People tend to overestimate changes in three years and underestimate changes in ten years, as Bill Gates said. Thinking early may lead to starting early. Bypassing the experience summarized by experts after the fact, most successful companies in the market simply started earlier than others. The macro environment is promising: political collapse in the US, South Korea, and Japan; economic collapse in the EU; Russia's lack of presence; Guangzhou becoming the capital of the third world; "Five stars rise in the East, benefiting China"—all that's missing is a heart ready to embrace the future. China's retail industry has its own uniqueness in market environment and shoppers. Combined with the development of retail technology, let me speculate on industry trends, which might help you "start early." From 2017 to 2027, urbanization rate will exceed 65% (56% in 2015), internet penetration will exceed 65% (51% in 2015), technology platforms are ready, and new technologies are about to cross the scale threshold. We face opportunities of "exponential growth" in technology; just thinking about it makes me tremble with excitement. This will surely be a decade of earth-shaking changes in the consumer goods retail industry. Market: Continuous Consumption Upgrade In Q4 2015, Nielsen's global consumer confidence survey showed China had the highest consumer confidence index at 107, with the US at 100 and Japan at 79. Despite China's economic slowdown in 2015 to only 6.9% growth, consumers' desire to spend was not only unaffected but continued to rise, sparking a series of upgrades. ○ Category upgrade. International experience shows that when per capita GDP exceeds $5,000, marathon events begin to rise. China's per capita GDP reached $8,016 in 2015, and like the awakening of insects, people of all abilities started running and posting on social media. Different per capita GDP levels lead to different category growth, driven by shifts in consumer awareness. Over the next decade, China's GDP growth will not fall below 6%. Sustained rapid development ensures some categories will wither while others thrive. Rising categories include coffee, pet food, baby care products, and low-temperature dairy; declining ones include candy, carbonated drinks, instant noodles, and room-temperature ham sausages. For brand owners, choosing the right category is more important than hard work, especially for professional managers. ○ Product upgrade. In recent years, the growth rate of FMCG sales volume has continued to decline, but sales value growth has been acceptable, driven by product upgrades that raised unit prices in various forms without creating more consumption demand. People aren't buying more, but they're willing to buy better things. What domestic product upgrades can't satisfy has fueled overseas shopping, but overseas shopping can't withstand national tax policies and generally has no future. In product upgrades, "flexibility and speed" are the passport for small enterprises, while "scale and standards" are the epitaph for large ones. ○ Service upgrade. Category shifts and product upgrades are huge for brand owners, but retailers are less affected; they just need to adjust product mixes in time. However, the service upgrade behind consumption upgrades is a dangerous opportunity for retailers: on one hand, people care about experience and are willing to pay extra for better experiences, highlighting the on-site experience advantage of offline business and providing foundational momentum for online-offline integration to achieve "new retail"; on the other hand, it was precisely the poor experience of offline retail that gave e-commerce a huge opportunity. Genes haven't changed; how can someone who created a problem turn around and solve it? "Experience design" becomes a key tool for retailers, with shopper behavior research and consumer psychology becoming basic courses, while also spawning a batch of professional experience design companies. Channels: Online-Offline Integration ○ The second half of e-commerce. Over the years, e-commerce companies have done most of the easy work; now they face deep-water challenges, along with rising logistics and customer acquisition costs. Facing these challenges, online and offline are on the same starting line. For e-commerce to further improve profits by optimizing value chain efficiency and costs, it's no longer enough to focus on the consumer end; optimizing the entire industry chain is necessary to squeeze out more profit. ○ Real business districts + virtual business districts. People always live in physical space. "Online and offline are like two sieves of different sizes, both losing some users." How to make online customers contribute more value and make every offline user, every purchase, and every product a traffic entry point—both e-commerce and retailers are thinking about this. Integrating online and offline is the main theme of the next decade. ○ I speculate that Alibaba will open its own CVS in some form. It has the capability to open massive numbers of CVS in China (in 2015, there were 190,446 modern retail outlets in China, according to Nielsen). There are 20 benefits, but the downside is that fixed asset investment might be too large, making the physical presence too heavy. If it really decides to do this, it could introduce a large number of Taobao brands into its offline retail outlets, combine physical and virtual sales, and simultaneously have profiles of most shoppers in the surrounding area, enabling precise shopper promotions and achieving a closed transaction loop. With Cainiao logistics, it would be quite powerful, and the story would be easier to understand than "Retail Link." Formats: Only the Ultimate Survive ○ EST principle. "good, better, bEST"—EST represents the superlative. Cheapest, most complete, most convenient, most professional, most experiential—retailers with a clear EST positioning have a chance to continue their future. This is the future of "ultimate survival." ○ Everyone can achieve "most complete." In the next decade, the term and implementation of e-commerce will change. This change makes all offline stores also "e-commerce," eliminating the so-called e-commerce; retail will almost all be a combination of online and offline. "Most complete" doesn't require physical presence, so retail formats like hypermarkets, positioned on complete distribution and wide selection, will face the greatest impact. I'll detail this in my article "Spoiler: A Tour of Retail Outlets in 2027." ○ Shopping Malls replace hypermarkets as "most experiential." Hypermarkets represented by Walmart have proposed the concept of "Retailtainment," but this slogan has been ceded to Malls. Children's entertainment, movies, dining—these services and experiences make Malls true community hubs, offering one-stop fun. Some counters in hypermarkets will transform into independently operated brand stores in Malls, since they're just borrowing foot traffic; of course, where there's more traffic, there's more value. ○ Category specialty stores occupy "most professional." Chain pharmacies, mother-and-baby stores, and cosmetics stores are representatives of this format. Shoppers seek the most professional products and advice in these stores. Influenced by national policies, these three specialty stores might even integrate into one terminal type: "personal care stores." Face-to-face professional service is the core value of this format. ▍ Chain pharmacies, together with community healthcare and home-based elderly care, form a health module. With the aging society, this is the format with the greatest potential. ▍ Cosmetics stores, with 155,564 in 2015 (Nielsen store census data), will go through a decade of consolidation, with massive M&A, store upgrades, and eventually becoming an oligopolistic format—a turbulent decade. ▍ Mother-and-baby stores, with 66,980 in 2015 (Nielsen store census data), will not see large-scale increases in numbers; after ups and downs, numbers will decline in ten years, but services and content quality will greatly improve. ○ CVS represents "most convenient." CVS becomes the center of community goods and convenience services, building a five-minute walking radius business district. In 2008, there was one CVS per 43,143 people nationwide; by 2014, that dropped to 18,758. In Shanghai, where CVS is most developed, there's one per 5,000 people; Taiwan has about one per 2,500; Japan about one per 2,000. In the next decade, China will fill this gap, meaning an eightfold increase in outlet numbers. Convenience store floor areas are trending larger, eventually reaching small supermarket scale, while community small supermarkets will mainly follow the fresh supermarket route. CVS will surely build community and daily life service modules on its own; the future belongs to CVS. ○ Hypermarkets lack clear positioning in the EST model. Looking at 2015 data, Walmart and Metro had almost no growth year-on-year, Lotte Mart and Carrefour had negative growth, while small supermarkets like FamilyMart and CVS saw double-digit growth—a clear difference. (When I saw Carrefour's negative 12% growth, I couldn't control the joy from the depths of my soul. Carrefour, you've had your day.) The road is tough; hypermarkets need to adjust their awkward positioning. Two paths are available: ▍ In areas without Malls, they will play the Mall role, maintaining larger scale and providing various in-store experiences, especially developing various "store-in-store" formats. ▍ In areas with Malls, they will shrink to 5,000 square meters of sales area, becoming large supermarkets, a combination of "FMCG + fresh supermarket." Shoppers: Loyalty Decreasing ○ The more fluid information, the lower loyalty. Americans published a statistic that areas with higher Facebook user density also have higher divorce rates. Facebook denied this, which made me believe the statistic's truth; everyone understands the reason—it's easier to arrange meetings. Business information will become more fluid, and shoppers' loyalty to a particular store will decrease. Maintaining customer loyalty is the top priority for retailers in the next step. ○ Traditional small retailers have survival space, but face huge challenges in maintaining customer loyalty; they will inevitably rely on external forces. There are two forces: ▍ One is professional service companies focused on customer relationship management, such as domestic Mr. Kaola, and North American fivestars, foursquare, shopperclick, etc., helping small retailers manage customer relationships, implement loyalty programs, and redeem rewards, making it more efficient for retailers to maintain their customers. ▍ The second is "FMCG B2B" companies that hope to bring small outlets into their networks, managing everything from product selection, restocking, to customer management. Such companies are helpful to both brand owners and retailers. There are currently dozens of such companies with various models, but within three years, only a few will remain. I speculate that JD's New Path might die early or die fragile—either early or fragile is fine. ○ Membership management without membership cards. No cards, no form filling; payment accounts serve as membership. From this perspective, WeChat Pay and Alipay have huge advantages. WeChat is already promoting a "payment + membership" solution to help retailers increase members, improve activity, and reduce member churn. According to Tencent itself, "the situation is promising and very good." Alipay also plays an important role in Alibaba's Retail Link; similarly, when consumers use Alipay in small stores, it means they've registered for membership. In this regard, opportunities for others are limited. ○ Retailers customize monthly shopping lists for each household. Helping people make choices is a big business opportunity in the future. Reducing uncertainty and saving people effort in making choices must be a good business. Religion does this—reducing mental hesitation; brand loyalty does this—loyal users don't go through a brand selection process; set meals are even more so. I like the business set lunch at the restaurant downstairs from my office; it often makes me feel decisive: "Boss lady, Set C, yes, the one with four dishes and soup for 7 yuan." For routine daily consumer goods with high homogeneity, consumers don't find much joy in these shopping choices. Those who happily pick out laundry detergent are usually not very mature mentally and still have a long way to go in growth. In these categories, retailers offering "suggested lists" is very meaningful. For example, small-pack rice and oil in the food category, toilet paper, cleaners, and laundry liquid in household items, and toothpaste and shampoo in personal care are all suitable. Retailers use customer profiles to offer "best combinations," balancing customer needs, price advantage, and retailer gross margin. Customers confirm with one click, and it's delivered to their door, just like bottled water. Supply Chain: Logistics Function Stripped Away The core of logistics is efficiency, lowest cost, lowest holding cost, lowest transportation cost. This force drives retailers to constantly break limits and march forward. This description isn't to highlight their vitality; they're just compelled by economic laws. Retailers with high logistics costs won't survive the dry season or wait for the next mating season. ○ The logistics function is stripped from retailers, with the same distribution center serving multiple retailers. Under economic laws, operators must pursue return on investment, calculating a linear programming problem daily: "Given output, minimize cost," seeking the optimal solution. In a retailer's system, logistics is a clearly defined independent module and one of the largest costs. The best way to reduce logistics costs is not to bear "non-shelf inventory" and share transportation costs with others. I speculate: first, retailers' distribution centers will be stripped from their operating systems to become independent profit centers; then, horizontal alliances among independent distribution centers will form new logistics business entities that can serve multiple retailers. This process is usually driven by industry chain capital. ○ So what do retailers do? Retailers are responsible for selling goods, solving the "willing to buy" problem. They attract shoppers, retain them, and use all means to keep them consuming. Logistics companies handle ordering and delivery, solving the "having goods to sell" problem. This is Adam Smith's "division of labor drives human social progress"—each doing their own job, doing what they're most professional at; full professionalism and self-interest drive progress in your human world. ○ The decline in logistics costs no longer relies on scale but on technology; logistics technology drives continuous cost reduction. Inventory robots further free up labor; autonomous driving technology will enter practical use within five years, with the biggest beneficiaries being long-haul freight—only the lead truck in a ten-truck convoy needs a driver, the rest are fully autonomous, saving labor and improving safety, ultimately reflecting advantages in cost. Truck drivers and storage personnel are destined to be replaced by technology; they are professions without a future. I use a lot of affirmative tone in this article because I don't want to always shyly hint that this is my speculation. Everyone's judgment of the future is speculation; history is composed of random events, and the future doesn't necessarily mean progress; it's full of uncertainty. But one thing doesn't need speculation: in ten years, warriors will still be warriors, poultry will still be poultry. How you are determines how your world is. Making yourself stronger now is all you can do for the future. This article is authorized for publication by the WeChat public account 为之