores, new retail stores, and commercial convenience (Bianlifeng) use offline geographic location or user shopping habits to closely encircle chain supermarkets.
2. "Air Force": Traditional search e-commerce, through drop-shipping delivery models, cuts into categories such as fresh produce, clothing, 3C electronics, and beauty products.
3. "Navy": Interest e-commerce (Douyin and Kuaishou), WeChat mall content e-commerce, and community group buying give commerce a social attribute, increasing stickiness and warmth, even turning consumers into consumer-sellers, forming a closed business loop and cutting market share.
4. "Rocket Force": Community group buying and front warehouses. Community group buying is increasingly becoming online supermarket-like, forming online malls that directly reach down to tier 3-6 markets; front warehouses use instant delivery to meet the 30-minute home delivery scenario in first-tier markets.
Advantages of Each Force's Attack
We use five key indicators—more, faster, better, cheaper, and fun—to explore how each force uses its strengths to attack the enemy's weaknesses, launching saturation attacks on traditional chain supermarkets and cutting into the market share that supermarkets once dominated.
The retail terminal market is directly fragmented, and the biggest victims are, of course, the once-dominant chain supermarkets. Newer retail formats have sharpened five blades—"more, faster, better, cheaper, fun"—against supermarkets. As the old king of retail, chain supermarkets are being devoured, cut, bled, and even pushed to the brink of death by new forces.
1. "More": More vs. less is measured from the perspective of product supply quantity. Traditional search e-commerce represented by Taobao, JD.com, and Pinduoduo, originating from PC and mobile, use infinite electronic shelves to saturate attack physical shelves in the information flow presentation tools. E-commerce's infinite products completely defeat the limitedness of chain supermarkets.
2. "Faster": Fast vs. slow is measured from the dimension of delivery efficiency. Community convenience stores solve user consumption scenarios within a quarter of an hour, which is a near-field retail interception attack on supermarket KA far-field retail.
Front warehouses, combined with riders, shorten the promise of home delivery to 30 minutes, using high delivery costs to create a strong experience, meeting the fast-paced consumption needs of Beijing, Shanghai, Guangzhou, Shenzhen, and developed cities along the southeast coast.
Bianlifeng uses data and algorithms to solve instant consumption needs in workplace scenarios.
3. "Better": Good vs. bad is measured from the direction of product quality. Tmall solves the abandonment of Taobao's consumer base, linking brands to create online boutique stores to meet high-end quality needs.
New retail stores represented by Hema, Qian Dama, and Pagoda are cutting high-end consumption needs through deep integration of online and offline.
4. "Cheaper": Cheap vs. expensive is measured from the perspective of user purchase cost. Taobao system (Taobao and Taote) and Pinduoduo solve the precise needs of the main population outside the Fifth Ring Road, in tier 3-6 sinking markets, and those with average monthly income below 2,000 yuan.
Warehouse stores use locations outside the Third Ring Road, minimalist decoration, and box-size selling to meet the needs of price-sensitive people.
Community group buying, with "pre-sale + self-pickup + next-day delivery," achieves lower operating costs from procurement to fulfillment, also cutting traditional supermarket market share from the dimension of "saving money" for users.
5. "Fun": Fun vs. boring is about Douyin's awesome creativity. Users don't like to pay for correctness, but they like to pay for fun. Live-streaming e-commerce uses KOLs to promote "lowest price on the whole network," using video live streaming to instantly stimulate potential demand, and uses limited-time and limited-quantity pricing to prompt immediate purchase.
3D video PKs 2D graphics. Through a 5.5-inch screen, bloggers and fans interact. Fun brings traffic, and traffic is a trading opportunity.
Supermarket Counter-Siege
In fact, over the past 10 years, traditional supermarkets have not been willing to sit idly by and have been self-rescuing. Those with ambition have been exploring counterattacks. Siege and counter-siege have been competing.
Chain supermarkets, as the former king of retail, have advantages and specialties that other formats do not have. With changes in consumption habits and user structure, all retail formats, including supermarkets, will be in a pattern of long-term coexistence, mutual learning, and objective co-opetition.
- Abandon the evil and backward "toll fee + long payment period" zero-supply cooperation relationship, lower the inflated prices, and truly save purchase costs for users.
Luoyang Dazhang Supermarket directly cooperates with brand manufacturers including Jiajia Soy Sauce with cash purchases, so Dazhang's product competitiveness is highlighted. Henan supermarket king Dennis has not gained any advantage in Luoyang, let alone international giants Carrefour and Walmart, which have no chance to survive.
- In the supermarket world, there is a powerful organization called "Ant Alliance," an alliance of over a hundred small and medium chain supermarkets with a combined scale of nearly 100 billion yuan. Starting with "private brands," they seek profits upstream, reverse joint procurement to build brands, and only cooperate with the top three manufacturers in the industry.
With first-line quality and second-line prices, they can still ensure considerable retail profits. Private brands have become the anchor of profits for member chain supermarkets of the Ant Alliance.
- Since its birth, community group buying has been controversial and mixed. In fact, community group buying is an inclusive retail method. Chain supermarkets can certainly combine community group buying to initiate group purchases for pre-sale. The "Xiaoai Alliance" from Jining is such an organization, where dozens of chain supermarkets jointly promote "Xiaoai Youxuan" for community group buying.
Since 2019, under the leadership of Fang Miao, it has been thriving. Chen Haichao, senior researcher at the Community Group Buying Research Institute, describes this new store commerce as chain supermarkets counter-harvesting community group buying.
Chain supermarkets can adopt front warehouse models, extending stores as warehouses to provide instant delivery services for online orders. RT-Mart's "Taoxianda" is this approach.
In Xuchang, Henan Province, there is a supermarket called Pangdonglai, which has always existed like a god. Founder Yu Donglai has persistently engaged in charity to build his personal IP, taking strong experience to the extreme, building word-of-mouth internally and image externally. In the Xuchang market, it dominates and harvests continuous dividends, leaving no opportunity for any competitor.
Conclusion:
Lian Jie, founder of Order Rabbit, clearly has an independent and sharp forward-looking judgment: in the future, only two retail models will be viable: one is a community group buying platform that does group points well, and the other is a chain supermarket that does pre-sales well. Other models are either dead or on the road to death.
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