---
title: "The Opportunity for Offline Retail Lies in Differentiation"
description: "As the wave of supermarket 'adjustment and reform' intensifies, Angel Bay Ventures partner Tan Zhiwang argues that copying others' 'result-oriented' actions is the easiest way to fail. Instead, one should learn 'why others can achieve it, not what they have achieved.' He emphasizes looking two years ahead, focusing on differentiation in categories, products, and high-margin areas, and building core capabilities in fresh food, processing, private brands, and traffic."
author: "楚勿留香"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-12-11"
categories: "Management & Methods, Retail Formats"
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citation: "楚勿留香. “The Opportunity for Offline Retail Lies in Differentiation.” New Distribution, 2025-12-11. https://xinjignxiao.com/en/articles/the-opportunity-for-offline-retail-lies-in-differentiation-f3b57288/"
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# The Opportunity for Offline Retail Lies in Differentiation

> As the wave of supermarket 'adjustment and reform' intensifies, Angel Bay Ventures partner Tan Zhiwang argues that copying others' 'result-oriented' actions is the easiest way to fail. Instead, one should learn 'why others can achieve it, not what they have achieved.' He emphasizes looking two years ahead, focusing on differentiation in categories, products, and high-margin areas, and building core capabilities in fresh food, processing, private brands, and traffic.

**Source** | Lingshou

_The wave of supermarket 'adjustment and reform' is growing stronger. But how to adjust? How to reform? How to imitate?_

Tan Zhiwang, partner at Angel Bay Ventures, believes that copying others' 'result-oriented' actions is the easiest way to fail. Instead, one should learn 'why others can achieve it, not what they have achieved.'

**Think Two Years Ahead**
**To Have Ample Time to Prepare**

One of my core viewpoints is that in retail investment and operations, every year you should look two years back. In 2021, we judged how the snack discount store trend would develop, and the opportunity window for this industry would last until about 2023. So, for the past two years, I have almost stopped paying attention to the snack discount direction because, from the industry's overall trend, its logic has become very clear.

In 2023, I spent a lot of time studying Aldi and Hema.

In Shanghai and Hangzhou, I visited almost all Hema stores several times, and I also found many former Hema employees to understand its operations, training, and check-in systems.

But by this year, we have stopped paying much attention to Hema because we have started thinking about what China's offline supermarket retail will look like in the next two to three years.

The development paths of Hema and Aldi are already very clear. We know very well what scale they will be in East China and even nationwide in two years. Against this highly certain backdrop, what will other retailers do? This is a question that all participants here today need to consider.

Whether we are manufacturers or retailers, we all need to pay attention to this issue. For example, if you are a brand owner doing business with Hema, 90% of your KA brand share might drop. Will you do OEM for it? This is a reality that all KA brands must face.

Retailers are the same. If Aldi or Hema Fresh opens next door, what should you do?

Although it is now the end of 2025, thinking about current matters is not very meaningful because everything today was decided two years ago.

What we need to think about today is: what should we do two years from now?

**E-commerce Giants Enter the Fray**
**Offline Retail Faces Unprecedented Pressure**

This year has been a year of dramatic retail changes, and it is also a watershed moment because e-commerce giants have entered offline retail, shifting from 'long-distance e-commerce' to 'near-field retail.'

Not only are offline supermarkets under enormous pressure, but traditional shelf-based e-commerce like Taobao and JD.com also feel a great sense of crisis.

Why does Taobao have to do flash sales this year? Why does Taobao Flash Sale have to 'fight to the death' with Meituan?

Because Meituan, using a 'local life e-commerce' approach, has directly broken through the price difference barriers of traditional shelf-based e-commerce—it can offer the lowest prices and deliver within 30 minutes.

This is also a life-or-death moment for Taobao and JD.com.

Against this backdrop, various new formats such as flash sales, front warehouses, and lightning warehouses are emerging rapidly, with tens of thousands of lightning warehouses already opened nationwide.

These changes all point to a core trend: online and offline have been completely integrated, all retail formats are competing crosswise, and boundaries are increasingly blurred. Whether you run a supermarket, a community store, or a category store, Meituan, Taobao, JD.com, etc., could all be your competitors.

In fact, for offline supermarkets, they cannot compete head-on with e-commerce; they can only differentiate.

I have reached a very clear conclusion: offline supermarkets cannot compete head-on with e-commerce platforms; otherwise, it will be difficult to find a way out.

Because these e-commerce giants have terrifying financial resources and scale, and the platform's resources are overwhelming. Take Meituan as an example. When Meituan launched 'Happy Monkey' and opened its first store in Hangzhou, the human and financial resources invested are hard for any offline entity to imitate. In community group buying, Meituan's losses are in the tens of billions. Perhaps the total investment of all physical supermarkets in China in recent years is less than what Meituan has lost.

From dimensions like price, high efficiency, and low cost, offline entities find it hard to compete with platforms. Directly competing with platform e-commerce is definitely not the right approach. Therefore, we must avoid head-on competition and take a differentiated route.

This is the basic logic behind all the offline retail paths, tactics, and strategies I consider. Where is the direction of differentiation? I believe there are three dimensions:

First, you cannot compete with platforms on price; comparing prices is meaningless.

Do not compete with JD.com, Tmall, or Pinduoduo on all categories. If your products cannot achieve the same efficiency as theirs and you sell at higher prices, then don't do it.

Because from a price comparison perspective, you not only have to compare prices with JD.com and Tmall, but also with Pinduoduo. How can offline retail possibly beat them?

Second, you need to achieve category differentiation and product differentiation.

Because not all products are suitable for low prices, and not all products are suitable for high efficiency.

Third, don't just focus on low-margin categories; explore high-margin categories.

Don't fall into the trap of continuously lowering prices on low-margin products. For example, if you keep competing on egg prices, from 17.9 yuan down to 14 yuan, eventually no one can play.

Offline retail should find ways to see if there are high-margin products, brands, or scenarios that can be pursued. This is the real breakthrough for future retail.

Shifting to operate some high-margin categories will be much better, and there are many cases proving this is feasible.

Why can snack stores survive? I believe the core point is selling bulk items. Based on current technology, bulk items are extremely difficult to sell online, with high costs and low efficiency. It is this 'cannot be e-commercialized' characteristic that allows snack stores to exist as an independent format.

It is important to understand these underlying logics. Bulk items constitute a kind of 'offline-only moat.' Similarly, many underlying logics in the retail industry can be inferred from this: anything that is extremely difficult to e-commercialize is an opportunity for offline.

Today's retail is very complex, and retail colleagues are among the most diligent and eager learners in China, learning from Europe, the US, Japan, and excellent domestic examples. But if you don't find the underlying logic and just learn the decoration, tags, and appearance, you won't get results.

**Three Trends Coexist in China's Retail Industry**

Currently, three trends coexist in the retail industry: quality retail focuses on 'better,' discount retail focuses on 'cheaper,' and instant retail focuses on 'faster.'

This corresponds to customer needs of 'more, faster, better, cheaper.'

'More' (richness) is the domain of e-commerce, which has unlimited shelves; offline supermarkets cannot achieve this.

So, offline physical retail should do three things: do you provide 'better' customer value, 'cheaper,' or 'faster'?

You must be clear about this; the worst is to be 'neither fish nor fowl.'

'Better': For example, Pangdonglai and Hema Fresh provide better experience and quality. Sam's Club never claims to have the lowest prices; it provides 'better' value.

'Cheaper': This is what many discount stores do, provided the quality is acceptable.

'Faster': This is the domain of instant retail.

My understanding is that today, all supermarkets must figure out whether you are doing 'better,' 'cheaper,' or 'faster.'

If a company can achieve excellence in one dimension, that is already remarkable. Trying to achieve both 'better' and 'cheaper' to the extreme is almost impossible.

Because your choice will run through the entire supply chain and operational logic of the enterprise.

Regarding supermarket formats and store types, I think they are important, but not that important. Opportunities exist in any store size in China, from 100-200 square meters to over 1,000 square meters, with clear successful cases and characteristics.

For example, Hema and Aldi mainly operate in the 500-1,000 square meter range. But can other supermarkets around them not survive? Not necessarily.

My research in Jiangsu and Zhejiang found that many can thrive, even better than them. Why? Because Hema and Aldi have strengths but also weaknesses. For instance, Hema lacks richness in fresh produce; if you want specific cuts of pork, beef, or live seafood, it may not have them. This is the space where other supermarkets can differentiate and compete.

The conclusion is: all retail formats corresponding to various sizes and spaces have opportunities in China.

Currently, many retail enterprises are learning from discount retail (like Aldi) and quality retail (like Pangdonglai and Sam's Club). But I want to warn: for example, learning from Hema, I don't recommend many small and medium-sized supermarkets to directly imitate, because you can't afford it, and there are too many pitfalls.

Let me give an example. A friend from Hema once asked me: do you think Hema Fresh is harder to run, or Hema NB? It seems Hema Fresh requires large investment and is complex, while Hema NB is simple. But in reality, they believe Hema NB is N times harder than Hema Fresh, with extremely high requirements for efficiency, scale, and extreme cost control.

In the past year or two, I have seen many enterprises from other places come to Hangzhou and Shanghai to learn, thinking it's simple, then go back and copy the decoration, display, etc., and the result is that they fail as soon as they imitate.

People greatly underestimate the complexity. Store type and model are important, but the most important thing is: 'What he can do, I cannot'—to what extent can I do it? What is my own team's capability? This is the most critical.

The same applies to learning from 'Xianfeng Life.' Many stores copy the colors, props, etc., and they look similar, but if you go and taste their cold noodles, buns, or grilled sausages, are the products good? You can learn props and equipment, but whether you can make products that good depends on each company's basic skills.

In the end, it comes down to basic skills, whether you can consistently make good products.

I used to think copying was important, but now I believe that simply learning from others' 'results' is problematic. We should learn the 'cause'—how they did it well and how they got there—rather than the 'effect.' Because Aldi only started improving the year before last; if you only learn its current state, how can you possibly learn it?

For offline retail enterprises, I believe the most core '3+1' things are particularly important: 'fresh food, processing, PB (private brand) + traffic capability.'

The three differentiation cores: fresh food, processing, and PB (private brand), are key to distinguishing yourself from e-commerce platforms.

The one thing is traffic: the ability to integrate online and offline traffic and manage private domain operations, which determines whether you can continuously attract customers and drive repeat purchases.

All retail ultimately cannot escape these 3+1 things, but it is unlikely that a company can do all four very well. In other words, no company can achieve excellence in all four; doing one well is already very difficult.

The most critical thing is to find the parts you can do well. For example, in fresh meat, can you do one or two categories well? Can you make one or two processed foods well? PB has high requirements for your product team, resources, and scale; if your scale is too small, you might start with third-party procurement.

It is important to work hard in the right direction. I have seen some snack stores exploring 'money-saving supermarkets,' 'wholesale supermarkets,' and 'discount supermarkets' in the past year, adding daily necessities SKUs like rice, flour, oil, and paper to their original snack format. But with normal thinking, you can know that this is unlikely to be a long-term effective strategy.

If adding a category of shelves works, your competitors can do it the next day. If everyone does it, the strategy becomes ineffective. For supermarkets to thrive, there is only one path: dare to do harder and more complex things. I think it is impossible to find a simple model or version that works everywhere.

Moreover, we must face a cruel reality: opening a supermarket used to be a low-barrier industry, but today it is an extremely high-barrier industry. It is even harder than being a manufacturer or brand. It requires extremely high capital scale, organizational management capability, and scaled operations. And when you do PB (private brand), you are no longer just a retail enterprise; you are also a brand enterprise. PB is a private brand, but not a private white-label.

Pangdonglai is a good example. It is not just a retailer; it is itself a strong brand. Why do its mooncakes and beer sell well? Not just because of the products, but because of the trust and premium brought by the 'Pangdonglai' brand. So, this is a competition of product, quality, cost, price, and finally brand.

We must realize that supermarkets have become a business with particularly high comprehensive barriers, completely different from ten years ago.

I have participated in the entrepreneurship and investment of many retail enterprises, and I have a deep feeling: I used to focus on models, but now I find that in the end, it is not a matter of model but of capability.

I have a friend whose 100-square-meter store sells only 20 products, yet daily sales revenue exceeds 10,000 yuan. Does this have anything to do with the model? Every enterprise should build its own core capabilities based on its team and organization, including product capability, operational capability, etc.

Some retail enterprises become popular by adding food processing, but will you become popular just by adding it? No. Their cold noodles and rice noodles are delicious; if yours are not, you won't have customers. So, for retail enterprises, today you must persist in doing difficult things, which is building your own capabilities.

Finally, my suggestion is: don't be too fast in retail; slower is better. The worst is lacking patience, being unable to accumulate capabilities, polish the team, and build systems.


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## Citation metadata

- Publisher: New Distribution
- Author: 楚勿留香
- Published: 2025-12-11
- Canonical: https://xinjignxiao.com/en/articles/the-opportunity-for-offline-retail-lies-in-differentiation-f3b57288/
- Original source: https://mp.weixin.qq.com/s/lp6ukpaPh9XATYeCFe0ZXw

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