In the past, retailers could blame the COVID-19 pandemic for poor business; now that excuse is gone. The first year after the pandemic is the true watershed for retailers' survival. "In 2023, the biggest problem facing China's retail industry is the sluggish market and weak sales growth." said one retail executive. Recently, he received calls from several friends facing nearly identical issues: store sales have declined to varying degrees, and owners are worried about the future. This concern is not unfounded. After the pandemic, many retailers have not seen growth; some have seen customer traffic and performance decline instead of rise. Some industry insiders even admit that those who said "business will be good after the pandemic" can go back to sleep. For retailers, 2023 started with no encouraging news, but rather a series of negative factors. First, several traditional retailers have been "taken over" by state capital. On February 20, Carrefour China was reported to have signed a strategic cooperation agreement with the Yingjiang District Government of Anqing City, Anhui Province, officially introducing strategic investment from Yingjiang District state capital. If the investment succeeds, it means Carrefour China's financial difficulties may be alleviated to some extent. In the same month, Renrenle's tender offer concluded, with Shaanxi state capital Qujiang Cultural Investment holding over 60% of shares, completing absolute control of Renrenle. Earlier, on January 15, Better Life announced that on January 11, 2023, Better Life Group signed a "Share Transfer Agreement" and "Voting Rights Waiver Agreement" with Xiangtan Industrial Investment. Xiangtan Industrial Investment will become the controlling shareholder of Better Life, and Xiangtan State-owned Assets Supervision and Administration Commission will become the actual controller. Better Life—the "first private supermarket chain stock"—has changed hands. These messages are a significant blow to many small and medium-sized retailers. Because these retailers that have been "invested" or controlled by state capital were once brands with certain scale and influence in their regions, and they all had glorious pasts, with similar development trajectories and circumstances. More critically, the "decline" of these companies is mostly due to their own unsuccessful transformation, especially in the face of new retail impacts, with multiple attempts yielding little effect. This includes both the constraints of traditional business models and the impact of new business models and formats. Second, there are almost no new retail formats, and innovation is in a dilemma. Even community fresh food, front warehouses, and unmanned retail, which were once favored by capital, have seen few financing news from larger companies. In February this year, only the snack collection store brand Zhao Yiming Snacks completed a 1.5 billion yuan A-round financing, led by Black Ant Capital, with Bestore following. But in the not-so-good year of 2022, there were also many financing news from retail and new consumption companies. According to IT Juzi data, in 2022, there were approximately 772 financing events related to retail consumption in e-commerce retail, local life, enterprise services, sports and fitness, smart devices, and metaverse, with total financing of about 67 billion yuan. Among them, physical retail had 182 financing events, and e-commerce platforms had 64. According to Yibang Power, by vertical industry classification, the food and beverage industry received the most financing with 138 events, but this was nearly half of the 270 events in 2021; physical retail and catering enterprises had 116 financing events, a slight increase from 102 in 2021. In 2022, the number of financing events in the consumer goods industry decreased by about 43% compared to the previous year, and in that year, C-round and later financing events accounted for only 5%. Even under this "winter," 26 consumer industry companies, including Miniso, Weilong, Wufangzhai, Sunshine Dairy, and DeRUCCI, went public this year. As the first quarter of 2023 draws to a close, there is still no more financing news. "China's retail industry is gradually returning to the state of being 'unnoticed' in the past," said Chen Yuefeng, founder of Lingchuang Media. China's retail industry has never experienced a true "economic crisis." In the past, the domestic and international situations facing China's retail industry have never been as complex as they are now. Domestically, the impact of the pandemic is far from over; consumption is weak; people's incomes have not grown significantly, and in many places have even dropped sharply; import and export data are not ideal; and the real estate market has not yet stabilized... Externally, the shadow of the Russia-Ukraine war has not dissipated; "China-US relations" are also full of challenges; and China's manufacturing is being gradually eroded and partially replaced by other countries... Under the intertwined multiple factors, the traditional retail industry is facing the state of being "eliminated," and everything is severe. In the view of the aforementioned retail executive, Chinese retail enterprises are facing increasing pressure. At the same time, there are three main reasons for insufficient market consumption: First, from a macroeconomic perspective, due to the superposition of international geopolitics, economic cycles, and the three-year pandemic, the macro economy has been severely hit. "Although pandemic controls have been fully lifted, apart from the rapid recovery of the cultural tourism industry, no other industry has shown signs of recovery," said the retail executive. "Market recovery, consumer demand, and operator confidence all take time to recover, especially the economy returning to pre-pandemic levels, which may take three to five years or even longer." Second, residents' income growth is slow, and consumer confidence is insufficient. Third, various specialty stores, discount stores, and online channels are diverting traffic, increasingly impacting physical stores. Online-offline integration has become a trend. "The question for enterprises is not whether to embrace the internet, but how to do it better. Marketing methods and online-offline integration are inevitable choices for the future. Whether building self-owned channels or cooperating with third parties, it should be done well according to the company's situation. This is a major trend, and we should follow it," said the retail executive. In fact, even though many retailers are strengthening digital capabilities and launching online businesses, they are only on the "same starting line" as fresh food e-commerce and front warehouse companies, and competition remains fierce. Because everyone is competing for the existing market. Recently, Douyin also launched food delivery and "supermarket" services, and future market competition will certainly be more brutal. Although Chinese retail enterprises have not truly experienced an "economic crisis," foreign experience can be borrowed. Economic crises are precisely the main force driving retail development and format changes. The 1929 financial crisis gave birth to supermarkets, and the US double deficit crisis in the 1980s produced Walmart. In addition, technological revolutions and changes in consumers have driven retail changes. For example, the emergence of POS machines, and the application of mobile internet, online, and offline, have brought tremendous changes to the retail industry. At the same time, changes in consumer purchasing behavior and demographics are the most fundamental forces driving retail innovation and transformation. It is the pandemic that has cultivated consumers' habit of shopping online, and it has also caused changes in retail formats, prompting traditional retailers to innovate themselves. The most fundamental force determining the development of retail is consumers. Chinese consumers and China's demographic structure are undergoing historic changes. First, rapid aging of the population; second, a serious trend of fewer children; third, a trend towards smaller families; fourth, the rise of the new middle class. With the rise of the post-90s and post-00s generations, changes in their consumption behavior pose new challenges to the retail industry. When a country enters an aging society with fewer children, costs will rise sharply, and competition in retail will become extremely fierce. If you focus on the post-90s, you need to build a life scene that suits them; this is an important trend for the future. Wang Wei, founder of Fresh Legend, said that price competition will intensify in the future, but it will be beneficial for companies with supply chains. For example, Fresh Legend has a large number of private label products, giving it significant control over product quality and pricing. And because of the large volume, there is relatively large profit space. "During the three-year pandemic, residents' incomes declined, living costs rose, and consumers will become more rational and health-conscious. The old habit of drinking and eating heavily may change, from eating enough to eating well, to eating healthily. This will be a trend," said the retail executive. "In the future, physical retail will compete on products, and the core of products is quality and price. Price is determined by cost and efficiency. Therefore, efficiency will definitely be the foundation for survival in the future." In 2023, China's retail industry will face unprecedented complex domestic and international situations. This year is the true watershed for the survival of Chinese retail enterprises.