On August 20, 2025, the 5th China FMCG Retail Innovation Conference was held in Shanghai. Ren Wenqing, CEO of New Distribution, delivered a keynote speech titled "From Price War to Matching War: Understanding the Logic of Production-Supply-Marketing Transformation Behind Retail Noise."
Core viewpoints:
The "selling field" is falling, and the "buying field" is rising.
Price competition has reached its limit; the next focus is matching.
Brands should adjust not product specifications but their industrial role positioning and organizational logic.
This article is a core summary of the speech.
The Squeeze Effect: Demand is Rising, but Supply is Rising Faster
Standing at this point in August 2025, I believe we need an explanation: "What exactly is happening in the market?" and "What should we do?"
We see a chart of China's total FMCG retail sales and year-on-year growth over the past 10 years. Note that this is for units above a designated size, not the full-caliber FMCG market, but it is suitable for trend observation and structural comparison.
In terms of total value, over the past 10 years, except for a decline in 2018, total FMCG retail sales have been growing.
In terms of growth rate, the past 10 years can be divided into three distinct phases: 2016–2018 downward (negative in 2018); 2019–2020 moderate recovery; after peaking in 2021, it declined, returning to +11% in 2024.
Total FMCG volume has been growing, growth rates have stabilized, and the numbers are not small. But why is business getting harder and more competitive?
Here are a few more data sets:
- In 2023, there were 87.995 million individual businesses, up 39.8% from 2018; 33.27 million legal entities in the secondary and tertiary industries, up 52.7% from 2018.
- In 2024, online retail sales of physical goods reached 13.0816 trillion yuan, up 86.4% from 2018; express delivery volume was 175.08 billion items, up 245.3% from 2018.
- In 2024, the total number of stores of the Top 100 chains was 257,200, up 86.4% from 2018; sales scale was 2.13 trillion yuan, down 11.3% from 2018.
What do these data sets indicate?
Market entities have expanded at a high level, and the supply base has increased significantly; online supply has surged, seizing offline share; chainization has accelerated, and the "squeeze effect" has led to declining output per store.
That is, although total demand is rising, supply is rising faster, and the squeeze effect is strengthening, leading to declining output for individual business entities.
This is the true meaning of what we call "stock" or even "shrinking volume."
In this situation, discounts, low prices, and involution naturally become common market phenomena. Many believe that only low prices can survive, and they want to out-compete others to stay at the table.
But I want to say, the price war has reached its limit; what we really need to compete on is the ability to aggregate people, gain insights, and meet demand.
Why do I say this?
The 4 Levels of Consumption: Competing on Function and Price Only Leads to Homogenization
To understand this, we must explain a concept—consumption.
What is consumption?
I summarize it into 4 levels (the Consumption 4M Model): First, the process of product function satisfaction (Merit); Second, the decision-making behavior of individual cognition (Mind).
What else is there?
Third, it is also a path for expressing identity and meaning (Meaning); Fourth, it is the collaborative outcome of the supply-demand system (Match).
Each level has different levels and focuses.
In the past, we focused more on the middle two levels: the product function level and the consumption decision level. To put it bluntly, it was about what products I have and how I can get you to buy them. For example, I produce a bottle of water; its function is to quench thirst. I need to advertise, distribute it to various terminal outlets, and do everything possible to get you to buy it.
But now, that doesn't work anymore. Because everyone is competing within these two levels, on function and price, leading to increasing homogenization.
What to do? Jump out of these two levels and understand consumption from the levels of subject meaning and supply-demand matching.
That is, go up one level to target the target audience. Go down one level to look at upstream and downstream collaboration.
This is also what I want to talk about: in the next 10 years, we will not fight a price war but a matching war.
Matching first involves target audience matching, and second, upstream and downstream matching.
Let's talk about the target audience first.
I remember once communicating with the founder of Xianfeng Life, and a statement he made left a deep impression on me. He said that supermarkets in the past served based on spatial dimensions, offering all categories to everyone within a few kilometers. But today, it's different. Supermarkets need to be reclassified: who exactly do you serve? You need to figure that out first!
Xianfeng Life no longer does "all categories, all people" but focuses on the middle-class population, delivering across all scenarios such as family, social, and work, creating an interface for high-frequency interaction and exclusive trust.
Price is only a "screening mechanism"; matching is the "deal-closing code."
Do not use a single price dimension to understand current market competition. It is very important, but price is just one dimension; it is only one of the matching elements.
The Current Market: People Before Products, Demand Defines Supply
Looking at the currently popular retail formats—Sam's Club, Xianfeng Life, Aldi, and instant retail—they all have "supply" precisely hitting "people's needs"!
- Xianfeng Life uses high-aesthetic displays, selected fresh produce, and 3R products to give people who value quality of life a sense of pleasure in "eating well, shopping comfortably, and discovering surprises" while spending a bit more. It matches the "refined and fresh experience" of daily consumption.
- Sam's Club is not "cheap," but it gives middle-class families a strong feeling of "worth the money, worry-free, effort-saving, and quality assured" after paying an annual fee and relatively high per-transaction spending. It matches the "efficiency and quality security" of family shopping.
- Aldi uses minimalist shelves, limited SKUs, and private-label products to give budget-conscious families a sense of "getting a bargain and quality assurance" in repeated "spend less, buy good enough" experiences. It matches the "cost-performance and quality balance" of daily shopping.
- Snack stores appear to be about "discounts," but the core is "instant gratification + combined surprises." The huge number of SKUs satisfies the curiosity to "try everything," small packages make choices guilt-free, and "grabbing a few items" costs little but immediately delights. It matches consumers' "stress-relief shopping" and "reward desire."
- Instant retail allows consumers to pay for the convenience of getting items anytime, anywhere, delivered to their door in 30 minutes, gaining the instant satisfaction of "have it when you want it, no waiting, life uninterrupted" while spending a few extra yuan. It matches the "speed and sense of control" of modern life.
What am I trying to say?
The current market—people before products, demand defines supply.
Current consumption—not just functional satisfaction, but a connection of values and lifestyles.
Why this shift?
Because China has completed the leap from material scarcity to material abundance and has truly entered a consumer society. What we are seeing now are typical characteristics of a consumer society.
Consumer Society: Essentially "Created by Being Full"
What is a consumer society? I summarize it in one sentence: A consumer society is essentially "created by being full."
Let me help you understand with two quotes.
First, Ning Gaoning said in his book "Three Lives, All Things": When you are hungry, you have only one problem; when you are full, you have many problems.
In 2023, our Engel coefficient (the proportion of food in total consumption expenditure) fell below 30%, and China fully entered an era of "population differentiation, demand stratification, and diverse choices." The phenomenon of "everyone buying together" is gone forever.
From initially solving the problem of food and clothing, to nationwide consumption, to later symbolic consumption, and now reflective consumption, China has completed in 40 years what took the West 200 years of consumption development.
Second, the thought of French thinker Jean Baudrillard: Modern people define themselves through consumption.
When eating is no longer a problem, individual consumption becomes a way to express identity and cultural participation.
We now see some characteristics of consumption, such as:
Rationalization: more calculating, more emphasis on cost-performance;
Stratification: not everyone pursues "the best," but "the most suitable";
Emotionalization: when function is insufficient, emotion fills the gap.
These seem contradictory, but behind them, demand is being differentiated and becoming increasingly fine-grained.
Understanding this is important: What we need to do is not a business for "everyone to buy," but a business that "serves specific people/specific scenarios."
This relates to the upstream and downstream matching mentioned earlier.
Supply-Demand Mismatch: The "Each Fighting for Itself" Mechanism Directly Fails
Over the past 40 years, the relationship between supply and demand can be simplified into three diagrams.
From the earliest shortage of supply, to the later prosperity of both supply and demand, to the current supply-demand mismatch—yes, now it is not just a problem of oversupply, but also a problem of supply-demand mismatch.
What is supply-demand mismatch?
If there is demand but no supply, consumption cannot occur; if there is supply but no demand, consumption cannot occur either. Only when supply and demand match can consumption occur!
Supply consists of three links: "production-supply-marketing." Demand must consider population characteristics, purchase reasons, and usage scenarios.
In the current era, matching is becoming increasingly difficult.
A market of stock competition: the cake is no longer growing; you are fighting for what is in others' bowls;
Highly stratified demand: some pursue extreme cost-performance, others pay for emotional premiums;
Severely excessive choices: it is not that goods are insufficient, but that consumers do not know whom to choose.
More importantly, there is the game among the supply side: production, supply, and marketing. The upstream production, midstream distribution, and downstream sales form a long chain, and each link is "considering itself," each party is "calculating its own accounts." This makes manufacturers and retailers, and suppliers and retailers, always the contradictory subjects of the industry.
This model could still operate in the incremental era because demand was large and the tolerance for error was high; but once it enters a stock or even shrinking market, this "each fighting for itself" mechanism directly fails.
With so many choices, why should consumers choose you? — This is a must-answer question for all supply-side parties (production, supply, and marketing)!
Retail Transformation: The "Selling Field" Falls, the "Buying Field" Rises
How to answer?
We need to re-understand supply: "Supply" is not "what to produce" or "what to sell," but the collaboration of production, supply, and marketing to aggregate people, gain insights into demand, and build an ecosystem that quickly meets demand.
Aggregating people is the business of retail.
In my view, the complex retail transformation can be simply summarized as: the "selling field" falls, and the "buying field" rises.
Who is your target audience? For whom do you select products? How do you collaborate with upstream to satisfy them?
Retail as a place for buying and selling goods is called a "selling field," which clearly takes the supply side's stance. In the future, it must truly stand on the demand side's stance, acting as the user's buyer, becoming a "buying field."
But retail is the interface; circulation is the system.
How products are defined, how they are circulated, and how they are accepted by users—these are matters of circulation.
Retail is the interface; circulation is the system
This chart shows a comparison of circulation models between China and the US, Japan/Korea, and Europe.
True circulation transformation is not simply about improving efficiency but a structural reconstruction about "who better understands consumers." Japan has undergone three circulation revolutions, the US is dominated by multiple roles, and Europe has formed a pattern where discount and comprehensive retail coexist.
Comparing China with foreign countries helps us locate our current era: China is transitioning from "manufacturer-led" to "retailer-led." Unlike foreign countries, platforms, as a "third order force," will deeply participate in China's circulation transformation.
Overall, China is moving from a "push logic" that relies on brand distribution to a "pull logic" stage of C2M and refined user operations.
In this situation, what should brands do?
My view is that to cope with industry changes, brands should adjust not product specifications but their industrial role positioning and organizational logic.
Brands Should Adjust Their Industrial Role Positioning and Organizational Logic
Brands need to adjust their strategies, for example, in the following aspects:
1. Category Structure Traditional approach: more products, wider distribution; new approach: selected SKUs, focus on key categories Brands traditionally succeeded in the "selling field" by "distributing more," but this is ineffective in an era of streamlined SKUs and efficiency. The "buying field" no longer welcomes "wide-SKU suppliers" but requires "category suppliers that match the sales structure."
2. Sales Growth Traditional approach: rely on pushing inventory and rebates to drive sales; new approach: joint product selection, develop collaborative business plans The essence of the "buying field" is no longer accepting "distribute and sell." Brands must work with retailers to select products based on consumer demand, co-customize, jointly develop business plans, and share sales targets.
3. Channel Distribution Traditional approach: rely on wholesale distribution models; new approach: possess light retail capabilities + front-warehouse supply + fast turnover mechanisms Traditional distribution is the logic of pushing standard products to all channels, but instant retail/home delivery platforms/community front warehouses require brands to have the ability to supply in small units and high frequency, manage regional inventory flow, and respond to orders within hours.
4. Marketing and Sales Promotion Traditional approach: store displays, salesperson promotion; new approach: precise product selection + content seeding + joint promotions The marginal effect of salesperson promotion and display placement is diminishing, and "buying fields" are abolishing promotion functions. In the future, "precise product selection + content seeding + joint promotions" will become the core of "explosion point design."
- Retail Positioning Traditional approach: retail is a "place to sell goods"; new approach: retail is a "data node + fulfillment node + user touchpoint" Do not define retail merely as a place for display and sales; it is also a user data node, a warehouse point for instant fulfillment, and a window for brands to deepen community relationships. Brands must realize: every store = a data node + fulfillment node + user touchpoint.
Do not understand the current predicament simply as "low-price involution" or "stock grabbing." You must see: we are undergoing a paradigm shift from a "producer/supply" center to a "consumer/demand" center.
This is not simply a matter of adjusting product specifications. It is a model transformation. Brands must realize that this is a repositioning of their industrial role and ultimately an adjustment of organizational logic.