Source | Ling Shou The renovation trend continues to heat up "Now the deli section at the supermarket near my home is indeed busier than the fresh produce section," said Zhang Wen, a white-collar worker living in Beijing. Zhang Wen, 32, is currently a product manager at an internet company. With a fast-paced work schedule and frequent overtime, her needs for food are clear: convenience, health, and good taste. "In the past, when I passed by the supermarket on my way home from work, I mainly bought vegetables and fruits. Since the supermarket near my home was renovated and upgraded early this year, I've noticed that they now have many more ready-to-eat and semi-finished products, giving me more choices. The taste isn't exceptional, but it can solve a meal problem. Some items can be taken home and eaten directly." She said that previously she went to the supermarket once or twice a week, mainly to buy vegetables, fruits, and snacks. But now, after work on weekdays, she almost always goes in to buy something to eat and take home. "I buy different things each time—today a braised duck leg, tomorrow a semi-finished Kung Pao Chicken, the day after fresh bread. For other daily necessities like shampoo and tissue, I basically buy them online, which saves time and effort. But for items like deli food and cakes, I want the freshness of being made on-site, so I definitely go to the store." Zhang Wen's changing shopping habits—leaning towards high-frequency, small-batch purchases—are reshaping the business logic of supermarkets. This is also a microcosm of the current supermarket transformation trend: traditional comprehensive supermarkets are transitioning to 'food-enhanced' supermarkets. A food-enhanced supermarket refers to one that, while maintaining the basic categories of a traditional supermarket, significantly increases the proportion and professionalism of food categories, especially high-frequency consumer items like fresh produce, deli, bakery, and semi-finished dishes, while compressing or optimizing the display area for non-food items. Of course, this transformation is not accidental. According to the "2024 China Supermarket Development Report" released by the China Chain Store & Franchise Association, in 2024, food products accounted for 68.2% of supermarket sales, up 8.8 percentage points from 59.4% in 2019. Among them, fresh produce increased from 22.1% to 28.5%, and deli and semi-finished dishes grew from 4.3% to 9.7%. From an industry perspective, the upgrade to 'food-enhanced' supermarkets is in full swing, and even membership store Metro has joined the ranks. It is reported that Metro's first self-renovated store opened in Beijing on August 15. The store was converted from Metro's Sijiqing membership store, with a significant optimization of product structure. The number of bakery and deli items has expanded nearly six-fold compared to before the renovation. The in-store prepared food area has been greatly expanded, and the aquatic section has added live fish and shellfish, with on-site slaughtering and processing services. In addition, traditional supermarkets have been more "active" in their renovations. For example, since April last year, Yonghui Superstores launched an upgrade project, planning to renovate and upgrade 298 stores, with reforms in product structure, shopping experience, organizational structure, and compensation. They have set up or expanded deli, bakery, and semi-finished dish sections. According to data reported by Zhongxin Jingwei, the total number of renovated stores nationwide has reached 156, with expectations to reach 200 by September 30. Overall, this "renovation" wave in the retail industry started last year, with companies like Bubugao, Zhongbai Warehouse, Century Hualian, Inzone, and Wumart all launching their own renovations. It is "hot" in major cities across China, including Beijing, Shenzhen, Shanghai, Guangzhou, Jinan, and Hangzhou. After entering 2025, this renovation craze continues to heat up. "Consumer demands have changed, and we must change accordingly," lamented a supermarket operator. "Today's consumers, especially young people, have increasingly high demands for convenience. They would rather spend more money on ready-made or semi-finished dishes than spend time buying, washing, and chopping vegetables." Of course, behind the rush of supermarket companies to join this "renovation" wave, besides the change in consumer shopping habits as lamented by the operator above, there is more of the realistic "pressure" of the industry's difficulties—e-commerce impact and declining performance—that traditional supermarkets urgently need to break through. Traditional supermarkets urgently need to break through Take Yonghui, the most "active" in renovation, which had been loss-making for four consecutive years before starting the renovation. From 2021 to 2024, Yonghui Superstores recorded losses for four consecutive years, with net profits attributable to shareholders of -3.944 billion yuan, -2.763 billion yuan, -1.329 billion yuan, and -1.465 billion yuan, respectively, totaling over 9.5 billion yuan in losses over four years. Its revenue scale has also been declining, from 93.199 billion yuan in 2020 to 67.574 billion yuan in 2024. The number of stores has shrunk from a peak of 1,440 to 618, and store closures continue. Facing years of losses, consecutive store closures, and a significant decline in book cash, Yonghui Superstores had to "renovate to save itself." The difficulties faced by Yonghui Superstores are not only a true reflection of the ebbing tide in the retail industry but also a microcosm of a traditional supermarket forced to self-revolutionize and survive against multiple impacts from the internet, e-commerce, and warehouse membership systems. Similarly, Bubugao, known as "China's first private supermarket stock," was once Hunan's largest chain enterprise. At its peak in 2019, Bubugao had over 400 stores and revenue of nearly 20 billion yuan. However, in recent years, Bubugao, which had expanded aggressively in the early days, has also fallen into trouble with continuous store closures. In mid-2024, Bubugao operated 37 department stores and 78 supermarkets. By December 2024, the number of supermarket stores had further decreased to 27. As for Metro, besides its structural dependence on Wumart, its supply chain faces severe profitability challenges. Its gross margin has been declining, from over 20% to about 10% in 2023, and its net margin has long hovered around 1%. Of course, the difficulties faced by these former commercial benchmarks further reflect the challenges currently confronting the traditional retail industry. After consumers have experienced various retail formats such as e-commerce, new retail, community group buying, and discount retail, simple product adjustments are no longer sufficient to meet market changes. The "renovation" exploration has become a way for supermarkets to save themselves. In the past year or so, the focus of China's retail industry has undoubtedly been on "renovation actions"—the core is to strengthen deli, bakery, and fruit processing to attract young consumers, rather than relying on traditional fresh produce to attract elderly customers. Wang Ming (pseudonym), a supermarket practitioner, has worked at a chain supermarket in North China for fifteen years. When the store he was responsible for launched a comprehensive renovation in early 2024, he was full of doubts. "Removing 40% of homogeneous standard products, lowering shelves from 1.8 meters to 1.6 meters, widening aisles to 3 meters—isn't this cutting off our own arms?" The data from the first month after the renovation shocked him. "Although the shelf area for standard products decreased by 30%, after expanding the deli and bakery area by two times, overall sales increased by 12%. The bestsellers were no longer cola and instant noodles, but 19.9 yuan for 8 pieces of double-flavor Swiss rolls and freshly made crayfish hot pot." "On weekends, single-day sales of processed food exceeded 10,000 yuan, equivalent to a week's worth before," Wang Ming marveled. Of course, the hot sales in the deli section also highlight the severe challenges faced by standard products in traditional supermarkets—national brands like Master Kong Iced Tea and Oreo cookies are gradually being marginalized. "Previously, procurement revolved around brand owners; now it revolves around chefs," Wang Ming witnessed the subversion of job value. The star chef at his store earns a monthly salary of 10,000 yuan, surpassing many management positions. After the on-site processing room was changed to transparent glass, the chef's live cooking of meat and egg casseroles became the best traffic-driving advertisement. In this regard, industry insiders say that although the renovation seems promising, the path to operating a food-enhanced supermarket is fraught with thorns. The path to operation is fraught with thorns A retail executive admitted, "In most supermarkets, the daily sales of the processing area are only 2,000-3,000 yuan, which is not even enough to pay employee wages." First, cost control is like walking a tightrope. For example, the processing area of a supermarket in Jinan, Shandong, requires 5-6 employees, including two technicians with monthly salaries of 10,000 yuan, but daily sales of 3,000 yuan cannot cover labor costs. Raw material loss is even more troublesome—a store calculated that 100 jin of flour should produce 700 steamed buns, but due to flour differences, only 650 were produced, resulting in an invisible loss rate of 7%. "Although deep processing increases the added value of products, and the profit margin of processed goods can reach over 40%, after deducting labor, loss, and venue costs, it is still difficult to be profitable at this stage," an industry analyst said. In particular, the number of employees for deep-processed goods is usually two to three times that of the traditional fruit and vegetable department. Some supermarkets even invest in building factories, but after completion, they find that existing sales cannot support capacity release, and costs are difficult to amortize. "To achieve differentiation, advanced equipment and store renovations are needed, and these investments can be as high as several million yuan." Second, supply chain restructuring tests financial endurance. Industry benchmark Pangdonglai also suffered three years of losses when it built its central kitchen in Xuchang in the early days. A supermarket in Henan invested 10 million yuan in a processing plant, but due to insufficient store sales scale, it can only produce basic items like steamed buns and braised foods, with equipment utilization below 50%. In this regard, Du Xiaoyi, director of Yas Group, once pointed out that self-operated processing requires at least 3-5 years of accumulation. In addition, talent shortages hinder quality upgrades. Bakery technicians and deli R&D personnel have become scarce resources. More critically, traditional buyers transitioning to product developers need to master interdisciplinary knowledge such as food technology and consumer insights, and such composite talents are scarce in the market. Furthermore, standardization difficulties hinder scaling. The same recipe can produce vastly different results across stores. A chain's braised food was complained about by customers for "tasting different at each store" due to inconsistent heat control. It can be seen that for food-enhanced supermarkets to truly realize their potential, they must overcome multiple challenges such as high investment, high costs, insufficient customer traffic, product standardization, and localization. To assess the effectiveness of the renovations, the author visited several renovated supermarkets in Beijing. The Metro Sijiqing store, which reopened after renovation on August 15, was bustling with people, just like the Yonghui store that had opened after renovation six months earlier. In contrast, at the Yonghui Hongkun Plaza store and Daxing Tiangongyuan store, which opened six months ago, the number of consumers has significantly decreased compared to the initial opening. Consumers are mainly concentrated in the deli section and the Pangdonglai product area. Compared to weekends, during weekday evening rush hours, there are rarely queues at the checkout counters of these two stores. At the Yonghui Hongkun Plaza store, a nearby resident said, "Although the renovated store looks clean and tidy, with wider aisles and more staff, the lively atmosphere of the fresh produce section is gone. Before the renovation, the fresh produce area was often crowded, and the prices of fruits and vegetables were reasonable. Yonghui's homemade tofu was also distinctive, and I often came to buy it. But now it seems more pre-made, and you can buy the same things in other supermarkets." The resident said that although vegetables and fruits are now neatly placed in fresh-keeping boxes, the prices are no longer affordable, so they basically don't buy them here. They still come to the deli section, where steamed buns, buns, and vegetarian meatballs are good. But other braised foods and deli items are also expensive. "The sliced Beijing roast duck in the store is a Beijing specialty, and tourists might be interested, but for nearby residents who shop regularly, who would buy that often? A few slices of meat and a few thin pancakes cost over 40 yuan, which is not a good price. It would be better to replace it with the specialty noodles from Pangdonglai, like braised noodles, farm-style pancakes, stewed noodles, and bean jelly. Northerners should like those, and the prices are more affordable." Consumers are the drivers of change and will ultimately be the biggest beneficiaries. The diversified retail formats provide more choices, improving convenience and experience. The current adjustment period for supermarkets is the beginning of a new round of transformation in the retail industry. The decline of traditional large supermarkets also reflects market laws and consumption changes. Of course, any business model has its historical limitations. When market conditions and consumer demands change, companies must adapt or be eliminated. This is the basic law of the market economy and the driving force for continuous innovation in business models. The key is that no matter how the retail format changes, meeting consumer needs remains the core. Looking at the transformation and renovation of retail enterprises over the past five years, most companies have fallen into a vicious cycle of "renovation, losses, and further renovation." The reasons are: first, confusing "formal imitation" with "essential innovation"; second, the capital chain cannot support long-term investment; third, ignoring regional consumption differences. For those undertaking renovations, the time window is gradually narrowing. Supermarkets, as an industry heavily reliant on channels and liquidity, face time as their biggest opponent. Some industry analysts say that within the next year or two, after the industry's renovations, there will be another reshuffle.