---
title: "The Fate of 7 Million Mom-and-Pop Stores: Under Multi-Pronged Attack, They Care About Only Two Things!"
description: "Mom-and-pop stores are seen as the 'nerve endings' of the retail sector, serving as 'warm' offline traffic entrances. Under pressure from internet giants, B2B startups, and traditional retailers, they care about only two things: price and logistics!"
author: "王君亚"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-11-18"
language: "en"
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# The Fate of 7 Million Mom-and-Pop Stores: Under Multi-Pronged Attack, They Care About Only Two Things!

> Mom-and-pop stores are seen as the 'nerve endings' of the retail sector, serving as 'warm' offline traffic entrances. Under pressure from internet giants, B2B startups, and traditional retailers, they care about only two things: price and logistics!

Mom-and-pop stores are seen as the 'nerve endings' of the retail sector, serving as 'warm' offline traffic entrances. Under pressure from internet giants, B2B startups, and traditional retailers, they care about only two things: price and logistics!

"Come to pick up your packages—you've got three today. Want to buy a Coke as well?"

At the edge of an old residential area in the southeast Fourth Ring Road of Beijing, a convenience store with a sign for famous cigarettes and liquor, the owner is greeting his customer.

The owner, surnamed Zhang, runs this store of less than 60 square meters with his wife. The store displays FMCG products mainly in categories such as beverages, alcohol, snacks, and grain and oil. Behind is a bedroom, with a double bed and a place for cooking and storing packages.

"We've been running this store for five years. Most of our customers are local residents. I can remember the names of most people who come to pick up packages, the cigarette brands most people smoke, and who likes which cold drinks," Mr. Zhang told Pintu Business Review.

**Stores like Mr. Zhang's, known as mom-and-pop stores, are located in every corner of China's cities, towns, and villages. Because they directly reach consumers, they are called the 'nerve endings' of the retail sector.**

**Store Owner: I Care Most About Price and Delivery**

According to data from Kantar Retail, **there are currently nearly 7 million small stores in China, including mom-and-pop stores, which contribute 40% of the total shipment volume of the entire retail channel. Among them, about 30% of mom-and-pop stores are in towns and villages, and 46% are in third-tier cities and county-level cities.**

These mom-and-pop stores, which have remained unchanged for over a decade, have weathered waves of online e-commerce and offline supermarket expansion. Even with the emergence of chain convenience stores, these stores are being courted because they are close to consumers, have long business hours, and offer a more personal touch.

"Recently, people come every day to check out our store—some promoting B2B platforms, some wanting to help us rebrand and join a franchise, and some wanting to take over the store and kick us out," said Mr. Zhang, who seemed reluctant to change but hesitated when hearing about generous subsidies from some platforms, and thus persuaded himself to actively face market changes.

He noticed that a mom-and-pop store less than a kilometer away had already put up the sign of Wangfujing Group's Ai Bianli, with its displays and staff replaced. Another store run by a Hebei couple to the west had put up the sign of Zhongshang Huimin, but they still owned the business. "Even so, I observed that customer flow hasn't changed much," Mr. Zhang said.

**These mom-and-pop stores face both the harvesting by internet giants and the pincer attack of chain convenience stores like 7-Eleven and Quanshi,** but Mr. Zhang told Pintu Business Review, "They don't pose much threat to me because nearly half of my daily revenue comes from selling cigarettes, and chain convenience stores don't have the right to sell cigarettes."

According to incomplete statistics, the nearly 7 million grocery stores in China have annual sales of around 10 trillion yuan, of which 3 trillion is from tobacco sales and 7 trillion from non-tobacco sales.

Despite the overall decline in China's retail industry, e-commerce giants like Alibaba and JD.com have set their sights on this last link in the traditional retail chain.

In July 2014, Alibaba's Retail Link platform was officially launched; at the end of 2015, JD.com established the New Channel business unit. Liu Qiangdong announced earlier this year that in the next five years, JD.com would open more than 1 million JD convenience stores nationwide, with half of them in rural areas. Other players include department store chains like Wangfujing and RT-Mart, express delivery companies like YTO and SF Express, and of course B2B platforms like Zhongshang Huimin and Zhanghe Tianxia.

**The market of 7 million mom-and-pop stores, the high ceiling of the retail industry, and the urgent pain points of traditional distributors have become the reasons why many players are entering to revitalize these stores.**

As the most downstream part of the retail industry, mom-and-pop stores have numerous upstream supply chains. The traditional supply channel has at least six levels, and profits are largely taken by the middle layers. Store owners lack the ability to distinguish genuine from fake goods, leading to a large gap between retail and factory prices. As a result, the profit margin for mom-and-pop stores is extremely low, compounded by scattered distributors and inadequate logistics delivery.

Therefore, whether it's rebranding or harvesting mom-and-pop stores, or the B2B platforms active as intermediaries, the goal of all participants is to reduce intermediate procurement steps and use field sales and marketing to get more small stores to purchase from their platforms.

Mr. Zhang also told Pintu Business Review, "As a small store owner, I care most about price, followed by delivery."

**B2B Platforms Are Fierce, But Second-Tier Distributors Are Also Indispensable**

Price sensitivity is a common trait among mom-and-pop store owners. B2B platforms have become acceptable to most small store owners because of their transparent product prices and open promotional activities.

Not far from Mr. Zhang's store is a mom-and-pop store with the Zhongshang Huimin sign. According to the store owner, he signed a one-year contract with Zhongshang Huimin, paid a deposit of 14,000 yuan, which will be returned in 12 monthly installments, and only after the contract expires will he decide whether to keep the sign.

Through visits to small store owners, Pintu Business Review found that **most said there are many discounts on B2B platforms. However, even so, the proportion of purchases from platforms is only about 50%, because no single platform currently covers all FMCG brands comprehensively.**

Zhang Yichun, chairman of Zhongshang Huimin, said that small stores now have a high level of acceptance of B2B business, but the B2B industry is still only a supplementary channel, so there is huge market space.

At the same time, **according to the China FMCG B2B Competitiveness White Paper surveyed by New Distribution, 77% of distributors want to transform. Among them, the willingness to transform in the grain, oil, and beverage industries is relatively low, while distributors in personal and household care are more willing to transform due to high B2B penetration.**

However, the fact remains that brand owners have large amounts of inventory, and distributors play a role in helping brand owners sell goods. Therefore, compared with small-store-oriented B2B platforms, distributors still play an unshakable role for brand owners.

"Low price and fast delivery are the core factors for me to choose a B2B platform. Compared with traditional distributors and B2B platforms, I am more satisfied with second-tier distributors because they deliver promptly—usually a phone call is enough—while many B2B platforms only deliver the next day," Mr. Zhang told reporters. "If the price is right, I'll stock up more; when there are promotions, I'll also stock up, but my main purchasing channel is still traditional distributors."

**Mom-and-Pop Stores Are Warm Offline Traffic Entrances**

Participants in the mom-and-pop store market are accelerating harvesting through chain and rebranding models, but clearly persuading small stores to join a platform is just the beginning. Experts in the B2B industry told Pintu Business Review that most mom-and-pop stores have no loyalty to platforms; after the contract expires, they can easily change signs. Solving the pain points of small stores is one thing, but bringing them value is more meaningful.

"The Guizhangbao platform not only considers selling goods to mom-and-pop stores, but also, to help store owners who join JD.com operate better, the New Channel has launched the Huiyan big data system; to solve brand owners' sales promotion difficulties, it launched the Xingzhe sales promotion platform; and there is also a smart store management system that relies on JD.com's big data capabilities to empower small stores to achieve 'one store, one face'," said Wang Zheng, general manager of marketing at JD.com's New Channel business unit.

According to the head of JD.com's New Channel project, JD.com has already introduced value-added services into small stores, providing support to mom-and-pop stores through finance, logistics, payment, and value-added services to help them upgrade and transform.

"These small stores can reach customers faster and have great development prospects. If more offline service and experience scenarios are integrated within a 1-kilometer radius, making them a consumer service center, the value could be even greater," a practitioner who has been deeply involved in the B2B industry for many years told reporters.

At the same time, Chen Tao, former CEO of Ai Bianli under Wangfujing Group, frankly stated, **"Redesigning mom-and-pop stores could even become an entrance comparable to Baidu's offline traffic. The value of this entrance is warm, and the fixed conversion rate of consumers will be extremely high, and the repurchase rate will also be high, because it is accumulated through real interactions between people and people, and people and things."**

In the battle to harvest mom-and-pop stores, based on their pain points, subverting traditional channels and providing lower prices and better services are the only ways to gain a foothold and attract the attention of small stores. "And because JD.com has a self-built logistics system and focuses on towns and villages, if it can also provide good service and favorable prices, it has the potential to disrupt all current distribution systems."

According to public data, more than 500 brands have signed brand direct supply agreements with JD.com's New Channel. During the Double 11 shopping festival, it announced the simultaneous opening of 1,111 stores. On the other hand, Alibaba's Retail Link has been laying out mom-and-pop stores and successfully created the internet-famous small store 'Weijun Supermarket'. It is reported that Retail Link has covered more than 300,000 small stores. After acquiring Aixianfeng, Zhongshang Huimin has accelerated its financing and expansion, and now has 400,000 stores.

Mr. Zhang told Pintu Business Review, "Distributors are also suffering, and the market competition is fierce, but we hope whoever can solve our problems will earn our trust."

The work of harvesting mom-and-pop stores continues.

Source: Pintu Business Review (ID: pintu360)
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