Core Tip Unmanned shelf retail, once the 'hottest trend,' has completely collapsed; unmanned convenience stores, once hailed as the 'ultimate retail form,' are now scarce and deserted; new retail coffee shops have lost their momentum, with even Coffee Box facing a wave of store closures; Luckin Coffee encountered financing difficulties, mortgaging coffee machines for 45 million yuan in financing... Recently, a 'wave of reflection' on new retail seems to pervade the industry. First, 'Hema's reflection and Hou Yi's anxiety' drew attention, followed by doubts about 'RT-Mart being led into a pit by Hema,' and even the bold statement 'There is no more new retail in the world.' Many now believe that 'new retail has no basic success cases' and 'new retail models have not yet been proven.' In my view, 'new retail models have not yet been proven' is a false proposition. New retail may never form a mature, stable, unchanging, guaranteed-profit, one-size-fits-all model. On the contrary, it is a rapidly iterating, constantly trial-and-error, performance-differentiated, and diverse pan-retail form, and it is the most basic retail form in the era of consumer sovereignty. New Retail Encounters Setbacks and Enters a 'Low Period'? Those who question new retail can cite many cases: For example, unmanned shelf retail, once the 'hottest trend,' has completely collapsed; unmanned convenience stores, once called the 'ultimate retail form,' are now scarce and deserted; new retail coffee shops have lost their momentum, with even Coffee Box facing a wave of store closures; Luckin Coffee encountered financing difficulties, mortgaging coffee machines for 45 million yuan in financing... Another example: after 'siding with' Alibaba, the performance of Sanjiang Shopping Club and Sun Art Retail has not improved significantly. Recently, Sanjiang Shopping Club divested Hema, transferring the operation rights of Hema in the Hangzhou market from its subsidiary to Hangzhou Hema; Sun Art Retail recorded declines in sales, profit, and same-store sales in 2018, with 'RT-Mart falling from its pedestal'; and the first Hema Xiaoma store also 'closed its doors.' Last year, due to continuous losses in new retail businesses represented by Super Species (losses of 116 million yuan in 2016, 267 million yuan in 2017, and further expanding to 617 million yuan in the first three quarters of 2018), Yonghui Superstores spun off Yonghui Yunchuang from the listed company; not long ago, it was reported that Peng Huasheng, Chairman and General Manager of Yonghui Yunchuang, was transferred and resigned. 'Insiders' revealed that due to bottlenecks in home delivery business and severe losses, some of Yonghui Life's operations may be sold, and negotiations are already underway. Another example: JD 7FRESH's expansion has repeatedly slowed, founder Wang Xiaosong was transferred, and the goal of '1,000 stores in three years' seems to be failing; it is rumored that Meituan's Xiaoxiang Fresh closed 3 stores in Changzhou and 2 in Wuxi, leaving only 2 in Beijing after adjustments, losing five out of seven; it is said that Dingdong Maicai is challenging Hema Fresh's 'pioneering position in new retail,' triggering 'Hema's reflection' and Hou Yi's anxiety. In a recent speech titled '2019: The Battle to Fill the Pit,' Hou Yi reflected on 'whether packaged food is competitive,' 'whether big seafood is still attractive,' 'whether dining must be a standard feature,' 'whether online logistics delivery costs can be covered,' and 'whether Hema's product structure is the best model.' These five 'reflection points' are almost all former 'Hema labels.' Recently, analysis suggested that the sales per square meter of Hema under Sanjiang is only about 13,000 yuan, far from the 50,000 yuan officially announced by Hema, and the four stores lost over 23 million yuan last year. Sanjiang divested Hema because it could not bear the high investment and continuous losses. In fact, doubts about Hema's profitability have never ceased. In 2017, when Hema had only about a dozen stores, it announced achieving scale profitability, but after entering the hundred-store scale, no overall profitability news has been seen. In a recent media interview, Hou Yi stated, 'We never use the word loss; we consider it investment,' and said, 'Hema's finances will gradually become healthy within one to two years,' which should be seen as confirmation that Hema is still in a loss-making phase overall. Many commentators have cited the 'carrot label incident' and 'cake early label incident' as evidence that Hema's management and service cannot keep up with its rapid expansion. Some commentators say that so far, no new retail model has been very successful, let alone basically successful. No Matter How Many Unsuccessful Cases, They Cannot Prove New Retail Is Wrong Just as 100 scientists signing a joint letter cannot refute Einstein's theory of relativity, no matter how many unsuccessful cases, they cannot prove new retail is wrong. First, fresh food supermarkets represented by Hema are only one branch of new retail, not the whole. Since the advent of new retail, not only have internet companies like Alibaba, JD, Meituan, Xiaomi, and NetEase quickly laid out and accelerated implementation, but also various physical retail formats—from shopping malls to department stores, from hypermarkets to supermarkets, from brand specialty stores to mom-and-pop shops, from restaurants to snack shops, from home furnishing stores to convenience stores, from mother-and-baby stores to accessory stores—have accelerated exploration and trials. In the past few years, a vigorous 'new retail movement' has swept across the national retail market, spawning countless new models, new formats, and new changes, resulting in a development pattern of 'a hundred flowers blooming and a hundred schools of thought contending' in China's commercial retail market. China's retail innovation has also shifted from a follower to a leader, with new retail development and innovation entering the 'no-man's land' and leading the world. A research report by Jones Lang LaSalle, 'Global Retail Destinations,' shows that China has become the fastest-growing retail market in the Asia-Pacific region. It is said that Amazon's decision to acquire Whole Foods was made by Bezos after visiting Hema. The achievements of new retail are evident. In recent years, the recovery of offline retail performance in China owes much to new retail. The '2018-2019 China Department Store Retail Industry Development Report' shows that in 2018, department stores' total sales increased by 4.2%, and total profits increased by 6.4%. The report suggests that after undergoing multiple retail transformations including digitalization and new retail, the department store industry is showing signs of resurgence. Chu Xiuqi, President of the China Department Store Commercial Association, also believes: 'After transformation, adjustment, revitalization, and digital application, the future of the department store industry is still very bright.' In the supermarket sector, Walmart and Carrefour have staged a stronger 'counterattack' with the help of new retail: After deep integration with Tencent and JD, Walmart has over 200 stores on JD Daojia, Sam's Club has fully cooperated with JD, mini-program users have exceeded 20 million, and compact smart supermarket Walmart Huixuan has been launched. A series of new retail moves have kept Walmart China growing for over a dozen consecutive quarters. Walmart China President Chen Wenyuan predicts that in 2019, Walmart China's e-commerce business will achieve triple-digit growth. Another Walmart executive said: 'Walmart's number one KPI is to attract consumers on both online and offline channels, actively, proactively, and frequently shopping at Walmart.' In 2018, the new CEO of Carrefour Group's main strategy to 'save' Carrefour was 'betting on digitalization and omni-channel.' At the beginning of that year, Carrefour China accepted investment and 'sided with' Tencent, and in June, it partnered with Google globally. That year, Carrefour China's WeChat mini-program had over 100 million visits, deeply accumulated over 10 million members, daily active members exceeded 300,000, and over 200 stores in 31 cities joined JD Daojia... A series of new retail transformation moves refuted rumors of Carrefour's exit from China. In 2018, Carrefour China's profit surged 11-fold to 350 million yuan, compared to just over 30 million yuan in 2017. In fact, countless enterprises have benefited from new retail, including Intime, Rainbow, Wangfujing, Joy City, Bubugao, Wumart, Li Ning, Peacebird, and Uniqlo, all maintaining good development momentum in new retail innovation. Today, it may be hard to find a physical store completely insulated from new retail. Of course, new retail is not a panacea. The recovery of physical store performance is a 'differentiated recovery' rather than a 'universal recovery.' Under the new retail tide, many enterprises have suffered losses or closed down, but this only shows that some enterprises may not have found the right way to embrace new retail, not that new retail is wrong. As Hou Yi said: 'As long as Hema can succeed, new retail is successful. If you can't do it, it's because you lack ability.' Second, new retail represented by Hema is rapidly iterating, landing in a more pragmatic, down-to-earth, and lively manner. In fact, the early Hema stores, which featured big seafood and gourmet food as main selling points and combined store and warehouse, were a successful model. They created much higher sales per square meter than traditional retail in Shanghai and achieved overall profitability. However, the early large-store model and high renovation costs may not suit second- and third-tier cities, and big seafood and fresh-made-to-order may not suit all consumers. 'One store fits all' violates basic business laws, which may be why Hema could be profitable with only a dozen stores but fell into losses after rapid expansion. But clearly, Hema has realized this problem. Not long ago, Hema launched a matrix of store formats including Hema Cai Shi, Hema Mini, Hema F2, and Hema Xiaozhan, opening different stores in different markets based on consumer markets and business district characteristics. This is clearly a pragmatic strategy of adapting to local conditions, a down-to-earth move to better match consumer demand. 'A thousand stores with a thousand faces' is the proper posture for accelerated implementation. The first Hema Cai Shi store at Shanghai's May Flower Plaza In terms of expansion strategy, Alibaba CEO Daniel Zhang revised the earlier 'run for life' to 'run to survive,' emphasizing that 'running long is the most critical.' This shows that Alibaba's top management requires Hema to improve management, service, and quality control capabilities while rapidly expanding, ensuring management capabilities keep pace with expansion speed, and shifting from extensive expansion to refined and professional operations. This can also be understood as Alibaba's top management not wanting the 'old Hema' that blindly pursues speed and scale, but a 'new Hema' that balances quality, efficiency, scale, and speed. Longshang.com & Supermarket Weekly analysis suggests that previous internet new retail projects indeed carried heavy e-commerce traces, still accustomed to burning money to attract traffic and grab market share. Without verifying a model, they would rush to scale up, burn money, and run for life, leading to various sequelae including food safety issues. However, since this year, many new retail projects have changed their traditional playbooks, landing and expanding with increasingly down-to-earth and sustainable models, adjusting toward pragmatism. The currently popular community group buying and various 'vegetable buying' models also reflect a pragmatic style. The former has advantages such as low cost, low loss, and light model, integrating home delivery and store visits, with strong vitality and expansibility, and has been adopted by more and more physical retail stores. The latter replaces store-warehouse integration with front warehouses, using a 'vegetable market + APP' 'mobile basket' model, with more focused categories, significantly reduced operating, logistics, and expansion costs, higher efficiency, and stronger replicability. Compared to new retail 1.0 represented by Hema, it has broader applicability. A Resistant Attitude Toward New Retail Is Not Advisable As economic growth shifts from high-speed to high-quality development, and with Generation Y and Generation Z becoming the main consumer force, people's consumption concepts, methods, and habits have profoundly changed. The service economy and experience consumption are prevalent. Against the backdrop of continuous development and accelerated breakthroughs in the internet, IoT, cloud computing, big data, artificial intelligence, and 5G technology, it should be said that new retail, characterized by dual-line integration, data-driven, demand-oriented, technology-based, store reconstruction, community marketing, and membership services, is the best business form to adapt to changes and match demand, and an effective way for online and offline retail to break through the 'ceiling' of performance growth and achieve professional, refined, connotative, and sustainable growth. To this day, some physical retail practitioners still view new retail with a mindset of watching the excitement or even gloating, always intentionally or unintentionally placing themselves in opposition to new retail. They feel happy when seeing some new retail projects lose money or close down. This 'rejoicing in others' faults' and opposing for the sake of opposition is a typical 'Boxer' mentality, essentially positioning themselves as remnants of traditional retail. This closed-door mentality is very harmful. In my view, China's new retail development has formed a situation where internet companies lead the pace and physical retail follows. Internet companies innovate disruptively, move fast, and iterate rapidly, while physical retail adopts a 'small steps, fast running' follow-up strategy with prudent investment and steady pace. Therefore, more mistakes occur in internet new retail projects, which is a normal phenomenon. Leading in the 'no-man's land' inevitably involves detours and paying tuition. For this, we should view it with an open, inclusive, and appreciative attitude. After all, innovation is always worthy of appreciation and respect. It was last year, I think, when Carrefour's Chief Marketing Officer Yu Ying said: 'In the past five years, Carrefour store traffic has decreased by 50%, mainly because weekly active customers became monthly active, and 10% of customers stopped coming altogether.' The continuous decline in customer traffic is a very fatal problem for physical retail enterprises. Some enterprises simply respond by controlling costs and reducing expenses, which, while necessary, cannot fundamentally solve the problem. Looking at consumers' love for new retail projects like Hema, and the lively scenes and abundant traffic at those new retail stores, it is not hard to conclude that new retail is the industry's development direction. Temporary setbacks and low periods cannot negate the value of innovation. As long as consumers like it and traffic is sufficient, there is time and space for adjustment and optimization. Meanwhile, traditional retail that is unambitious and stable will be quickly marginalized in 'boiling frog' conditions until it is eliminated. In fact, despite losses from new retail businesses, whether Yonghui Superstores, Sun Art Retail, or Suning Xiaodian, none have 'hit the brakes.' Instead, they are investing more resources, greater strength, and advancing with a more aggressive offensive posture. This shows that new retail is the right direction they have identified. Wei Zhe, founder of Jiasu Capital, also believes that in the future retail landscape, winners should be of two types: one is new brands, new channels, and new IPs, and the other is merchants who successfully implement 'old city renovation' on traditional retail, with the latter having greater value. Zhou Yong, a professor at Shanghai Business School, once called out: 'Stop applauding and cheering for ridiculing, satirizing, and belittling new retail!' This hits the nail on the head. Ignoring the positive significance of new retail innovation and trial-and-error, and only focusing on problems and shortcomings, is very short-sighted and narrow-minded. New retail's higher efficiency, more precise marketing, all-time connection with consumers, and continuous innovation of customer value are all worth learning from for every physical retail enterprise. Of course, retail is a 'marathon,' as Zhang Yong said, 'running long is the most critical.' On the path of new retail development, physical retail enterprises should not only see the direction clearly but also avoid blind action and reckless effort. They should firmly embrace new technologies and new demographics, maintain high agility and adaptability to market changes, and keep rapid response capabilities to avoid falling behind. They should also proceed from reality, strive to avoid various opportunity traps, properly handle the relationship between surprise and orthodoxy, adhere to the right business path, return to the essence of retail, and persistently focus on operational innovation, product quality, service quality, food safety, and customer experience. The stronger the foundation and the more solid the basic skills, the more significant the results of new retail transformation. Not long ago, Wang Hongtao, Deputy Secretary-General of the China Chain Store & Franchise Association, proposed 'six matches': development strategy matches market conditions, development model matches China's national conditions, products and services match target customers, development speed matches management capabilities, investment capability matches profit levels, and strategic layout matches future trends. Although he was talking about 'the road to convenience stores with Chinese characteristics,' it is clear that these 'six matches' also apply to physical retail enterprises' new retail path. Source: Supermarket Weekly (ID: cacszk) -END-