A Shanghai premium supermarket that had been operating for 29 years—Shanghai CityShop—suddenly announced the closure of all its stores. As for the reason for the closure, a notice issued by Shanghai CityShop stated: "In recent years, Shanghai CityShop has been struggling to operate. Despite various self-rescue measures, it has become unsustainable. The company has now resolved to dissolve and will cease operations of all Shanghai CityShop stores starting April 16." More plainly, it closed due to sustained losses. According to Xinmin Evening News, CityShop's online store will also close. "After the closure, Shanghai CityShop plans to resolve all outstanding debts legally, fairly, and properly within the legal framework, to the greatest extent protecting the interests of all creditors," the notice said. Additionally, CityShop provided a solution for employee compensation: salaries will be calculated up to April 15, 2024, social insurance contributions will be made through April, and severance pay (if any) will be properly resolved after liquidation. A personnel working group will proactively contact employees regarding follow-up matters. The news of the closure has left many industry insiders and consumers lamenting.
In 1995, Cui Yixiong founded Shanghai CityShop. From its inception, Cui positioned fresh and imported goods as CityShop's mainstay, offering global delicacies with over 80% imported products, making it one of Shanghai's most renowned high-end imported premium supermarkets. However, after more than 20 years of operation, Shanghai CityShop changed ownership. As early as February 2017, an insider revealed to this author that CityShop had a new major shareholder, but it was still confidential at the time. The author then checked business registration records: on January 13, 2017, CityShop's investors (equity) changed from Cui Yiying and Cui Yixiong to Ningbo Meishan Bonded Port Hongshi Investment Center (Limited Partnership), Ningbo Meishan Bonded Port Penghui Yixing Investment Center (Limited Partnership), and Cui Yixiong. After the change, the chairman was Wang Qiang, directors were Cui Yixiong and Luo Yu, supervisor was Sun Xiaolan, and general manager was Cui Yiying. In March 2017, Cui Yixiong told this author that only the business registration had changed; no formal agreement had been signed. At the same time, Cui stated he would not exit CityShop, still holding shares, and would "continue to do this." However, some industry analysts believed Cui had essentially exited, with his remaining shares being symbolic to show the public he was still involved. At that time, Beijing Business Today reported that Fruitday had invested in CityShop. Fruitday confirmed a deep strategic cooperation with Shanghai CityShop, with Fruitday investing in CityShop. At the time, some packaged fruits in CityShop carried Fruitday's logo in addition to weighing labels. In fact, CityShop's fresh food areas were gradually being handed over to Fruitday for operation. On March 28, 2017, Cui Yixiong told this author that Fruitday had invested, with the shareholding ratio determined, but he did not disclose the specific ratio. "Many things are not yet finalized," Cui said, adding that within a few days, the foreign investment approval from the Shanghai Municipal Commission of Commerce would be available on its official website, which should contain information about the major shareholder. Another insider said Cui was only selling the stores, retaining the supply chain and other companies, and might engage in consulting in the future. The public was most concerned whether the high-end premium supermarket positioning and unique characteristics that Cui had championed would change after the ownership change. According to Beijing Business Today, CityShop would hand over the premium fresh food areas of its 15 stores to Fruitday, which would share supply chain resources for premium fresh food with CityShop, and CityShop's agricultural bases, vegetable production cooperatives, and central kitchen would be fully open to Fruitday. This meant Fruitday's overall SKU would expand beyond fruits and seafood to include cooked food, cold food, and fresh-cut items. At that time, Shanghai CityShop had 15 stores: 13 in Shanghai and 2 in Beijing.
When Shanghai CityShop was founded, China was opening up to the outside world, and more foreigners were coming to Shanghai. CityShop allowed foreigners to find a taste of home and Shanghai residents to experience exotic flavors, which was its initial differentiation. In recent years, as China's middle class has grown, CityShop's Chinese customers have increased. Currently, CityShop operates nearly 20,000 products, with over half imported from abroad, of which 8,000 are directly sourced overseas, accounting for more than 60% of sales. In Shanghai, CityShop stores are mainly located in high-end commercial areas and luxury residential areas such as Shanghai Centre, SML Center, Hongmei Road, Pudong Citi Tower, Shanghai Film Art Center, Tianshan Road, Xujiahui, Jidi Road, and Xingeng Road. In Beijing, stores are in Liangmaqiao and Fuliao Fangcaodi Diplomatic Residence, also high-end commercial and residential areas. Since its founding, CityShop's positioning has always been "products over services." Pursuing high quality has always been CityShop's hallmark. Cui Yixiong believed that whether customers order online or shop offline, their purpose is to buy goods; with good products and good service, achieving customer satisfaction, a supermarket will surely have its place. Taking imported beef as an example: "Beef prices vary, but we don't touch cheap beef because our priority is quality, then we set the price," Cui said. In CityShop, beef is divided into four grades: 45-day grain-fed, 100-day grain-fed, 150-day grain-fed, and Wagyu, with prices ranging from 50 to 250 yuan per jin (500g), to meet different consumer needs. The same cut of beef can vary in price by five times. To ensure beef quality and price, CityShop sources beef from overseas farms, then sends it to slaughterhouses. Sourcing from farms directly ensures the origin and quality of the beef. CityShop offers more than 20 types of cooked beef products alone, to meet diverse customer needs. To guarantee high product quality, CityShop insists on controlling quality from the upstream, laying out a full industry chain. Since 1997, CityShop has established national agricultural standard demonstration direct-operated bases in Shanghai, Hainan, Yunnan, and other places, totaling over 5,000 mu (about 333 hectares). Unlike many supermarkets that use a "contracted farm" model, the staff at direct-operated bases are CityShop employees, managed with corporate and standardized methods. The feed for pigs and seeds for vegetables are directly controlled by CityShop. For example, CityShop produces 180 types of vegetables annually, with at least 80 types grown in greenhouses and bearing CityShop's own label. CityShop's vegetables have served APEC and the CICA summit in Shanghai. CityShop has its own central factory, which can process everything from coffee, cakes, bread, to pork cutting. From direct-operated base production to ambient and cold chain processing centers, plus its own logistics system, CityShop controls the entire supply chain, truly achieving "products self-imported, vegetables self-grown, coffee self-roasted, bread self-baked." Cui Yixiong also stated that in food, one must ensure the quality and safety of fresh products from the source. "We are willing to pay for high-quality, safe products." This full industry chain layout and high-quality products, when not achieving sufficient scale, mean high costs that need to be absorbed.
Of course, almost all high-end premium supermarkets face high-cost challenges, but more retail companies are joining the competition in premium supermarkets. At that time, a retail executive told this author that the prospects for high-end premium supermarkets were good, and supermarkets with low-price competition strategies should be nearing their end. Now, the focus should be on customer experience and scenario experience. In China, high-end premium supermarkets have great prospects, catering to consumption upgrades. This may be the main reason many companies are developing premium supermarket businesses. These companies include Yonghui Superstores, Century Mart, China Resources Vanguard, Beijing Hualian, and others. There are also cross-industry competitors such as G-super under Greenland Group, Freshmart under Shanghai Jiuguang Department Store, and EasyMart under Easyhome. In such fierce competition, it is understandable that CityShop brought in a new major shareholder. Some investors also believed CityShop's development was too conservative. Since its founding in 1995, over 22 years, CityShop had only opened 15 stores, which is indeed conservative. It wasn't until July 2008 that CityShop opened its first store in Beijing; on March 13, 2013, the Shanghai Nanxiang store and Beijing Fangcaodi store opened simultaneously. CityShop's main battlefield remained limited to Shanghai and Beijing. When scale is not achieved, the high costs of controlling the supply chain from farm to table need to be digested. CityShop's target customer group was foreigners, compatriots from Hong Kong, Macao, and Taiwan, and "returnees" with overseas study backgrounds—a relatively affluent group, but the market segment is still limited. Now, with the rise of China's middle class, CityShop's customer base is changing. Cui Yixiong admitted that the proportion of middle-class customers will increase, and high-end supermarkets need to offer reasonable prices. Although Cui had long used process management to make prices reasonable, the scale problem remained unsolved. As the retail executive said, high-end supermarkets should not be equated with high-priced supermarkets, but rather pursue cost-effectiveness. Of course, in recent years, CityShop has made many innovations and changes, actively embracing the internet to expand customer sources and better serve customers. For example, offline marketing activities include cooking classes and farm picking. CityShop is also building a lifestyle center, combining buffet, freshly baked coffee, imported food tastings, and even pottery experiences to create a three-dimensional supermarket concept. At the same time, the product structure has been adjusted from raw to cooked, from ordinary imported products to higher-end products. CityShop has its own mobile micro-mall, supports WeChat Pay and third-party delivery services such as Ele.me, JD Daojia, and Meituan, to reach and serve consumers comprehensively. But no one expected that seven years after the ownership change, Shanghai CityShop would completely cease operations. Of course, from another perspective, since CityShop's founding, Chinese consumption has been in a state of "upgrading," but now, due to various complex reasons, consumption is on a downgrade path, so it is not surprising that premium supermarkets face challenges.