Click to read the original text for details The continuous penetration of the internet into the retail industry has led to an endless stream of new concepts, from new retail, borderless retail, and smart retail to the current hottest trend of instant retail. Since last year, the concept of instant retail has sparked repeated discussions. Recently, consecutive reports from CCTV.com and People's Daily Online have once again made instant retail the protagonist, and these reports also indicate that the market has further affirmed the consumer trend of convenience stores going online on food delivery platforms. According to a CCTV market research report, the average frequency of using instant retail per person in the first half of 2021 was 6.4 times. Since the beginning of this year, the new business format of instant retail has continued to show new momentum. Previously, the China Chain Store & Franchise Association released the "White Paper on Instant Retail Open Platform Model Research," which showed that instant retail is experiencing rapid growth. Among them, the platform model had a compound annual growth rate of 81% from 2016 to 2021. It is expected that by 2025, the scale of the open platform model in instant retail will exceed the trillion-yuan threshold, reaching approximately 1.2 trillion yuan. Facing the successive new models and new ways of playing, Li Lechen, a mom-and-pop store owner, told Retail Circle: "Mom-and-pop stores are becoming increasingly difficult to run. Facing these new trends, if we don't make changes, we will face elimination." Mom-and-pop stores play a capillary-like role in various cities, scattered in streets and alleys and near residential areas, serving hundreds of millions of consumers every day. Li Lechen has witnessed the changes in mom-and-pop stores over the past two years. With the online migration and the uncontrollable epidemic, even being close to consumers, unchanged products and business methods can hardly escape the dilemma of store closure. However, with the development of the retail industry, Li Lechen believes that mom-and-pop stores still have new stories to tell. "The way of doing business, the model, and the logic behind it have changed. This is a problem faced by the entire industry. Enterprises have their strategies, and small stores have their methods. In short, actively make changes and actively embrace consumers," Li Lechen told Retail Circle. 01 Different Mom-and-Pop Stores Li Lechen's mom-and-pop store is located in an old residential area, which has a strong sense of everyday life. Various vendors on both sides of the street take care of the daily needs of residents, with people coming and going and bustling noise. Li Lechen's store is on the right side of the community entrance. Unlike street-facing shops, this store is transformed from a "living room." The first-floor houses seem to possess the code to wealth; the owners partition off part of the house and convert it into shops, some setting up fruit stalls, others running grocery stores. There are six other mom-and-pop stores in the community similar to Li Lechen's. Unlike other mom-and-pop stores, Li Lechen has his own business philosophy. Retail Circle found that this 50-square-meter store differs from other mom-and-pop stores in that through careful display, the number of SKUs is more than twice that of other stores, and it tends to be younger. In addition to serving offline consumers, Li Lechen has also joined online platforms. "The reason for this positioning is that business is not easy now, and the frequency of store visits has decreased," Li Lechen said. Indeed, as Li Lechen said, people's consumption patterns have undergone earth-shaking changes. Online shopping has become people's primary choice. According to reports, online retail sales in 2021 reached 13.1 trillion yuan, of which physical goods retail sales were 10.8 trillion yuan, an increase of 12%, accounting for as high as 24.5% of total social retail sales. The online migration of customers prompted Li Lechen to make changes. He improved his product categories, shifting his focus from the original single-direction development to diversified online and offline development. "Traditional mom-and-pop stores can no longer sustain their livelihoods. The opening of online channels can alleviate the difficulties of offline stores," Li Lechen said. Li Lechen joined Meituan and Ele.me platforms and opened online stores. Consumers can purchase needed goods without leaving home, and through the platforms' flash purchase and express delivery, goods can be delivered to consumers within half an hour. Li Lechen showed Retail Circle an order from that day. Taking an order amount of 72 yuan as an example, after deducting platform service fees and activity fees, the net amount for this order was 58.8 yuan. The platform commission is 20% to 22%. "The commission charged by the platform is set according to the region, and the commission varies in different regions. Moreover, unlike catering, fast-moving consumer goods online do not have monthly exposure; the commission is only based on orders." In addition, Retail Circle observed that Li Lechen's product prices are consistent online and offline. In this regard, Li Lechen said, "If online prices are high, consumers will not choose to buy, so they can only stay consistent with offline prices. If platform commissions are added, the profit on some products is extremely low. But if the frequency of online consumption is high, the profit is still considerable." Li Lechen's store operates from 9 a.m. to 3 a.m. Most of the time, Li Lechen watches the store, while his wife, Zhao Zexi, takes over at fixed times. In 2021, Li Lechen's store had a net profit of 310,000 yuan. "Fatigue is common, but the current situation is what it is. If we don't change, we will face elimination. Changing ourselves requires time and labor costs," Li Lechen said. Zhao Qi and Liu Xiaoyan run a fresh food supermarket in a street-facing shop outside the community. The two were once real estate salespeople. After getting married, they started a fresh food business in the community where Liu Xiaoyan's parents live. Zhao Qi is not good at words and is mainly responsible for online orders. "A new order is here!" is the sound Zhao Qi likes to hear most every day. Liu Xiaoyan grew up here and is particularly familiar with the surrounding residents, responsible for serving offline store customers every day. "Traditional stores have to make changes," Liu Xiaoyan said. As fresh products have short cycles and high loss rates, the competition from community group buying and the uncertainty of the epidemic make Liu Xiaoyan feel pressure and vigilance. "There are several fresh food stores around. It's a small business, and every link is done by ourselves. If we want to differentiate, it requires a lot of effort. The most basic thing is to ensure the quality of the products. Joining online platforms brings incremental sales to the store while also reducing some losses," Liu Xiaoyan said. 02 Mom-and-Pop Stores Fight Back Online channels have brought incremental sales to Li Lechen and Liu Xiaoyan, but they still find it difficult looking to the future. Nowadays, the rapid development of community commerce and the sinking of convenience stores pose various threats to mom-and-pop stores. Before that, community group buying had already made mom-and-pop stores feel the pressure. During the epidemic, due to restrictions on offline stores, people's consumption shifted from offline to online. Community group buying and online grocery shopping brought new consumption experiences to residents. Due to the great convenience, most consumers have become loyal online shoppers. Zhao Xiaoyan said, "Previously, offline stores were the primary choice for customers. Now consumers have developed the habit of shopping online. Even when life returns to normal, consumers will choose a mixed online and offline shopping model. For example, a mother picks up her child from school, then goes downstairs to buy groceries and returns home to cook. If there is a traffic jam, she will be late. Now with online channels, she can choose to shop online during the traffic jam, saving a lot of time without needing to go to the store every day." Zhao Yong, who once ran a fresh mom-and-pop store, told Retail Circle, "The endless new models have squeezed offline stores. As the capillaries of the city, mom-and-pop stores must accept the current 'harsh' environment, find breakthroughs, and seek new growth. The mom-and-pop store group will not disappear, but that does not mean individual stores will not disappear." The rise of community commerce has also brought new challenges to mom-and-pop stores. In the past two years, the retail industry has reached a consensus that with consumer convenience as the core, enterprises have established a business system with complete formats, comprehensive functions, and proximity to consumers, forming a new era of everyday life. Compared with the physical commerce that suffered heavy losses during the epidemic, community commerce has a clear trend of improvement. According to the 2021 "China Physical Commerce Customer Flow Orange Paper," among the top 100 business districts with the largest recovery growth in customer flow in key cities, 41% were community-oriented commerce. Taking Xi'an as an example, as early as 2019, Xi'an issued the "Xi'an Action Plan for Vigorously Promoting the Innovation and Development of Convenience Stores" (referred to as the "Action Plan"). The Action Plan clarified that by the end of 2020, the city should have no fewer than 3,000 branded chain convenience stores, with at least one in small communities with fewer than 2,000 households, at least two in medium-sized communities with 2,000-5,000 households, and at least three in large communities with more than 5,000 households. All are aimed at building a 15-minute convenient service circle around the city to meet the multi-level and diversified consumption needs of citizens. According to the "2020 China Urban Convenience Store Index" released by the China Chain Store & Franchise Association, Xi'an's convenience store growth rate surpassed Beijing, Shanghai, and Guangzhou, making it the fastest among 36 cities nationwide. Li Lechen told Retail Circle that mom-and-pop stores are part of community commerce, with prominent advantages and disadvantages. On the one hand, mom-and-pop stores rely on the community, and long-term operation makes them familiar with the preferences of community consumers. The trust and emotional bonds established with community residents cannot be broken in a short time. On the other hand, when enterprises enter community commerce, based on digital development, they will know the preferences of young consumers faster than us and can quickly change product categories. Secondly, the store area determines the number of SKUs, which mom-and-pop stores cannot match. "Community commerce has seized the convenience advantage of mom-and-pop stores, while online channels have squeezed the sales space of mom-and-pop stores," Li Lechen said. 03 There Are Still New Stories The macro environment has changed the growth model of retail, while information technology has changed the transaction rules of the retail industry. Nowadays, there are more and more mom-and-pop stores like Li Lechen and Liu Xiaoyan in cities. Mom-and-pop stores are embracing online channels one after another, starting diversified development directions. Through instant retail platforms, they can reach a wider range of customer groups. In Li Lechen's view, no matter which channel, as long as it brings incremental sales, it is good development. As a business based on acquaintances, the essence of mom-and-pop stores is to serve the daily needs of community residents. While keeping up with trends online, the "human touch" offline cannot be abandoned. While developing online channels, Li Lechen still pays attention to offline stores. Since the product categories are mostly younger, he has lost some elderly customers. Li Lechen uses tobacco, alcohol, eggs, grain, and oil to maintain old customers, and even undertakes some parcel storage services. On the one hand, offline stores can use high-frequency products to increase store traffic; on the other hand, they retain some elderly customers. Li Lechen said, "Offline stores are the core of the physical retail industry, and online channels have allowed us to 'survive.' We must also provide better services to offline consumers. In the future, it will be the coordinated development of online and offline, with online focusing on products and offline focusing on services." Liu Quan, 52, did not add online channels to his mom-and-pop store. Instead, he uses a WeChat group. Community residents place orders through the WeChat group, his wife Li Hui is responsible for picking goods, and Liu Quan delivers them to the door. Liu Quan believes that compared with instant retail on online platforms, his current operating model is also a form of online operation. "The first three orders are delivered for free, and after that, each delivery charges 1-2 yuan depending on the distance. As an acquaintance business, we also give residents some feedback, such as buying cigarettes and getting a lighter. For orders over 50 yuan, we give a free bottle of water or other snacks," Liu Quan introduced his business model to Retail Circle. When Retail Circle visited other mom-and-pop stores, it did not find any other store that delivered goods by themselves like Liu Quan. Based on the daily needs of residents, Liu Quan's store's product categories are almost all needed by the surrounding residents. This also differentiates it from other mom-and-pop stores. For food that is about to expire, Liu Quan also has his own plans. Liu Quan told Retail Circle, "I also know that near-expiry food sells well now. Some small mom-and-pop stores throw away expired food. For near-expiry food, we also give sufficient discounts." "Compared with the past when we just guarded the offline store, now under various retail trends, the future is unpredictable, but if we actively embrace the trends, mom-and-pop stores will have new stories," Liu Quan said. Source: Retail Circle (ID: retailsphere) Author: Gu Jiu -END-