Click to read the original article for details. New retail must return to value-based retail The decline of traditional supermarkets is hardly a new topic, but Carrefour's "bargain sale" to Suning has still stirred many nostalgic souls. If you're in the retail industry, you might sigh with emotion, lamenting, "The times abandon you without saying goodbye." If you're an older consumer, you might feel a bit sorry, but life seems unaffected. If you're a young consumer, you might ask, "Who is Carrefour?" feeling like you haven't been there in ages. And if you're a supplier, you might be pinching your thigh to keep from laughing out loud, since you still have payments tied up with them. The prosperity and decline of China's retail industry both began with the rise of hypermarkets. Chinese people, who came from an era of material scarcity, have a natural love for "going to the market." With tens of thousands of products, open shelves where you can "take freely," clean and tidy environments, careful lighting, comfortable temperatures, and free shuttle buses right to your neighborhood, hypermarkets gave Chinese consumers their first taste of "being treated like a god." Thus, tired of the rigid and cold traditional department stores, consumers with money in their pockets flooded into hypermarkets, creating a scene of "drums and gongs, firecrackers, waving flags, and a sea of people." There's a joke: A person runs while taking an elevator, and when it reaches the tenth floor, he thinks he ran up the stairs. Hypermarkets generally had this illusion at the time. In fact, the elevator supporting the rapid development of retail was the rapidly growing Chinese economy, the rising income of the people, and the retail formats that urgently needed change. Illusion leads to delusion, and delusion leads to decline. The first to decline was Carrefour. Carrefour was the first to adopt the model of charging channel fees, delaying payments to suppliers, and profiting from backend margins, enabling low-cost rapid expansion (Note: This model was not imported from abroad but specially developed for Chinese babies). In that era of staking claims, Carrefour, under the banner of "modern terminals," gained support from many local governments and quickly grew large. In our market, all short-sighted and opportunistic things have fertile soil to grow. Carrefour became the benchmark for all supermarkets and hypermarkets across the country, sweeping through almost all retail systems. As a result, large retailers all became platform operators. "Whether goods sell or not is none of my business; I collect tolls." Entry fees, barcode fees, anniversary fees, poster fees, distribution fees, promotion management fees, special display fees, new store opening fees, old store renovation fees... There's no fee they can't collect. The "bad kid game" of squeezing suppliers became the main business of various retailers, and the true function of retail was conveniently shifted to suppliers. This money seemed easy and stable, but it was actually a low and short-sighted behavior. Can retailers "squeeze" suppliers? Of course! Look at Porter's Five Forces model; bargaining power with upstream and downstream is an important part of competitive capability. The big store bullies the customer, and the big customer bullies the store—this is a market rule. But "squeezing" partners also has its nuances. It should be based on providing value, with core competitiveness as the main bargaining tool. Relying on negotiation tricks and persuasion is low-end behavior. Carrefour and its ilk could squeeze suppliers because of traffic—their radiation to residents in the surrounding business district. But is this traffic yours? Would it be the same if it were Carrefour Luck or Carrefour Longevity? Traffic relies on location. Even if the initial traffic was brought by you, the buildings belong to the property owners, and the land is owned by the whole people. If you want to be a platform operator, you're actually on someone else's platform. In the end, you're just an actor, at best a fox borrowing the tiger's might as a second landlord. The behavior of hypermarkets collecting "tolls" while abandoning retail functions is the source of the "absence of retail entities" in the current retail industry, which directly leads to low circulation efficiency in our market. In the U.S. market, the circulation cost rate for consumer goods is 37%-39%; in Japan, 35%-39%; in Italy, 27%-35%. What about us? There are no accurate domestic statistics, so let's roughly estimate. Typically, for a consumer product with some brand influence, the ex-factory price is set at 50%-70% of the retail price, leaving a large portion to cover various supermarket fees and distributor support. In this way, maintaining a 30%-50% discount is considered good. The circulation cost rate is 50%-70%. This does not include the financial costs of delayed payments. For products lacking brand influence, it's even worse. Shipping at 20%-30% of retail is common, and some even sell at a 10% discount in bulk, pushing the circulation cost rate to 90%. Are you convinced or not? This circulation cost rate has already exceeded the period in the 1990s when wholesale distribution dominated. From this perspective, hypermarkets brought regression, not progress, to Chinese retail; they brought decline, not improvement. The decline in retail efficiency and the rise in circulation costs directly stimulated the rapid growth of e-commerce. Teacher Ma said, "Make it easy to do business anywhere," prompting suppliers of all sizes to defect and flock to e-commerce. In the early years, when e-commerce was growing rapidly, I discussed with industry insiders why China's e-commerce developed faster than abroad. One important reason mentioned was "foreign supermarkets don't charge fees." While hypermarkets were collecting "tolls" until their hands were tired, they may not have realized that they were simultaneously castrating their core competitiveness and digging graves for themselves. They forgot that their initial popularity in China came from providing consumers with a different shopping experience. Instead of continuing to build core competitiveness, they went further down the road of charging fees. Carrefour once boasted of being the "Whampoa Military Academy of Chinese retail." Every time I hear this, I can't help but laugh unkindly. Carrefour's fee model not only fleeced suppliers and reduced retail efficiency but also brainwashed China's supermarket retail industry, causing them to cripple their own abilities and collectively take a crooked path, to the point where the government repeatedly had to speak out. How can they boast about being the "Whampoa Military Academy"? Carrefour has changed hands, but the fee model in Chinese retail has not changed, and the problem of "absence of retail entities" remains unresolved. Large e-commerce platforms now charge fees comparable to traditional supermarkets, just under different names like slotting fees, Juhuasuan, and Zhitongche. Online retailers have become advertising companies plus online real estate developers, collecting advertising fees and rent, still calling themselves "platforms," but in reality, they are even bigger "online Carrefours." Currently, the good news for platforms is that they have some control over online traffic, unlike offline Carrefours that rely entirely on location. Another piece of good news is that e-commerce platforms themselves are trying to change the "online Carrefour" model, which is why "new retail" has been hot in the past two years. Although the concept is not yet accurate and the practice not yet successful, it shows their efforts to use new technology to improve consumer experience. The good news for suppliers and the entire retail industry is that online traffic is easier to segment, no matter how invincible the opponent seems. Douyin's e-commerce is currently the biggest traffic trading dividend on the internet. Pinduoduo took only three years to become China's third-largest e-commerce platform. Luckin Coffee, relying on private domain traffic, went public at a record speed with an astonishing valuation. Because of this, suppliers now have more confidence when facing platform operators. Not long ago, when Tmall played the "choose one of two" game, Galanz dared to directly confront them with "Don't play dirty tricks." And the government's timely support undoubtedly strengthened suppliers' backbone, setting a very good example. Another surprising piece of news: Lei Jun's business idol, America's Costco, the membership warehouse club that claims "once you go, you won't want to go anywhere else," opened in Shanghai this year. Of course, Costco's membership model may not necessarily succeed in China. Membership is not new. When Metro first entered China twenty years ago, it briefly implemented a strict membership system but was quickly overwhelmed by the Carrefour-style fee model. In recent years, Alibaba and JD.com have also launched paid membership plans, but they haven't achieved obvious results yet. But this customer-centric retail philosophy that provides higher service value and deeply explores customer value, this retail model that grasps true C-end traffic and has high customer stickiness, is definitely worth learning from for most retail enterprises. Traditional retail platforms are so ferocious. In recent years, when I talk to insiders, they complain bitterly, feeling they are in the most miserable industry under the sun. Even the top retail giants generally have operating profits below 5%. Take Carrefour, which just "sold itself" and has been losing money for years, with net assets already negative. More despairingly, the trend continues downward, no growth direction is found, various new retail methods fail, and costs keep rising. Return to the most fundamental issue in business and marketing—value. Lao Miao's contacts are mostly manufacturers and distributors. I often hear them complain about the various "exorbitant taxes and levies" of platforms, leaving them with no profit. My usual response is: What value do you actually provide? If you can't bring traffic yourself and rely entirely on the platform, then they should take all the profits. This question applies equally to retail platforms: If you can't create customer value and your traffic relies on location, then however you squeeze suppliers, the property owners will squeeze you. Platforms that cannot provide genuine customer value are doomed. Truly viable new retail must be value-based retail. Source: Lao Miao Marketing Button (ID: yiheyingxiao)