Snack discount stores are staging a drama of both seizing market share and transforming. At the end of September, the snack discount brand Liangshiyouming announced its official entry into the 'wholesale supermarket' format, opening 189 stores simultaneously during the National Day holiday. This model retains the characteristics of the snack business while expanding into categories such as frozen foods, general merchandise, and daily chemicals, with slogans like 'Wholesale prices even for one item' and 'Everything at wholesale prices.' This extends the logic of snack discount stores to more categories. Not only Liangshiyouming, but other brands are also signaling transformation. In August this year, the snack bulk sales brand 'Ailingshi' declared its entry into the convenience store sector; in September, the Huizhen Wholesale Supermarket under Snack Youxuan began stocking shelves; Qiahuopuzi is transforming into a discount supermarket by expanding into categories like rice, flour, and cooking oil; and Laiyifen also opened its first warehouse membership store this year, covering 2,500 square meters, mainly targeting household, corporate, and organizational procurement, with an annual membership fee of 99 yuan... It can be seen that the snack discount track is attempting to escape the intense competition within the snack industry and seek incremental markets. Retail formats represented by hard discount wholesale supermarkets are becoming a focus for track players and capital. It can be predicted that the hard discount wholesale supermarket track will become even more crowded. From Snack Discount Stores to 'Discount Wholesale Supermarkets' Liangshiyouming opened its first store nationwide in 2021 and expanded rapidly with the booming track. By the end of April 2024, the total number of Liangshiyouming stores nationwide exceeded 3,000, with layouts in regions such as Southwest, South China, Central China, Northwest, and Northeast. Currently, with an average daily customer count of over 1.2 million and an annual reception of over 430 million consumers, it is growing rapidly at a pace of more than 200 new stores per month. Liangshiyouming's Chairman and CEO He Jinpeng once publicly stated: 'First is the power of choice. We keenly captured that consumers regard convenient food as one of the main ways to obtain energy, so Liangshiyouming chose to open stores densely in communities and lower-tier markets, seizing the opportunity of the return of offline business.' The aim at discount supermarkets is actually an extension of categories and new formats. In June this year, Liangshiyouming tested and launched its first 'Liangshiyouming Wholesale Supermarket' store in Chengdu, which focuses on communities, vegetable markets, and farmers' markets. In terms of store area, Liangshiyouming Wholesale Supermarket has expanded to 200-400 square meters per store. In terms of product structure, SKU count exceeds 3,000, including not only leisure snacks and beverages such as fish and meat products, alcoholic drinks and dairy, and convenient instant foods, but also daily necessities and livelihood goods such as paper products, daily chemicals, general merchandise, rice, flour, and cooking oil. The core of the products lies in the majority being from big brands and large manufacturers, with prices that are hardcore to the end. In terms of performance, after opening, the store's business was far more booming than expected. Having tasted the sweetness, Liangshiyouming naturally would not let go of this market dividend. During the National Day holiday, it opened 189 Liangshiyouming Wholesale Supermarket stores at once, showing remarkable speed. Of course, we also observe that discount wholesale supermarkets are not comparable to traditional large supermarkets; they are different formats. For example, discount supermarkets typically abandon non-standard products like fresh produce, mainly expanding categories around standard products, with store areas roughly 200-400 square meters, and product SKUs are also carefully selected. Traditional supermarkets, on the other hand, often require tens of thousands of SKUs, so it is unlikely to have a fundamental impact on traditional supermarkets, but rather will form a confrontation with traditional distributors and wholesale channels.
Using the Snack Discount Store Logic to Do Discount Supermarkets
The Models Are Similar So the question to answer is: Is it reliable for snack discount stores to do discount supermarkets? We need to look at several points. First, both are business models of 'discount' on standard products, and the operating models and store-opening logic are similar, allowing their supply chain advantages to extend to more categories. Second, from the consumer market perspective, the consumption categories and frequency of supermarkets are much higher than those of snacks. Daily necessities are mostly essential items, and consumers have a higher demand for cost-effectiveness. Huatai Securities once conducted a calculation in a research report: snacks have price markups in various sales channels, with the most severe being KA stores, where the markup can reach up to 80%, while traditional circulation channels and BC supermarkets also have around 60%. The lowest markup occurs in the snack bulk sales scenario, with an overall markup of about 36%; if the brand premium is excluded, the channel markup is only about 26%. This also means that discount snack brands opening supermarkets will have 'low-price' trust. Of course, difficulties still exist. For example, compared to discount snack stores, discount supermarkets require more categories, and how to achieve ultimate cost-effectiveness after supply chain optimization is a core test. At the same time, there are already players occupying leading positions in the hard discount supermarket track. For instance, Leerle, founded in 2011, now has over 7,200 stores. In 2023 alone, Leerle opened more than 1,000 stores, with annual sales exceeding 40 billion yuan, and the highest annual turnover for a single store reaching 1.176 billion yuan. In comparison, snack discount stores are just starting to run in this track. 'The biggest advantage of snack discount stores expanding into supermarkets is that they have roughly the same consumer groups and the same supply chain docking model behind them, so snack discount stores with store-opening experience can also quickly scale up in the discount supermarket format and increase store numbers,' said an industry insider. The author believes that the extension of snack discounts to supermarkets will also be a greater test of the company's own operational capabilities and the strength of franchisees, requiring a balance between scale development and single-store efficiency.
Snack Discount Stores
On the Road to Transformation? Returning to the competition in the snack discount track. Currently, the number of stores of leading snack discount platforms has exceeded 25,000, and the Matthew effect is obvious. The top few brands can continue to dominate the rankings, while brands that cannot keep up with the pace of store openings may be reshuffled in the next round of competition. Therefore, many players in the track are seeking transformation. Previously, media surveyed nearly a hundred bulk snack brands and found that more than one-third of the brands are undergoing or planning transformation and upgrading. Zhao Yiming's founder Zhao Ding once admitted, 'Competition among peers is becoming increasingly fierce, and we must find new trends.' The 'Blue Book of China's Snack Bulk Sales Industry' shows that from 2017 to 2022, the market size of the snack bulk sales model experienced explosive growth, with a compound annual growth rate of 114.6%. With the future growth in the number of stores, the market size of snack bulk sales is expected to increase from 40.7 billion yuan in 2022 to 140 billion yuan in 2027. Image source: 'Blue Book of China's Snack Bulk Sales Industry' The author believes that after the initial land grab, snack discounts will enter a phase of intensive cultivation. With larger scale, it will no longer simply compete on price, but will force companies to improve their unique competitive advantages in terms of supply chain and products. The next market competition will gradually need to find barriers and differentiation. We believe the main strategies are: first, through the scale advantage of land grabbing, upgrade to supply chain advantages. With the increase in the number of stores and daily sales, gain a say in the supply chain, and finally continuously establish the absolute advantage of low-price, discount supply chain. At the same time, after the scale effect emerges, reduce operating costs and improve single-store profitability, so that the franchise system can be more stable. The second point is to do private labels. Differentiated products can avoid homogeneous competition, and private labels have relatively higher gross margins, allowing more benefits to consumers and forming a price advantage. The third point is to extend to other categories and formats, such as opening discount supermarkets as mentioned earlier, or exploring innovations in convenience stores and membership stores. Cinda Securities research report points out that the industry is expected to have the strong getting stronger, and head brands with core competitive advantages will continue to squeeze the market share of small or weak brands. Whether the industry's final pattern is 'a few superpowers with many strong players' or 'many strong players standing together' depends on the competitive gap among the industry's head brands. Although the market competition pattern still has variables, overall, the opportunity for new players to enter the snack discount track is already slim.