Click to read the original article for details Source: Red Bowl Society (ID: hongwanshe2020) Author: Ren Zixun Near-expiry food is becoming a hot topic in the consumer industry. More and more young consumers are paying attention to this category. Discounts as steep as 10% to 20% off, novel specialty store formats, and the balance between the massive shopping needs of consumers and their spending are the main reasons they choose this category. User Ali (pseudonym) told Red Bowl Society that the biggest problem he faces now is no longer where to buy near-expiry food, but whether the near-expiry food at home can be consumed in time before the expiration date. "It's really cheap, and I'm not too worried about food safety." This view is also widely echoed by several other interviewees. The concept of near-expiry food is not new. In the past, traditional offline supermarkets had dedicated clearance sections and promotions tied to near-expiry food. However, the "low-key" near-expiry food, influenced by the rapidly heating new consumption trends in the past two years, is unlikely to return to its former state. According to research from iiMedia Consulting, from the supply side, the total output value of China's snack industry exceeded 3 trillion yuan in 2020. Even with a 1% inventory accumulation, the near-expiry food market size would exceed 30 billion yuan. On one hand, boosting domestic demand has led to an overall oversupply, with a large number of new brands and products emerging. On the other hand, the addition of various novel formulas and brand premiums has driven up snack prices. For example, Zhong Xue Gao ice cream, which recently trended on social media due to its tens-of-yuan price tag. Take two categories deeply remembered from many people's childhoods—guoba (crispy rice) and latiao (spicy strips). On Hema's bestseller list, the former can sell for up to 16.8 yuan per bag (220g), while the cheaper version, though smaller (170g), costs only 9.9 yuan. For the latter, on Taobao, latiao with a net weight of around 240g can sell for about 15 yuan. While these prices are not astronomical today, looking back at the historical prices of these categories, one cannot help but marvel at the magnitude of change. Smart consumers have a "nose" for deals. And keen capital follows consumers. More and more individuals are trying to get a piece of the upstream near-expiry food market, while some are directly partnering with investors to expand nationwide chains. How long will the dividend period of near-expiry food last, and where will it go in the future? This is perhaps the most thought-provoking question behind it all. A New Trend for Nationwide Entrepreneurship "I want to get into near-expiry food. Does anyone have a supply source? Can you guide me?" Zhang Qiang (pseudonym) has been asking questions for several days in a national near-expiry food exchange group. He told Red Bowl Society that he has a stable job locally, but his family's interest in near-expiry food led him to decide to start a business together. However, they still have many avenues to figure out in this industry. Even if one or two people respond to his queries in the group, Zhang Qiang's voice is quickly drowned out by hundreds of resource exchange discussions. Essentially, these exchanges fall into two types: those seeking to transfer near-expiry food supplies and those hoping to acquire specific categories. However, in this atmosphere, it is evident that behind the popularity of near-expiry food, a group of gold diggers from various industries is rapidly gathering upstream. Every day, new members join the group. Besides cross-industry entrepreneurs like Zhang Qiang, there are also practitioners from the warehousing and retail sectors. A person from a discount supermarket said that a certain brand of tea-flavored beverage with 8 months until expiration could be transferred to Red Bowl Society at 18 yuan per box. Upon checking, this price is about half of the same product on Taobao (a few days later, the product was hard to find online). As for whether this product can be sold after taking over, he said he wouldn't act as an agent if it didn't taste good. He also sent a clip of the product's advertisement on CCTV. The natural attribute of a commodity is its use value; its value is the undifferentiated human labor crystallized within it. But in the commercial ecosystem of near-expiry products, the use value is downplayed, and the product itself becomes a target for repeated exchange. In this regard, trader Li Yan (pseudonym) believes this behavior is not unjustifiable. "Resource exchange has existed since ancient times, like trading horses for cloth. In some large group companies, such products exist, but they are not necessarily near-expiry. Some products don't sell well in the market, or the boss doesn't want to continue in that industry, so they cooperate with us to exchange for cash they need. Li Yan said that for first-tier consumer brands, every brand's distributor bears annual or quarterly sales targets, and if they complete them, they get rebates. But it's actually difficult to sell so many products within the specified period, so they must seek transfers. This is also a characteristic of the FMCG industry. Even so, for Li Yan's company, near-expiry product trading is still a business not to be underestimated. Currently, its trading volume accounts for 30%, with monthly transaction amounts reaching several million yuan. A report from iiMedia Consulting shows that the near-expiry trading market still has huge potential. Data shows that in a 2020 survey of Chinese consumers, over 40% expressed willingness to buy and recommend near-expiry food to those around them. Although over 45% of Chinese consumers said they still would not buy near-expiry food in the future, more than half believed they would buy it for various reasons. But in this trend, is the money in near-expiry food really easy to make? Some practitioners believe the reality may be the opposite of expectations. A near-expiry trader specializing in cooperation with upstream manufacturers said that only when upstream has stock and the products can be sold can the business truly profit. The biggest problem lies in unstable delivery times and inconsistent sales and profits. Due to the pandemic, orders that were supposed to be shipped to him were all canceled, and this single transaction was expected to result in tens of thousands of yuan in losses. As for whether products usually sell, it mainly depends on the price. Next Stop: Community Group Buying? Unlike the "lone wolves," those with more capital and resources have set their sights on platform-based development. A very typical personal case comes from Bilibili UP master "En Shi Pang Ding Ya" (hereinafter referred to as "Pang Ding"), whose platform followers have reached 30,000. According to Pang Ding's video self-description, he initially earned intermediary fees from near-expiry trading through information asymmetry, i.e., receiving goods from upstream and reselling them for a fee. After reaching a certain scale, he began transitioning to live-stream e-commerce. Red Bowl Society saw on his cooperative WeChat that Pang Ding is also building a paid near-expiry resource integration platform. Compared to the former, more retail platforms focusing on near-expiry food are emerging, with various capital backers behind them. For example, the discount supermarket "Elephant Life" (Xiaoxiang Shenghuo), which received tens of millions in financing in April 2021, with investors including Joy Capital and Angel Bay Ventures; another example is "Hot Special" (Hao Te Mai), which completed its fourth round of financing of tens of millions of yuan in September 2020, attracting well-known investment institutions such as GSR Ventures and RICHU Capital. Red Bowl Society noted that the franchise-based near-expiry retail platform "Near-Expiry Premium & Mei Te Hui" is also quietly accelerating its national expansion recently. According to public information, the company's CEO Hu Shuangyong once founded "Lingwa," which was acquired by Bianlifeng. In promotional materials, Near-Expiry Premium believes the food industry will give birth to a hundred-billion-yuan unicorn enterprise in this direction. A relevant person in charge told Red Bowl Society that there are currently dozens of franchise stores nationwide, with about 70-80 partners. From the perspective of store count, this expansion speed is already fast. The minimum franchise fee of 150,000 yuan per partner means that at the initial stage, it has already attracted over 10 million yuan in capital. "Although it focuses on near-expiry, the store doesn't sell only near-expiry products. The products in the store can be divided into 1-2 months, 3-6 months near-expiry, and regular products. After our own market research, we believe the most suitable ratio should be 70% 3-6 months near-expiry, 20% 1-2 months near-expiry, and 10% regular products. Because we cooperate directly with brands, the supply channel is completely different from regular products; in fact, we help brands clear inventory. So even with products at 0.5-1 discount, the merchant's gross margin can reach about 50%," the person in charge introduced. Currently, supply sources have become the focus of industry competition. Behind supply sources are multiple tests of supply stability and inventory management capabilities. Previously, Elephant Life stated it was seeking cooperation with large and medium-sized shopping malls to secure its supply-side capabilities. Company founder Hai Hui pointed out that due to China's vast territory and extremely fragmented sales terminals (the top five supermarket companies—Gaoxin Retail, China Resources, Walmart, Yonghui Group, and Carrefour—account for 27% of the market, while 6 million mom-and-pop stores hold a huge market share), the efficiency of product circulation is very low. Near-Expiry Premium CEO Hu Shuangyong also said in a media interview that near-expiry products require sufficient sales capability, procurement capability, supply chain integration capability, warehousing, logistics, and turnover control capabilities. These capabilities impose very high algorithmic requirements on near-expiry food management. Industry analysts told Red Bowl Society that differences in business models may lead near-expiry retail platforms to different outcomes. If products mainly focus on big brands' near-expiry surplus, the future problem will be the limited total surplus. This means brands cannot expand indefinitely. And as more players enter, even near-expiry product prices will gradually rise, eventually losing their initial advantage. Another issue this raises is: if the main proportion of products is OEM-branded products from contract manufacturers, where will the core competitiveness be reflected? "Can the idea of near-expiry products also be applied to community group buying?" Many are curious whether, after the community group buying trend subsides, near-expiry products will take over and spark a new trend in communities. The two do share similarities in some aspects, such as radiating to small community users in the form of individuals or mom-and-pop stores, but deep-seated pain points are hard to solve: Can community users' consumption of near-expiry food be sustained and stable? Can individual (platform) operators respond quickly, timely, and flexibly to community needs? Can replenishment methods break away from push-based replenishment? From these perspectives, the future of near-expiry food platforms still faces many challenges. In any case, the growth of the near-expiry food industry has, to some extent, helped alleviate food waste. But the ultimate solution to overcapacity in the food market still lies in the effective matching of supply and demand. Are you "watching" me?