Supermarkets in Shopping Malls Are Really Struggling!

Supermarkets in shopping malls are really struggling! Recently, while visiting the market, I found that a local business district has three shopping malls, each with a supermarket. All three supermarkets are located on the basement floor, and the scene is almost identical: no customers in the supermarket. Mall A Among the three malls, this one has the most foot traffic. Outside the supermarket, there are restaurants and milk tea shops, which were almost full that day, with many customers waiting outside. The supermarket across from them, however, presented a completely different scene. A few young people were wandering around casually, without shopping baskets, seemingly just to pass the time. I stood at the checkout counter for a long time and noticed that only a few customers came to pay, buying only some snacks, and there were almost no high-ticket customers. Mall B From the mall entrance, going down to the basement floor, there is only one supermarket. Going down the escalator, you reach the fresh food area. The stacking displays and shelves are widely spaced, with more than a dozen stacks in the same area, making it look very empty. Mall B already has sparse foot traffic, and the supermarket has even fewer people. Mall C Among the three malls, this one has the least foot traffic. From the first floor of the mall, you can see the sign for the supermarket on the basement floor, clearly intended to attract customers. When I went down, I saw that the supermarket had almost no customers, and a notice was posted at the entrance: "This store will cease operations from October 31. We apologize for any inconvenience caused..." These three supermarkets are almost a microcosm of the current situation of Chinese supermarkets—high-traffic malls see few customers entering the store and low average transaction values; low-traffic malls struggle to operate, with poor business, and are forced to close. The difficulties in supermarket operations stem from three external reasons: 1. Vertical categories 'dividing the cake' In recent years, supermarkets have been gradually replaced by many near-field formats that are active in the public eye. Among these near-field formats, vertical category stores are particularly prominent. Discount stores like HotMaxx in malls, with lower prices, better decoration, and closer distance, open at the entrance of supermarkets, intercepting customers for the snack and beverage areas. Guoquan on major streets divides the frozen food category of supermarkets; Qianfuma in some areas seizes the fresh food category, creating community fresh food stores. In previous supermarket planning, the fresh food area was considered a traffic driver, so it was often placed at the back of the store to better expose products along the traffic flow. But now, the appeal of the fresh food area has greatly diminished, and community fresh food supermarkets and fresh food stores bring more convenience to surrounding consumers. Consumers no longer need to select vegetables and fruits in a 3,000-square-meter supermarket. Therefore, these vertical players, known as 'category killers', have achieved substitution of supermarket categories, using richer product selection, better prices, and closer distance to strengthen consumer loyalty, becoming one of the powerful competitors of supermarkets today. 2. Instant retail 'snatching the cake' The pandemic gave rise to instant retail, and consumers' needs for 'certainty', 'immediacy', and 'speed' have been greatly satisfied by instant retail. According to the "'Instant+' 2023 Instant Retail Development Trend White Paper", it is estimated that by 2030, the average annual compound growth rate of the instant retail market will reach 25%, and the market size is expected to grow to 3.6 trillion yuan by 2030, accounting for 6% of the total retail sales of consumer goods in the same period. Formats like Lightning Warehouse and Dingdong Maicai use lower prices and better services (delivery to home) to harvest consumers. On the purchase interface, we often see promotional items like 0.5 yuan Nongfu Spring tea and 0.5 yuan small bags of Lay's potato chips to induce shopping. Instant retail has changed consumer habits, separating the actions of 'buying' and 'browsing', moving 'browsing' online, and increasing the purposefulness of purchases. Consumers only need to enter the product they want to buy in the search bar and select the product from the store. In terms of after-sales, online business provides consumers with more convenient and faster solutions, and with the involvement of third-party platforms, the consumer experience is also better. Although many supermarkets are also exploring instant retail business, the results are not good. Delivery time is usually more than an hour, and during peak periods it can even exceed an hour and a half. Moreover, only when the order exceeds 69 yuan is the delivery fee reduced by 6 yuan, which is often complained about. 3. Discount retail The emergence of discount supermarkets has undoubtedly dealt a fatal blow to traditional retail. By optimizing supply chain management, fine cost control, and differentiated management, they achieve price reductions. According to data from the China Research Institute of Puhua, discount stores will be the fastest-growing format in the next 10 years, with a compound growth rate of 5.6%, far higher than hypermarkets' 2.5%, and even higher than convenience stores' 5.5%. Combined with the transformation of the domestic market economy and consumer concepts, as well as the development history of discount stores in developed countries, discount stores with bustling traffic are undoubtedly the new trend in the current retail format. Facing so many competitors and a series of its own problems, what is the way out for supermarkets? "Moving further away from consumers is the fundamental reason for the decline of Chinese chain supermarkets." Mr. Meng Fanzhong, Chairman of Biut, shared this at the 6th China FMCG Conference. In my view, 'far' contains two meanings. First, price 'far'. The price of goods purchased at convenience stores near home is the same as or even lower than that in supermarkets, and discount stores are almost 50% cheaper than supermarkets. Second, distance 'far'. To save rental costs, most supermarkets often choose the basement floor of shopping malls. In addition, traditional supermarkets are almost always thousands of square meters in area, and if the traffic flow is unreasonable, consumers will walk many 'detours' in the supermarket. The market is oversupplied, and Chinese retail has changed from a seller's market to a buyer's market, with the power of discourse returning to consumers. In the buyer's model, retailers are undoubtedly the agents closest to consumers. Therefore, changing perspectives and mindsets, and breaking traditional models, is undoubtedly the most important lesson for supermarket transformation. Currently, there are two directions in the retail market that can serve as references for traditional supermarket transformation. First, product differentiation The most prominent problem of Chinese retail enterprises is 'thousands of stores with the same face and same products'. Therefore, companies that first realize this problem are also the first to stand out. Take Pangdonglai as an example. The real secret of its success is not extreme service, but product selection. Adhering to the concept of 'selection first', it strictly screens suppliers, eliminates low-quality products, and ensures that every product has high cost performance. It places more 'refined and accurate' products in front of consumers, continuously attracting repeat purchases. From the case of Pangdonglai's adjustment of traditional supermarkets in the first half of this year, it is not difficult to see that the adjusted supermarkets eliminated 90% of the previous products, and among the products in short supply, Pangdonglai's own brands accounted for almost half. Similarly, the popular Sam's Club has three key indicators for whether a product can be put on the shelf: where is the differentiation advantage, whether it has extreme cost performance, and the evaluation of the product's sales power. Sam's SKU count is usually around 4,000, only 1/5 of traditional supermarkets. Wide SPU, narrow SKU, and selected products allow Sam's to maintain long-term leadership in the warehouse membership store track. Second, efficiency leadership The practical meaning of efficiency leadership is to sell goods cheaply. There are two paths to choose: one is soft discount, selling near-expiry and clearance stock; the other is hard discount, reducing costs by selecting products, building vertical supply chains, reducing logistics and warehousing losses, and improving personnel efficiency, to provide room for price reductions. In the past two years, leading snack hard discount stores have reached a scale of 10,000 stores, regional snack stores have blossomed everywhere, and now discount supermarkets and wholesale supermarkets are emerging, which is exactly in line with the current industry trends. It is difficult to change a solidified traditional model overnight. Whether it is a product differentiation strategy or an efficiency leadership strategy, it is a difficult exploration for traditional supermarket transformation. The law of market competition is survival of the fittest. In the future, the supermarket format will definitely exist, but it must adjust and reform. Chinese retail is in a period of great change, and every party in retail, brands, and supply chains is looking for new ways to survive. In this transformation, how to seize the opportunity in market fluctuations and become the future winner is already a key issue facing every decision-maker. To this end, from August 19-21 in Shanghai, at the 2025 [New Demand · New Supply] 7th China FMCG Conference and the 5th China FMCG Retail Innovation Conference, we have invited industry experts and frontline practitioners to analyze and discuss future new trends and opportunities: Zhang Peiyan, founder of Every Day Convenience Store; Wang Zhengqi, chairman of Mosxian; Zeng Cheng, CEO of Manxiao Bao; Zhang Ning, co-founder of HotMaxx; Zhang Huiying, national sales director of Oishi; Lin Yongqiang, chairman of Guankepai; Ding Jiachuan, managing director and global partner of Boston Consulting Group; Weng Bocheng, founder and CEO of Maizima Food; Xu Liyue, head of Douyin E-commerce Instant Retail Food and Beverage Industry, and other industry leaders. At the same time, the industry-exclusive "China FMCG Production, Supply, and Sales Transformation White Paper (Industry Insights 2025)" will be released on site—the first report that comprehensively and from a three-dimensional perspective elaborates on the changes of the times in China's FMCG industry, providing direction for the collaborative ecosystem of the supply side under the great changes in demand! This is not a traditional retail conference, but a conference for tripartite collaborative dialogue among retail, brands, and supply chains! The focus is not on 'problems', but on the perspective of production, supply, and sales collaboration, discovering incremental opportunities for the next 10 years! If you also aspire to stand out in the industry transformation, then in August, Shanghai, we'll see you there! 🔺