The former giants are retreating step by step. "Business was booming, and everyone was motivated. Monthly revenue alone reached 210,000 yuan." This is how Sister Li, who sold hot dogs at the counter in Carrefour's Wanguo store in Guangzhou in 2002, described the scene. "Later, she switched to selling marinated food, and monthly revenue stabilized at over 100,000 yuan. The flying pancake business was also good; a 6.8-yuan durian flying pancake could sell 300 to 400 portions a day," Sister Li recalled to the media. In August 2002, Carrefour Wanguo store, which had postponed its opening several times, finally opened its doors. At that time, a 6,000-square-meter, two-story hypermarket in Guangzhou was undoubtedly a major event. Crowds from all directions came to Wanguo Plaza to see Carrefour; the entrance, escalators, and checkout counters were packed. "In the first few days, the foot traffic was comparable to the Spring Festival travel rush; we ourselves were squeezed and couldn't move," recalled Brother Fei, who rented a counter at Carrefour to sell flying pancakes. At the beginning, Carrefour ran a promotion of one-yuan fried chicken, and long lines formed daily at the manned checkout counters. Unfortunately, time did not stay in 2002. The former giants in the Chinese market began to decline, and now even the media rarely mentions them.

Carrefour enjoyed its heyday for many years, but unfortunately, starting in 2009, it began closing stores, showing signs of operational decline. After being acquired by Suning in 2019, Carrefour's long-standing operational crisis was not resolved.

Across the industry, customer traffic has decreased, and the incomes of staff and stall owners have been sharply reduced. Today, the traditional supermarket and hypermarket model has lost ground in first-tier cities. Over the past decade, traditional supermarkets such as Carrefour, Walmart, Renrenle, and RT-Mart have been hit hardest by the changes of the times.

According to media reports, in the first quarter of 2024, at least 31 supermarket brands closed more than 140 stores nationwide, involving well-known brands such as Walmart, RT-Mart, Yonghui, Wumart, Rainbow, Hema, and Lotus.

Among them were some city or regional first stores, such as Walmart's first store in Nanjing (Xinjiekou), Yonghui's first store nationwide (Fuzhou Pingxi), and Zhuji's first Wumart store.

According to data from the National Bureau of Statistics, since 2017, the number of supermarket stores in China has continued to decline, from a peak of 38,554 to 24,082, a drop of 37.5%. Large chain supermarkets saw an even faster decline, from 11,947 stores in 2012 to 5,340 in 2020, a drop of over 55%.

In fact, since 2020, due to the pandemic, the offline economy has been sluggish, and the performance of most traditional supermarket enterprises has continued to decline. But by 2023, as the pandemic gradually receded, data from the National Bureau of Statistics showed that the macroeconomy began to stabilize and improve, and traditional supermarket enterprises finally saw the dawn of recovery.

Data released by the National Bureau of Statistics showed that in 2023, total retail sales of consumer goods reached 47,149.5 billion yuan, a year-on-year increase of 7.2%. Among them, retail sales of consumer goods excluding automobiles reached 42,288.1 billion yuan, a year-on-year increase of 7.3%.

However, it is worth pondering that since 2023, the performance of most traditional supermarket enterprises has not improved significantly. According to incomplete statistics, in 2023, among 13 listed supermarket companies, only Hongqi Chain and Huangshang Co., Ltd. achieved both revenue and net profit growth while being profitable.

In 2023, eight companies, including Yonghui Superstores, Lianhua Supermarket, and Jiajiayue, saw their revenues decline year-on-year. Among them, Renrenle's revenue was 2.853 billion yuan, a sharp drop of 28.15% year-on-year. Due to poor performance, Renrenle's stock was labeled "ST" starting April 22, 2024.

Not only did most supermarket companies see revenue decline, but six companies, including Lianhua Supermarket and Bubugao, were also mired in losses.

In addition, RT-Mart, the former "chain king," also faced its toughest struggle in a loss quagmire.

Its latest 2024 annual performance report shows that as of March 31, 2024, Gaoxin Retail achieved operating revenue of 72.567 billion yuan, a year-on-year decrease of 13.3%; gross profit was 17.958 billion yuan, a year-on-year decrease of 12.7%; and comprehensive loss attributable to the parent company's shareholders was 1.605 billion yuan, the largest loss since listing.

In this regard, industry insiders said that given the current development of China's traditional supermarket formats, the decline will continue.

Newcomers Fill the Gap

After many traditional stores closed, some supermarket brands have filled the vacancies.

In the Beijing market, the replacements are mostly Hema, Qixian, and other supermarkets, which have taken over the locations previously occupied by Carrefour, Walmart, and other stores.

Although new brands have moved in and are still supermarkets, this also reflects the reshuffling and upgrading of the supermarket industry. Facing numerous alternative channels represented by new retail, hypermarkets find it difficult to provide consumers with sufficient reasons to visit stores in terms of product selection and display, and physical retail has entered a more diversified era.

Compared with traditional hypermarkets, local "new" supermarket models are no longer traditional stores but membership stores or premium, curated, and fresh food supermarkets, and they also have e-commerce genes, incorporating new consumer service models such as instant delivery.

For example, premium supermarkets such as Qixian, Hema, and Olé have replaced some hypermarkets, and the rise of small formats has also diverted some hypermarket traffic. But these newcomers cannot guarantee full growth and profitability either, as they still face a sluggish consumer market.

"New stores" are also trying to increase sales per square meter by reducing supermarket area. Previously, Carrefour's Sunshine Plaza store operated on the second and third floors of the project. When Hema moved in, it only operated on the second floor. Perhaps miniaturization and operational flexibility can better serve nearby community consumers.

In addition, in the past two years, curated supermarkets have also been increasing the proportion of imported goods. According to relevant statistics, premium supermarkets mainly focus on imported goods, offering differentiated products. In premium supermarkets, the proportion of imported goods is mostly above 30%, and some stores can even reach 80%. High-quality imported goods differentiate them from the many homogeneous ordinary supermarkets while increasing gross margins, thereby improving category profit contribution.

In contrast to the retreat of most traditional store channels, with narrowing imagination space, and under the impact of instant retail and e-commerce, discount stores and membership stores that emphasize low prices and value for money are thriving.

In 2023, companies represented by Sam's Club and Costco, which focus on "hard discount" warehouse membership models, saw steady performance growth.

Take Sam's Club as an example: in 2023, its China market achieved sales of about 80 billion yuan, a year-on-year increase of about 21.21%, with offline accounting for 53%.

As of the end of 2023, Walmart had 47 Sam's Club stores in China. Based on this, the average annual sales per Sam's Club store were 1.67 billion yuan. Currently, Sam's Club has over 4 million paying members in China, and on average, each member spent about 20,000 yuan at Sam's in 2023. Clearly, whether in terms of store efficiency or per-customer output, Sam's Club leaves traditional supermarket companies far behind.

In recent years, besides Sam's Club and Costco performing well, Pangdonglai, which has a traditional supermarket background, has also become an industry "top influencer" with impressive performance, and its founder Yu Donglai has begun a path of helping and reforming listed companies.

For example, on May 7, 2024, Yu Donglai appeared at a Yonghui Superstores store in Zhengzhou, Henan, and subsequently announced that he would help reform Yonghui. Affected by this news, on May 8, Yonghui's stock hit the daily limit. At the end of March 2024, Yu Donglai led a senior team to Hunan to help Bubugao. It is reported that after Yu's help, the average daily customer traffic at Bubugao's Changsha Meixi Lake store increased from 2,000 to over 10,000. After 20 days of adjustment, the daily sales of a single Bubugao store rose from 150,000 yuan to 1.42 million yuan.

In fact, the recent explosion of the discount retail market is nothing more than consumers' "obsession" with and pursuit of cost-effectiveness. In this context, many companies focusing on vertical discount tracks have also achieved good performance. For example, Snack Busy, together with Zhao Yiming Snacks, had total revenue of over 20 billion yuan in 2023, receiving over 600 million consumer visits annually.

It is clear that while China's traditional supermarket and hypermarket formats are declining, a "new king" has begun to take their place.

Returning to the Essence of Retail

A research report by the China Chain Store & Franchise Association pointed out that traditional supermarket enterprises currently face three core challenges: continuous loss of in-store consumer groups, gradual loss of product differentiation competition, and rising store operating costs.

Among them, the most significant change is that the differentiation of consumer groups is becoming more prominent, with younger consumers having higher awareness and recognition of new brands like Hema Fresh. At the same time, the product and channel differentiation of traditional supermarkets has narrowed significantly. "Promotions," "discounts," and "member prices," including the "moving mountain price" and "tug-of-war price" that were lively last year, are essentially "price wars" over homogeneous products.

But facing the strong industrial chain advantages of membership-based warehouse giants like Sam's Club and Costco, traditional supermarkets' operating costs are rising, and their price advantages are not prominent.

Knowing the problems, traditional supermarkets have begun actively seeking solutions, and adjustment and optimization have become the first choice for many supermarkets.

It is understood that Yonghui Superstores has started on the path of adjustment and optimization. Last year, Yonghui optimized its supply chain, and through external market research and internal product structure analysis, it introduced a large number of internet-famous and trend-setting products. As of now, Yonghui has set up "new product incubation zones" in 200 stores nationwide. At the same time, this year it will continue to increase the number of "genuine discount stores," planning to complete the transformation of 600 "genuine discount stores" in the first half of the year.

In this regard, an industry insider told the author that in the past retail development, large chain supermarkets held channel discourse power. Now, with the development of the internet, brands have new channel choices. From the perspective of model competitiveness, the three core competitive advantages of traditional hypermarkets are complete product range, low prices, and genuine products. In the mobile internet upgrade, these three advantages have been replaced and intercepted.

Retail upgrading involves many detailed changes, and the functions of traditional supermarkets and hypermarkets are no longer suitable for the current consumer market.

Take the shopping experience as an example: consumers in a hypermarket need dozens of minutes to browse the entire store and select products, while online shopping can search and add related products in just a few minutes, and the experience gap gradually becomes apparent. Curated and premium supermarkets optimize products to meet consumers' immediate shopping needs.

Retail innovation lies in constant experimentation, but the transformation task for traditional supermarkets and hypermarkets is even more arduous.

Industry insiders said that the supermarket format has a solid market position, but the survival of the fittest in the industry is reflected in service capabilities, category structure, price, location, and other levels. The industry will continue to see new models and species. How to integrate with online will also be a key point in the evolution of traditional retail.

The core of the retail industry is products and services. Traditional supermarkets focus on self-service shopping and pursue a large and complete product range. At the beginning of retail development, the above strategies could meet consumers' diversified needs.

However, as the economy develops, especially with the rise of the middle class, consumer demand is quietly changing, with an increasing pursuit of high-quality, differentiated products and services.

This is the key reason why the "new king" wins the market. But ultimately, market competition must be reflected in profitability. No matter how much brand influence is achieved, the most critical thing is to be proven by operating data.

The transformation path of traditional retail is far from over, and retail enterprises still need to continue their efforts.

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