--- title: "\"Price War\" Hits Community Stores" description: "Under consumption downgrading, community store owner Yingzi (pseudonym) resists price increases and adopts aggressive price-cutting strategies to survive, reflecting the broader price war in the retail industry. The article explores how traditional supermarkets and small stores adapt through supply chain reforms and product differentiation." author: "十里" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2024-01-18" categories: "Retail Formats" language: "en" canonical: "https://xinjignxiao.com/en/articles/price-war-hits-community-stores-22f3c930/" markdown: "https://xinjignxiao.com/en/articles/price-war-hits-community-stores-22f3c930.md" original_source: "https://mp.weixin.qq.com/s/GmK8_uEDVpuiGT0N64aRbA" translation: "https://xinjignxiao.com/zh/articles/%E4%BB%B7%E6%A0%BC%E6%88%98-%E8%A2%AD%E6%89%B0%E7%A4%BE%E5%8C%BA%E5%BA%97-22f3c930.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/price-war-hits-community-stores-22f3c930/" citation: "十里. “\"Price War\" Hits Community Stores.” New Distribution, 2024-01-18. https://xinjignxiao.com/en/articles/price-war-hits-community-stores-22f3c930/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # "Price War" Hits Community Stores > Under consumption downgrading, community store owner Yingzi (pseudonym) resists price increases and adopts aggressive price-cutting strategies to survive, reflecting the broader price war in the retail industry. The article explores how traditional supermarkets and small stores adapt through supply chain reforms and product differentiation. Under consumption downgrading, community stores face challenges. "Just now, the salesperson from Hongxing Distillery came and informed me that their baijiu would uniformly increase in price in March, and suggested I stock up. But I decided to refuse. Consumers are extremely price-sensitive now; even a 50-cent increase could make products unsellable." Yingzi (pseudonym) explained while carefully considering which alcoholic products to remove from the shelves. As an individual operator who has run a supermarket in the southern Fifth Ring area of Beijing for nearly a decade, Yingzi invested 1 million yuan to open a community supermarket. "Through ups and downs, it's just a matter of earning more or less." This year marks the sixth year of operation. "In early December last year, the landlord called to say the rent would increase by over 40,000 yuan per year." This is the fifth rent increase Yingzi has faced. Upon hearing this news, she once considered closing the store. "But after careful consideration, given all the efforts I've put in and seeing the business gradually improve, I decided to renew the lease for two more years." The improvement Yingzi refers to is that after a difficult year with annual rent as high as 700,000 yuan, per-capita consumption increased to over 40 yuan, but daily turnover dropped to around 4,000 yuan, and foot traffic decreased to about 100 people. Since the second half of the year, she adjusted her business strategy, and both foot traffic and turnover have rebounded, though profits have not yet returned to previous levels. She remains hopeful about the store's future. **"My strategy is simple: cut prices. As long as prices are lower than surrounding businesses, I can attract customers," Yingzi told the author.** Yingzi detailed her business strategy: "Every day, I compare prices on major e-commerce platforms, and at night I personally visit supermarkets to research, checking what Dingdong Maicai's specials are today, what Yonghui Superstores' New Year promotions look like, and observing every demand that comes to the store." Over the past six months, Yingzi has focused all her business efforts on how to fight the price war, and this small community supermarket is just a microcosm of the difficulties faced by the traditional supermarket industry. **At a time when traditional supermarkets are under siege, Sam's Club fired the first shot in the price war, frequently implementing permanent price cuts on items like Swiss rolls and mochi. Subsequently, Hema and Yonghui could no longer sit idly by and had to offer discounts as a sign of "sincerity."** On July 31 last year, Hema's "Move Mountain Price" was launched in Beijing and Shanghai, and the following month, it expanded to 15 cities including Guangzhou, Hangzhou, and Chengdu, even indefinitely. Regional retailers also followed suit. In October 2021, Jiajiayue opened a discount store in Weifang, offering products 10% to 15% cheaper than regular stores. Similarly, Pangdonglai Supermarket joined the price war by launching a "wholesale market," which shares a similar business philosophy with Yonghui Superstores' "authentic discount store." These discount stores set aside sections within existing stores to sell specific categories at lower prices. To improve efficiency and reduce costs, the wholesale market's goods are delivered directly from production sites to stores, bypassing logistics centers. For a time, terms like "Move Mountain" and "Tug-of-War" became a "catfish" in the supermarket track, igniting a fierce "price war" in industry competition. This competitive landscape not only affects industry giants but has a more significant impact on small individual businesses. The price war led by foreign enterprises has spread to every corner of the city, even affecting community mom-and-pop stores. The reason is that consumer spending patterns have changed. According to Nielsen China's "2023 China Consumer Insights and 2024 Outlook" report, **the number of young consumers who are not price-sensitive has dropped from 30% in January last year to 15%.** Facing this shift in consumption trends, businesses have to adapt to the new consumer era. Confronted with such dramatic changes in the industry and consumption patterns, Yingzi has to admit a harsh reality: although she once seized a good historical opportunity, in this rapidly changing era, only by fighting can she avoid being eliminated and marginalized. **How to survive consumption downgrading?** "In the past, if I heard that a popular baijiu was about to raise prices near the end of the year, stocking up was almost a necessary choice. Even if I could save 10 yuan per case, 100 cases would save 1,000 yuan. But now it's different; once prices rise, I don't stock up because there are too many substitutes on the market that don't raise prices," Yingzi explained to the author why she no longer hoards Hongxing baijiu. Moreover, she applies the concept of substitutes to her store's product mix. For example, she replaced the not-so-cost-effective Lao Sichuan beef jerky with a 10-yuan beef jerky; she reduced the presence of the Weilong brand, replaced by brands with similar taste but lower prices. After these changes, store sales increased, and profits rose to over 35%. Yingzi's examples are similar to the logic of chain supermarkets using imported goods and private labels to replace mainstream products. When Hema started the price war, it announced abandoning the previous model of sourcing from suppliers and instead imitating Costco and Sam's Club by building its own vertical supply chain, reducing intermediate links, effectively lowering costs, and on this basis, undergoing a full-line discount transformation. For small community supermarkets like Yingzi's, which lack scale, the only way to solve product differentiation is to find lower-priced upstream sources or substitutes, creating a low-price positioning. The core logic of this strategy is to make their products cheaper than all competitors, including chain community stores, mom-and-pop shops, and foreign convenience stores, through product differentiation and price competition. Yingzi's observation is not without merit. Take Japan's 7-Eleven, for example: after 20 years of bubble economy collapse and deflation, most consumer goods dared not raise prices easily. There was even a national brand's popsicle that raised its price by 5 cents, and its chairman had to publicly apologize in the media. In the context of consumption downgrading, Japanese retailers helped customers save money by lowering prices while retaining some profit margins. In addition, Yingzi's strategic adjustments shifted from products to the store itself. Before the National Day holiday last year, she closed the supermarket for three days to rearrange the layout, canceling the fresh produce section that was no longer competitive and renting that area to a roasted nuts operator. In terms of product structure adjustment, she added a candy and toy section, which tripled sales, and clearly defined price bands from 9.9 yuan to 18.8 yuan, highlighting the price advantages of first-tier brands. "Retail has always been about enduring hard times." Yingzi sees the current market clearly: the product structure of community business districts has long been mini-supermarket-ized. To be convenient, fewer people are willing to spend more. With demand fixed, you can only earn every penny possible. She also uses Xiaohongshu and Douyin platforms to enrich her product mix, introducing items like bulk pastries, neck warmers, and foot soak powder, and removed freezer products because frozen goods lack price advantages. Instead, she added a hot beverage cabinet offering coffee, milk tea, soy milk, and other drinks to meet diverse consumer needs. Finally, to enhance cost-effectiveness, Yingzi made fine adjustments to shelf layouts. For example, in the puffed food section, mainstream products are limited, but brands like Lay's offer a wide range of flavors, including imported items. The prime display spots on the chocolate shelf are reserved for Daily Dark Chocolate and Meiji, while mainstream products are only stocked if they are special reduced-sugar versions. Through product strength and differentiation strategies, Yingzi is finding a path for survival and development amid the fierce "price war." **The way out for supermarkets: low prices?** In the past two days, the price war has intensified. Offline supermarkets like Yonghui and RT-Mart have successively launched New Year shopping festivals, covering various categories with discounts ranging from 7.9% to 5.9% off. "Consumers are too price-sensitive; they even use their phones to compare prices in stores with Douyin live streams and JD.com," a store clerk told the author. At the same time, supermarkets are also adjusting their supplier lists. Some brands favored by consumers have stopped cooperation or been replaced by different products under the same brand, such as June Fresh soy sauce replacing Weidamei. However, feedback from various stores shows that these changes have minimal appeal to consumers. "Consumers are gradually realizing that so-called low-price promotions are not truly cheap but rather create a low-price atmosphere by posting promotional signs in the store," a retail industry expert said. This is similar to how fresh products used to be placed at the back of the store but have moved to the front in recent years, in the most prominent position, to highlight quality. In reality, supermarket discounts are not a vicious competition of pursuing low prices without limits but should be a strategic price adjustment. Behind this adjustment is a reform of the supply chain, including direct sourcing from production areas, reducing transportation and storage losses, streamlining human resources, and developing private labels. These measures help reduce costs, thereby providing room for price reductions. Therefore, the extent of low prices also reflects, to a certain degree, the efforts and efficiency of the supply chain. Similar to the logic of membership stores like Sam's Club, retail discount stores that want to keep prices low while maintaining profits undoubtedly need to rely on a strong supply chain and bargaining power. Behind the farewell to the pure low-price era is actually a transformation of the supply chain. "Supermarkets should think about who they are selling to. The supply of goods can no longer be from distributors or suppliers with certain payment terms and normal markup sales; clearly, that era is over," the aforementioned industry insider told the author. The real low-price strategy is to ensure no losses and sufficient gross profit even at lower selling prices. In this process, the key is to improve supply chain efficiency. For example, Anhui's Andeli Supermarket, when facing competition, chose to skip middlemen and cooperate directly with upstream suppliers, reducing procurement costs from 6.2 yuan to 4.7 yuan. Even with a 20% price reduction, profits remained. They even cooperated directly with factories, further reducing costs by 40%. A person in charge of an agricultural product base told the author that after cooperating with supermarkets without middlemen, delivering goods directly to warehouses and stores can reduce logistics and warehousing losses by about 35%, and the saved costs are partly used to benefit consumers. Additionally, changing settlement methods has also reduced costs to some extent. In the past, supermarkets optimized cash flow by extending payment terms, which was beneficial for capital management and liquidity. Now, to deepen cooperation with suppliers, supermarkets have begun adopting more flexible settlement methods. This shift enables supermarkets to adapt agilely to market dynamics and effectively update and adjust product assortments. This not only reflects supermarkets' enhanced bargaining power in the supply chain but also helps further reduce operating costs by negotiating more favorable settlement terms, thereby increasing profit margins. Undoubtedly, 2024 will be an era emphasizing cost-effectiveness, and it also marks the true beginning of the test for offline supermarkets. If they rely solely on price reduction strategies, sacrificing their own profit margins, the final outcome seems already predetermined. **PS: From March 14-16, 2024, the 9th China FMCG Innovation Conference, the 2nd China FMCG Hard Discount Conference, and the 2nd China FMCG Distributor Conference will be grandly held in Chengdu!** This conference will revolve around the theme **"Supply Chain Revolution"**. Over 3 days, with 1 main forum and more than ten sub-forums and closed-door exchange meetings, we will gather with thousands of FMCG brand owners, distributors, retail transformers, and industry service providers from across the country in Chengdu to discuss the challenges and opportunities, changes, and ways out in the era of supply chain revolution. In this era of supply chain revolution, a new business era will be born. We hope every participant will still have a place in this wave, and we believe this will be a worthwhile conference! **🔺Scan code for ticket inquiries🔺** --- ## Citation metadata - Publisher: New Distribution - Author: 十里 - Published: 2024-01-18 - Canonical: https://xinjignxiao.com/en/articles/price-war-hits-community-stores-22f3c930/ - Original source: https://mp.weixin.qq.com/s/GmK8_uEDVpuiGT0N64aRbA ## Copyright and AI use This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL. Contact: zhaobo258@gmail.com · +86 158 5481 7671