---
title: "The Midlife Crisis of Retail"
description: "The decline in retail has been evident since around 2011, though not initially obvious, but has accelerated in recent years, with some small retailers reaching the end by 2015. Many companies are desperately adding online components like websites, apps, official accounts, and micro-malls, but fail to sustain them. With rapid economic growth over the past 20 years, physical retailers, especially supermarkets and electronics chains, experienced wild growth, becoming regional 'commercial warlords' and going public, but their recent performance has been deteriorating."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2016-04-02"
language: "en"
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---

# The Midlife Crisis of Retail

> The decline in retail has been evident since around 2011, though not initially obvious, but has accelerated in recent years, with some small retailers reaching the end by 2015. Many companies are desperately adding online components like websites, apps, official accounts, and micro-malls, but fail to sustain them. With rapid economic growth over the past 20 years, physical retailers, especially supermarkets and electronics chains, experienced wild growth, becoming regional 'commercial warlords' and going public, but their recent performance has been deteriorating.

**The decline has been evident since around 2011, though not initially obvious, but has accelerated in recent years, with some small retailers reaching the end by 2015. Many companies are desperately adding online components like websites, apps, official accounts, and micro-malls, but fail to sustain them.**
With rapid economic growth over the past 20 years, physical retailers, especially supermarkets and electronics chains, experienced wild growth, becoming regional 'commercial warlords' and going public, but their recent performance has been deteriorating. The decline has been evident since around 2011, though not initially obvious, but has accelerated in recent years, with some small retailers reaching the end by 2015. This is not alarmist; the data for listed retailers is public, so you can collect and analyze it yourself.
The current state of the retail industry resembles the midlife crisis some men face: in youth, they were vigorous and proud; after forty, they suddenly find their career in trouble, the old ways no longer work, and they face a daunting challenge. Many companies are desperately adding online components, such as websites, apps, official accounts, and micro-malls, but fail to sustain them. Having spent over a decade in both retail and e-commerce, I'd like to share some insights on methodological innovation and team building, hoping to inspire retail colleagues to avoid blind investment.
Methodology: Retail's Collective Indifference to Users
After years of accumulation, retail enterprises have significant scale, with money, people, and resources, but why do they lose ground to e-commerce? I believe it's a methodological problem. Let me compare two formulas:
Physical retail's business logic: Profit = Sales Revenue * Gross Margin + Back-end Fees - Operating Costs
E-commerce's business logic: Profit = User Value * User Scale * User Activity
Although both sell products, these are fundamentally different business philosophies. One is financial, the other user-centric. Due to different philosophies, the approaches differ greatly. Retail enterprises operate like this:
From the above, physical retail's strategies are all designed around financial indicators. Retail emphasizes 'data-driven decisions,' but often beautiful data masks many issues, and extensive management has led to deep-rooted problems that haven't erupted yet:
* Unsustainable 'land grabbing': Retail store openings have almost stalled. In previous years, there were fewer commercial projects, rents were low, and stores could be profitable upon opening. Now it's hard to find suitable projects. In the next three to five years, many retailers will face lease expirations, and many will have to close stores to stop losses (CR Vanguard will close 68 stores in 2016).
* Blind promotions: Physical retail promotions are numerous and varied, but their effectiveness is declining, and they erode gross profit. Seemingly effective promotions are actually borrowing from the future; when promotions stop, sales drop below normal. Promotion effectiveness should be evaluated with a lag. To boost short-term results, they push low-quality products, lowering their positioning, and users don't buy. Promoting hard is the best way to appease the boss!
* Price bubbles: Physical retail's price bubbles are severe, previously in department stores, now in supermarkets. Retailers essentially don't control pricing; brands do. To meet retailers' increasing gross margin demands, suppliers raise prices. What do users think?
* Fake disintermediation: Retailers claim to shorten supply chains and source directly from origins to control costs, but it's often superficial. Even if they sign with manufacturers, manufacturers have already reserved margins for distributors. Business as usual!
* Fees! Fees! Fees!: Many retailers' back-end fees from suppliers may be their main profit source. This has been a flashpoint in supplier-retailer conflicts, with government intervention and legislation, but to no avail. Fees can be roughly divided into 'entry fees' and 'marketing fees.' Many manufacturers, to avoid high entry fees, find local distributors to 'list' on their behalf, creating distributor oligarchs that compete with retailers. Selling shelf space leads to loss of control over displays. For example, electronics chains auction prime locations, and supermarkets charge for display adjustments. It's strange that the most valuable asset—display space—is not controlled or allocated by the company but by grassroots store managers. Suppliers know this trick: to solve display issues, don't talk to procurement; just bribe the store staff. What do users think?
* Cost control paradox: Retail is labor-intensive, and a key cost control is wage suppression. For instance, in Shenzhen, where even air is expensive, employees earn around 2,500 yuan per month. Costs seem lower, but employee apathy is severe, and service quality suffers. If they don't offend customers, it's a miracle (kudos to Pang Dong Lai). Moreover, many store staff are supplier-provided promoters, with less than half being self-operated employees. On the surface, this transfers labor costs, but suppliers quietly raise prices by 10% in the next quote. What do users think of this?
Retail's approach is like a landlord collecting rent; they don't really care about production, while suppliers are like tenant farmers. The landlord only cares about this year's rent, not whether the crops are good, expensive, or who buys them. E-commerce companies, on the other hand, are masters of 'flirting': they dress well, attend events to meet people (promotion and entry points), even approach strangers on the street (ground promotion), then categorize the women they meet, noting their personalities, hobbies, measurements (user research), and craft jokes or images to make them smile (content operations). If she likes food, they cook; if she likes sports, they walk with her; if she likes romance, they take her to count stars. As for when to get intimate, no rush! This is not just JD and Alibaba's approach; WeChat businesses use the same tactics. Essentially, they are user-centric, 'attacking the heart first, the city second'! Product development and operations must revolve around user needs, habits, and experience, reinforced through processes, structures, and reports, truly putting users at heart. Their strategies are clear, division of labor is precise, and actions are dense and swift, as shown below.
I believe the highest principle of all business should be user-centric, and practicing user-centric methodology is the way. Physical retail's biggest gap is indifference to users! 'Consumer-centric' is just a slogan. Some lament that users have no loyalty, but without deep engagement and attraction, how can there be loyalty?
Team: Is the Old General Still Able to Eat?
In the past 20 years of rapid development, retail enterprises have long dominated the industry, forming a 'channel is king' situation, with retailers sitting and suppliers kneeling. But long-term relative monopoly leads to professional degradation and bureaucratization. Facing industry-wide changes, I ask: Is the old general still able to eat?
On team age, there's data: Baidu employees average 26, WeChat 27, Alibaba 32, and they don't want people over 35. Retail industry employees are typically 40-45 or older, possibly higher in second- and third-tier cities. I remember visiting an e-commerce company before the New Year; everyone was around 20, and their enthusiasm was moving. Many retail 'old-timers' just rest on their laurels waiting for retirement. While I don't think younger is always better, younger teams do have strong advantages:
Young people have energy and drive, and retail really needs fresh blood. The copy you admire is from young people; your DM flyers are thrown away. The hit products you praise come from young people's discovery, while your products are lackluster. Young people are highly adaptable, and with a healthy environment or good mentorship, their growth potential is amazing. For example, the bestseller 'Everyone is a Product Manager' was written by a graduate just four years into Alibaba. Also, young people understand the target demographic like themselves: those born between 1980 and 1990 number about 250-300 million, with strong population size, willingness to spend, and purchasing power. Your young competitors are from this same group.
You might say young teams lack experience, but your so-called experience is less valuable in this rapidly changing era. Now let's discuss the missing knowledge structure.
I recall a training two years ago where veterans were still teaching product structure ABC theory and volume display, which were Walmart's management tools in the 90s, yet many companies treat them as scripture. The fact that they can still teach without absorbing new knowledge shows the low professional level in retail. Take product introduction as an example. Retail often evaluates new products like this:
1. Whether benchmark stores or competitors have introduced it; if so, add points.
2. How it performs in other channels; if good, add points.
3. How much entry fee or gross margin it can provide; if satisfactory, add points.
4. Similar products' sales performance; if good, add points.
5. Products mentioned by the boss; add points.
6. Supplier influence and PR (100 words omitted).
Notably, there's no user demand management, reflecting both lack of awareness and knowledge structure. Without this crucial source and premise, product introduction becomes 'ordering dishes,' relying entirely on the buyer's character and experience, costing the company huge trial-and-error expenses. Such phenomena are common in retail, exposing deficiencies in knowledge structure. How many retail practitioners actively learn? Those dragged into training by HR don't count. E-commerce teams start with high standards but still focus on learning, voraciously.
Retail's bureaucratization has long been criticized, rivaling government agencies. I've observed that those who thrive in this industry often excel at networking, 'shoe-shining,' and reading superiors' minds, and are skilled at passing the buck and bullying suppliers. Bureaucracy in large enterprises is common, but it's a disease that needs treatment.
Let me ask quietly: if others are smarter, younger, and work harder, how can you win without changing? Barbarians are already at your door, but many still sneer: 'Physical retail isn't losing to e-commerce; it's suffering from macroeconomic downturn,' 'E-commerce lacks staying power; users will eventually return to physical retail,' 'O2O will be decided offline; we have inherent advantages, just wait for the wind.' Wei Yuan, during the Qing dynasty's crisis, called to 'learn advanced techniques from the barbarians to control them,' but you lack the courage to admit gaps. That's a mindset problem. Only by fully understanding yourself can you find the way forward.
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