---
title: "Supermarket Overhaul Is Not the Endgame for Chinese Retail"
description: "Since 2023, the retail market has been exceptionally dynamic, with new innovation trends emerging each year. Observing from the front lines, new developments seem to occur monthly. Behind these innovations, a new major trend appears to be forming. This article discusses these changes, starting with the current predicament of retail, then exploring the second solution for retail overhaul, and finally the integration of production, supply, and sales."
author: "戚特"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-06-25"
categories: "Retail Formats"
language: "en"
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markdown: "https://xinjignxiao.com/en/articles/supermarket-overhaul-is-not-the-endgame-for-chinese-retail-9985754f.md"
original_source: "https://mp.weixin.qq.com/s/kW8oxpUOGczltxZUiCfaiA"
translation: "https://xinjignxiao.com/zh/articles/%E5%95%86%E8%B6%85%E8%B0%83%E6%94%B9%E4%B8%8D%E6%98%AF%E4%B8%AD%E5%9B%BD%E9%9B%B6%E5%94%AE%E4%B8%9A%E7%9A%84%E7%BB%88%E5%B1%80-9985754f.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/supermarket-overhaul-is-not-the-endgame-for-chinese-retail-9985754f/"
citation: "戚特. “Supermarket Overhaul Is Not the Endgame for Chinese Retail.” New Distribution, 2025-06-25. https://xinjignxiao.com/en/articles/supermarket-overhaul-is-not-the-endgame-for-chinese-retail-9985754f/"
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---

# Supermarket Overhaul Is Not the Endgame for Chinese Retail

> Since 2023, the retail market has been exceptionally dynamic, with new innovation trends emerging each year. Observing from the front lines, new developments seem to occur monthly. Behind these innovations, a new major trend appears to be forming. This article discusses these changes, starting with the current predicament of retail, then exploring the second solution for retail overhaul, and finally the integration of production, supply, and sales.

Since 2023, the retail market has become exceptionally lively, with new innovation trends emerging every year. Being on the front lines of the market, I see new innovations happening almost every month.
Behind these innovations, I seem to see a new major trend taking shape. In this article, we can discuss these new changes.
**The Current Predicament of the Retail Industry**
Let's first review the changes in the retail market from 2023 to now, which have roughly gone through three main phases:
> 1. 2023 was the first year of discounting, with New Distribution being among the first in the industry to propose the concept of hard discount.
>
> 2. In 2024, supermarket overhauls replaced discounting as the new main theme.
>
> 3. From 2025 onwards, we believe that the integration of production, supply, and sales will become the new market main theme.
We need to deeply understand that today's changes in the retail system are largely due to significant changes in the upstream supply chain. This change stems from major variables in macroeconomic factors. As I mentioned before, this variable is "insufficient effective demand across society."
Insufficient effective demand across society is a transitional phenomenon as our national economy shifts from investment-driven to consumption-driven. This is also evident in the FMCG industry, manifesting as an imbalance between supply and demand.
The phenomena in the retail industry, from "discounting" to "supermarket overhauls," are closely linked to changes in the upstream supply chain.
The destruction of the traditional FMCG pricing system led to the emergence of "discount" formats. As discount formats grow in scale and influence, they further push down the price center of traditional standard products. Traditional retail, facing deteriorating competitive conditions, must adjust its product structure and procurement methods to respond to competition—this is what we call "supermarket overhauls."
However, traditional retail overhauls still face capability gaps at this stage:
(1) Lack of capability in new product categories;
(2) Without sufficient scale, it is impossible to support effective direct sourcing to lower prices;
Therefore, the downstream retail industry will gradually transition from "discounting" and "supermarket overhauls" to the third main line: "integration of production, supply, and sales."
What is the current predicament of traditional retail?
Essentially, traditional retail's core categories have been limited to fresh produce and traditional standard products. Today, both categories face enormous challenges. On one hand, traditional standard products have slow turnover and high pricing, being siphoned off by discount formats. On the other hand, fresh produce is also being diverted by community fresh food stores and instant e-commerce.
The current "supermarket overhauls" aim to help traditional supermarkets rebuild competitiveness through adjustments in procurement methods and product structure.
But if we think deeper, for small and medium-sized retail enterprises, adjusting procurement methods is relatively easy, but adjusting product structure involves deeper supply chain transformation, which is not an overnight task.
In simple terms, "Pang-style" overhauls can introduce Pangdonglai's supply chain to the retail enterprise being overhauled, but many small retailers, once separated from Pangdonglai, lack the capability for supply chain innovation.
For China's retail industry to achieve a phoenix-like rebirth, it is not about simply copying DL's private-label products. Instead, a large number of small and medium-sized retailers need to have their own product innovation capabilities.
However, the awkward reality today is that, without Pangdonglai's supply chain, most small and medium-sized retailers lack both product innovation capabilities and face inflated prices for traditional standard products, which are heavily diverted to discount stores.
Of course, companies with a certain scale in the market have the ability to gradually build product innovation teams, but this is not universally applicable.
**The Second Solution for Retail Overhaul**
In 2025, the retail industry's transformation will enter a new phase.
Traditional retail overhauls generally follow two paths:
  * The "Pang-style" overhaul represented by Yonghui and Bubugao, which focuses on lowering product prices through direct sourcing, adjusting product structure to attract middle-class/young consumers, pursuing humanistic organization, and not prioritizing scale growth.
  * The pragmatic route represented by Biyoute and RT-Mart, which focuses on leveraging scale advantages to lower product prices, first reducing prices of traditional standard products before optimizing more difficult categories, adopting a results-oriented organization, and driving efficiency through scale.
Pang-style overhauls are difficult in terms of product structure and organizational adjustment. **However, this overhaul route is not replicable by all retail enterprises.**
Pangdonglai's current "results" have historical reasons. Every successful company emerges from a combination of historical opportunities, founder endowments, and other factors. Pangdonglai's nearly 30 years of cultivation in Xuchang have led to today's outcome. Each enterprise has its own unique circumstances; its success experience can be referenced but is hard to fully replicate.
Today, many regional retail enterprises carry heavy historical burdens and are too entrenched to directly copy this result. Therefore, retail overhauls today require a more pragmatic path.
Meanwhile, we see that RT-Mart achieved profitability for the full year of 2024. In fact, after Shen Hui's team returned to RT-Mart, it turned profitable in the first half of 2024, with positive same-store sales growth.
RT-Mart's overhaul may not have the explosive traffic and stunning products of Yonghui's, but its transformation is proceeding quietly and pragmatically.
In today's retail industry, the fundamental issue is to solve the problem of value for money for ordinary people. Choosing products that ordinary consumers will buy creates the greatest common denominator and achieves economies of scale.
The influx of young people/middle-class into Yonghui's overhauled stores attracts more spotlight. But in third-tier cities and below, meeting the basic livelihood needs of ordinary consumers is a larger market.
"Pang-style" overhaul is a referenceable path, but we must also be wary of this "absolutist" way of thinking. Being wary of absolutist views is essentially a respect for the complexity of the world.
There is not just one solution in this world.
What other solutions are there? What have we seen?
**Integration of Production, Supply, and Sales in Retail**
In the future, I believe that leading regional retail enterprises will all have their own supply chain companies.
Why was RT-Mart able to successfully turn profitable in 2024 and is expected to reverse previously impaired store losses? The core reason is that RT-Mart re-adjusted its past erroneous strategies, cut costs, and returned to low prices.
But more importantly, its scale of over 70 billion yuan makes it easy to implement a low-price strategy.
Retail overhauls do not need to be done in one step, recreating another Pangdonglai. For most retail enterprises, it is difficult to achieve that in one step given their team capabilities and financial resources. First, let the enterprise return to a value-for-money mindset and implement structural price reductions on products familiar to ordinary consumers—I believe this is a more pragmatic path.
Today's small and medium-sized retail enterprises find it hard to replicate the paths of Sam's Club and Costco. Similarly, replicating RT-Mart is difficult; RT-Mart has an annual scale of over 70 billion yuan and over 4 million square meters of owned properties, allowing it to quickly implement structural price reductions.
The only way for regional small and medium-sized retailers to achieve scale advantages is to form supply chain alliances, enabling bulk procurement of common standard products that form the greatest common denominator. That is, by banding together to achieve a certain scale, they can then extend upstream for supply chain transformation.
Regional small and medium-sized retailers forming procurement alliances for joint purchasing has long-term practical cases in Europe and Japan. Currently, China has also entered this cycle.
In other words, the future supply chain model for retail enterprises will become a composite model of self-owned supply chain + outsourced supply chain.
**Adjusting Product Structure in a Gradual Manner**
Therefore, following the above ideas, regional small and medium-sized retail enterprises can adopt a pragmatic, "gradual" strategy, divided into two steps overall.
**Step 1: Lower prices of traditional standard products and introduce basic bakery/deli items (10-20% share) plus low-priced private-label product lines.**
**Step 2: Continuously improve and iterate bakery/deli and private-label products, and introduce differentiated standard products (novel items).**
Product development requires deep supply chain collaboration. "Direct sourcing" and "custom development" require long cycles, but for ordinary retailers, it is more important to first lower prices of traditional products. At least at the level of standard products, price competitiveness should not be significantly weaker than discount channels.
Secondly, after achieving sufficient scale, integrate upstream supply chains and gradually cultivate self-owned product teams.
Ultimately, as shown below, small retail enterprises can form a product portfolio combining outsourced supply chain + self-owned supply chain.
Self-owned product teams focus on non-standard items such as fresh produce, deli, bakery, and catering to form differentiated competitive advantages. Outsourced supply chains, through alliances with other retailers, develop private-label products and jointly procure standard products to enhance price advantages. Forming a composite supply chain model will be the exploration direction for regional small and medium-sized retailers.
**Another Dimension**
**Retailers Share Product Information with Brand Owners**
The problem in today's FMCG industry lies in the severe bullwhip effect in the distribution system.
The bullwhip effect refers to the phenomenon where information flow from end customers to manufacturers cannot be effectively shared, causing order fluctuations at each node in the value chain, distorting and amplifying demand information. A large amount of ineffective production and inventory pressure leads to massive stockpiles, ultimately causing the collapse of the product pricing system.
In the long run, the only way to solve this problem is through data sharing between retailers and brand owners.
Data sharing has significant value for both retailers and brand owners.
  * For brand owners, it has strategic value in refined channel operations, new product testing, precise production, and inventory optimization.
  * For retailers, it also helps improve turnover efficiency, and more importantly, breaks the closed communication system. Through collaboration with brand owners, retailers can further enhance their product capabilities.
An independent database can open relevant desensitized category data to suppliers (similar to Alibaba's Business Advisor or Pinduoduo's Intelligence). This data system can be borrowed by the offline retail industry.
Data sharing between retailers and manufacturers can promote deeper integration of production, supply, and sales, further driving product innovation.
Therefore, when retail overhauls enter the third stage, retailers and brand owners can achieve deep co-creation of products. Brand owners collaborate with retailers based on regional and channel characteristics to develop personalized "new standard products."
New standard products are independent of the traditional standard product distribution system but are not entirely the same as private-label products. To some extent, they retain the brand's logo but form better co-creation with retailers. They are developed based entirely on new consumer insights, in cooperation with retailers.
From the retailer's perspective, the future product structure will be:
(1) Fresh produce+;
(2) Quality deli/bakery/catering+;
(3) Private label+;
(4) Novel products+;
(5) Channel co-created "new standard products" retaining the brand owner's logo.
Such a product portfolio can bring consumers: a sense of high cost-performance + one-stop shopping needs + quality products + a fresh shopping experience.
Changes in the industry cycle are independent of human will; only those who follow the trend can survive. I have always believed that retailers will play the leading role in this circulation revolution. The industry needs more retailers to step forward, join forces with new-type brand owners and supply chains, and jointly promote this FMCG circulation transformation.
From August 19-21, 2025, at the [2025 New Demand · New Supply 7th FMCG Conference] in Shanghai, we will invite leading retailers, brand owners, and channel operators to discuss the structural reconstruction of supply and demand, engage in deep dialogue on solutions under the new changes, and build a new ecosystem.
This is an industry thought conference truly focused on "new demand" driving and "new supply" evolution, and also a consensus-building, connecting, and practice field to promote industry leapfrogging. We welcome every peer who wishes to cross the cycle to join us at this key node of industrial reconstruction!
**🔺 Details of the 7th China FMCG Conference**
**Scan the QR code for ticket consultation**


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## Citation metadata

- Publisher: New Distribution
- Author: 戚特
- Published: 2025-06-25
- Canonical: https://xinjignxiao.com/en/articles/supermarket-overhaul-is-not-the-endgame-for-chinese-retail-9985754f/
- Original source: https://mp.weixin.qq.com/s/kW8oxpUOGczltxZUiCfaiA

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