Introduction Recently, the hottest event in the e-commerce sector is the online supermarket war. First, Tmall Supermarket announced it would reach a scale of 100 billion yuan in three years, becoming the number one supermarket online and offline. Then JD.com countered, claiming it was number one. Subsequently, JD.com acquired Yihaodian and announced an investment of 1 billion yuan within three months, proactively igniting the war. The hot news these days is that Yihaodian's CEO has been replaced by a JD executive, and Tmall Supermarket is offering a 50% discount on orders, while JD Supermarket is offering 199 yuan off for every 100 yuan spent on all self-operated categories. It is foreseeable that in the next two years, Alibaba and JD.com will invest tens of billions of yuan in online supermarkets, engaging in a real, bloody battle. This is a war of capital and resources, as well as a test of supply chain operations and customer experience. But there is another key issue: the battle of positioning. JD.com and Alibaba may not have deeply considered this; they currently position online supermarkets as online hypermarkets. Is this positioning the most suitable? Is there a better positioning that could enhance the competitiveness of online supermarkets?

Online Supermarkets Should Be Positioned as Costco Model positioning determines the format organization, product selection, pricing strategy, etc. For example, convenience stores are positioned to meet convenience shopping needs, so they are close by, have limited product selection, and focus on emergency small packages. Hypermarkets are positioned to meet one-stop shopping needs, so they have a full range of products, low prices, and are located far away. Costco (and similar stores like Metro, Sam's Club) is positioned as a membership-based curated warehouse store, so it offers curated products, many exclusive customized products, and uses membership to enhance customer loyalty. Some readers may not know Costco. Costco is the world's largest chain warehouse-style membership store. Founded 20 years after Walmart, Costco is the second-largest offline retailer after Walmart. Its difference from Walmart hypermarkets is that its gross margin is only 10% (Walmart's is 15-30%), and it has only 4,000 SKUs, helping customers select products rather than letting customers choose for themselves. Costco's exclusive customized products are very popular, often featuring flash sales and limited-time offers. It also charges customers a $55 membership fee. Based on membership, it offers services such as car sales, finance, travel, online photo, and e-commerce. In essence, Costco operates on trust. Members trust Costco, so they believe in all its products. Consumers are confident that even if they shop at Costco with their eyes closed, they will get the highest quality at the lowest price. Currently, online supermarkets generally position themselves as hypermarkets. The author (Zhang Chenyong) believes that online supermarkets are more suitable for a Costco-style (curated warehouse membership store) positioning. The reasons are as follows:

  1. Jiang Pan, general manager of Tmall Supermarket, said that the repurchase rate for Tmall Supermarket is 38% in the following month and 55% in the third month. This figure is lower than that of the hypermarkets where the author has worked. There is a possibility that hypermarkets benefit from high-frequency purchases offsetting low-frequency ones. After all, hypermarkets operate fresh and chilled products (including some general merchandise that is inconvenient for delivery), which are categories that online supermarkets find difficult to handle. Online supermarkets competing with hypermarkets do not have an advantage in meeting one-stop shopping needs; online supermarkets cannot fully replace offline supermarkets.
  2. The essence of Costco is operating on trust, using trust to expand categories, services, and stores. Because of trust, customers are willing to pay membership fees. Costco took many years to build trust and has always insisted on curating high-quality products. Online platforms can build trust more easily than offline because data and reputation are more transparent, persuasive, and easier to spread. How to use online platforms to build trust (specific methods later), build a channel brand, and promote exclusive customized products is worth deep consideration by online supermarket decision-makers.
  3. The Costco model has a higher average transaction value than hypermarkets. Why do online supermarkets set free shipping thresholds? Because delivery and packaging costs are hard to compress. The higher the average transaction value, the lower the proportion of delivery and packaging costs. Therefore, positioning as Costco helps improve net profit margins.
  4. Delivery costs vary greatly by category. For example, beverages have low unit prices and require protective packaging; instant noodles and biscuits are prone to damage; bulk grain and oil have low gross margins and are heavy. In contrast, famous liquor, personal care, and nuts all have high unit prices and low delivery cost ratios. Online supermarkets can quantitatively calculate the delivery and packaging cost ratio for different categories and focus on promoting advantageous products based on this, cultivating customers' stock-up shopping habits.
  5. Data analysis shows that a considerable portion of customers shop online supermarkets with a stock-up characteristic, and the average price per item is much higher than in hypermarkets. Costco's large-pack features also align with online supermarket positioning and can reduce the proportion of delivery and packaging costs.

In summary, the author believes that online supermarkets learning from hypermarkets to position as one-stop shopping platforms is not perfect; some products are destined to be difficult for online supermarkets to operate. It is better to position as an online Costco, mainly meeting stock-up shopping needs, calculating costs based on category characteristics, focusing on recommending advantageous products, increasing average transaction value, reducing the proportion of fulfillment costs, and emphasizing the use of exclusive customized products and online platform features to cultivate customer trust and build a brand channel.

How Online Supermarkets Can Learn from the Costco Model The above discusses that online supermarkets should learn from Costco's positioning. Finding one's own positioning and continuously strengthening it is the basic approach to building competitiveness. So how can Costco's positioning be implemented? The author believes there are the following three points:

1. Reduce Transformation Risks Existing online supermarket platforms should consider how to shift toward the Costco positioning. Directly and comprehensively changing the existing supply chain, strategy, marketing, etc., will face risks. Changing strategic positioning must be cautious and requires evaluating investment and risks. To reduce transformation risks, the author suggests that on the basis of maintaining the existing model, try the Costco model. The specific plan is described in the next two points.

2. Special Zone Format Adopt a special zone format by establishing a channel zone on the online supermarket platform. The products in this zone are carefully selected, helping customers choose products rather than letting customers choose. It tends to favor products that suit stock-up shopping and have low fulfillment cost ratios. Using exclusive customized products to build customer trust is the most critical point. Product costs include raw material production costs, channel costs, and marketing costs. Exclusive customized products can save channel and marketing costs, allowing customers to purchase high-quality exclusive products at lower prices. Building trust on online platforms is much simpler than it was for Costco. For example, you can display the product selection process on the detail page, link buyers' income to the repurchase rate of selected products, have buyers provide content for detail pages to promote products, and products with a repurchase rate below 50% cannot enter the selected zone. In short, truly achieve careful selection, exclusive customization, and use the transparency and rational data of online platforms to build customer trust. When the special zone channel has a rich product range and customer base, consider launching a membership system where customers who pay membership fees can purchase zone products at lower prices.

3. Wholesale Shopping Another approach is to increase the average transaction value and reduce the proportion of fulfillment costs. The specific method is to display two prices for a product: one normal retail price and one member price, with the member price on average 10% lower than the normal retail price. To enjoy the member price, customers must pay an annual fee of 150 yuan or a per-use fee of 10 yuan. That is, paying 150 yuan allows them to enjoy member prices for one year; paying 10 yuan allows them to enjoy member prices for one shopping trip. Because the member price is on average 10% lower than the normal price, if a customer pays 10 yuan, it is more cost-effective to choose the member price when shopping over 100 yuan. The higher the transaction value, the more savings, encouraging customers to buy more, increasing the average transaction value, reducing the proportion of warehousing and distribution costs, and turning the platform into a wholesale stock-up shopping platform. The promotional model of online supermarkets has led many small supermarkets to stock up on e-commerce platforms, even cultivating professional scalpers who only buy large quantities of promotional items. These items not only yield no profit but may even have negative gross margins. In contrast, the model described here does not emphasize single-product promotions but rather all-category low prices similar to Costco, without single-product losses, and with a minimum fee of 10 yuan as a safety net. Online supermarkets are accustomed to the "free shipping over a certain amount + promotional activities" approach, often running promotions like "buy two pay one," "red envelopes," "second item half price," and "199 yuan off for 100 yuan spent." Some customers like such promotions, but customers attracted by promotions have lower loyalty. Other customers do not like flashy activities; they prefer simple and direct, buying what they need rather than promotional items. This "wholesale shopping" approach better suits the second type of customer and is more likely to cultivate their loyalty.

This article analyzes why online supermarkets are more suitable for the Costco model and then proposes two specific implementation ideas. The author (Zhang Chenyong) believes that the competition level of capital and resources in online supermarkets is lower than that of supply chain and shopping experience, which in turn is lower than that of model positioning. Choice is often more important than effort. The author focuses on retail O2O and has proposed multiple FMCG O2O ideas. This article summarizes the positioning model for online supermarkets. The author believes that FMCG O2O has unlimited opportunities. As long as the path is right, it is likely to develop into the next BAT. Readers are welcome to add the author's WeChat for communication.

Author: Zhang Chenyong, WeChat: csdso2o, focusing on retail O2O -END- The best learning platform for FMCG distributors in China Focusing on providing professional, practical, and applicable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operations | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brands | 016 Distributor B2B transformation | [Long press QR code to follow]