Front warehouses are experiencing their best period yet. Source: Business Coffee (ID: businesscoffee) Entering 2019, in conversations with many friends, there is a consensus that discussions about New Retail have gradually cooled down. There may be several reasons for this, but the core reason is that the "newness" of New Retail must integrate with the old to unleash long-term vitality. However, so far, the existing assets have either fallen into pitfalls or are utterly confused by the solutions New Retail offers. Meanwhile, the industry has begun to return to the micro-level of business operations and try new approaches. For example, the recent boom in grocery shopping is closely related to the heated discussions about front warehouses. Compared to the "Tao" (strategy) of New Retail, front warehouses are more about the "Shu" (tactics). However, the industry's focus shifting back to tactics may not be a bad thing. At least for front warehouses, which were once questioned, it is a good thing. After two years of trial and error, front warehouses, which existed before New Retail, have survived and are now showing signs of becoming mainstream. This is quite unexpected. This article attempts to share personal observations and offer a viewpoint: regardless of New Retail's fate, the front warehouse model has proven its viability, and the debate over front warehouses can be put to rest. Digitalization Foothold The initial concept of front warehouses was to rely on backend big data algorithms for precise product selection, addressing the pain points of freshness and convenience. These were also the focus of New Retail enterprises like Hema. However, early front warehouses had a problem: they were overly reliant on algorithms, believing that precise algorithms could infinitely approach consumer demand, reduce waste, and lower costs. This approach led to two issues: first, it neglected other aspects like supply chain; second, it failed to recognize that the premise itself might be flawed. From both sociological and psychological perspectives, fully predicting human behavior and decisions is impossible. Decisions can be subjective, influenced by external factors, planned, or spontaneous. Although front warehouses focus on daily consumer goods, primarily fresh produce, such consumption is influenced by multiple factors when applied to individuals. Pursuing algorithmic precision is not wrong, but algorithms cannot be infallible. Moreover, New Retail teaches us that it is the digitalization of people, goods, and venues. If digitalizing a single person is difficult, digitalizing all three is even more challenging. The emergence of front warehouses simplifies the object of digitalization. Currently, front warehouses mainly digitalize goods, making implementation less difficult. Furthermore, as front warehouses have evolved, they no longer treat algorithms as the core secret weapon. Instead, they combine algorithms, product selection (positioning), and services to create models tailored to their needs, securing a place in the market. For example, Miss Fresh is generally perceived as excelling in fruits; Pudu Supermarket is seen as having a relatively complete category mix among current front warehouse models; and Dingdong Maicai is praised for its service attributes rather than purely product attributes. Increasingly Offline-Oriented Early front warehouses resembled a variant of the e-commerce model, merely transforming the single-product hit model of early e-commerce from one-warehouse-ships-nationwide to distributed warehousing. The only difference was that the warehouse was more forward. Note that from one-warehouse-ships-nationwide to distributed warehousing, the underlying logic did not undergo fundamental change. Traditional logistics systems are indeed hierarchical or waterfall-like, where small warehouses are subsets of large ones, and their storage logic is determined by the large warehouse, not by orders. However, looking at current front warehouse models, although they also transition from large to small warehouses (or from visible to dark warehouses in foreign terms), the underlying logic has quietly undergone a qualitative change. This change is that small warehouses are no longer subsets or appendages of large ones; their storage logic is actually determined by orders. In traditional e-commerce, only pre-sales operated this way, but pre-sales often became hunger marketing. The reason lies in the different supply chain logic. When each front warehouse becomes an independent operating center, two changes occur. First, the backend supply chain changes. Ideally, each front warehouse is like a retail store, and if truly achieving "thousand stores with thousand faces," it should have its own (partially) independent supply chain system. Second, front warehouses are becoming more store-like, with product selection and operations increasingly resembling community fresh food stores or convenience stores, focusing on matching and satisfying local customer groups, where "local" might mean a radius of 1.5 kilometers. At this point, the e-commerce genes are fading, and offline logic is becoming more prominent. No Optimal Solution, Only Suboptimal Solutions In the past, there have been many comparisons among front warehouse models, front-store-back-warehouse models, and in-store warehouse models. Experts and industry insiders have elaborated on these, so I won't expand here. Do front warehouses have shortcomings? Yes, they have many. But among the currently available solutions, where is the optimal solution for New Retail? What everyone finds are suboptimal solutions. In this context, front warehouses are still a logically self-consistent model. Moreover, in the current competitive environment, front warehouses have an advantage that may be amplified by various players and capital, potentially becoming a decisive factor. That is the speed of expansion and ease of replication. A model may have three or four pros and cons, but at a certain period, one advantage may be particularly important. This is like a person: some traits are crucial during courtship, but after marriage, those traits might become drawbacks. However, getting married first is the priority, and the same applies to front warehouses now. Exploring New Retail so far, there are two prominent approaches. One is retail + dining. But this trend seems more like a pitfall; Hema admits it is filling a pit, and that is not modesty. If Hema had not initially focused on this direction but instead thoroughly studied each sub-category of fresh produce, especially grocery shopping, the current chaotic fresh produce market might not have emerged. The other approach is delivery-to-home services, but this also has issues: the initiative is not in the hands of retail enterprises. Moreover, both approaches face the challenge of replicability. Hema, despite running desperately, has only about a hundred stores. And delivery-to-home services, if overdone, can affect in-store customers and services. Thus, discussions about New Retail have failed to create a spark that can start a prairie fire. But now, front warehouses seem to have great potential in replicability and expansion. Especially since front warehouses have not yet faced many compliance and property management challenges, it is an excellent time for expansion. From an industry perspective, front warehouse companies that have received capital are quietly running desperately. Essentially, front warehouses still have strong channel attributes and cannot yet truly reverse-engineer the supply chain. In the era of channel dominance, scale is crucial. Having 1,000 warehouses versus 200 warehouses will give different bargaining power in the future supply chain. Once the front warehouse model takes root and grows, it will also have a substitution effect on other channels. From this perspective, front warehouses may be experiencing their best period yet. -END-