---
title: "The Post-Pandemic Era of Discount Stores"
description: "Discount stores appear to be a 'low-price business,' but in reality they are 'low-price, high-quality'—beyond low product prices, their product quality and operating costs are not low. The pandemic since 2020 has made discount stores a new trend in the retail sector, but within just one to two years, a large portion of the first batch of startups entering the discount store space have already collapsed, such as the highly visible Boom Boom Mart, whose parent company declared bankruptcy in March last year; the soon-to-expire food discount chain 'Bengong Snack Innovation Studio' has faced a similar fate."
author: "东方"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-02-27"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/the-post-pandemic-era-of-discount-stores-15bd3750/"
markdown: "https://xinjignxiao.com/en/articles/the-post-pandemic-era-of-discount-stores-15bd3750.md"
original_source: "https://mp.weixin.qq.com/s/v2hcZK86EGG8cnhOcEgYfA"
translation: "https://xinjignxiao.com/zh/articles/%E6%8A%98%E6%89%A3%E5%BA%97-%E7%9A%84%E5%90%8E%E7%96%AB%E6%83%85%E6%97%B6%E4%BB%A3-15bd3750.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/the-post-pandemic-era-of-discount-stores-15bd3750/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# The Post-Pandemic Era of Discount Stores

> Discount stores appear to be a 'low-price business,' but in reality they are 'low-price, high-quality'—beyond low product prices, their product quality and operating costs are not low. The pandemic since 2020 has made discount stores a new trend in the retail sector, but within just one to two years, a large portion of the first batch of startups entering the discount store space have already collapsed, such as the highly visible Boom Boom Mart, whose parent company declared bankruptcy in March last year; the soon-to-expire food discount chain 'Bengong Snack Innovation Studio' has faced a similar fate.

Discount stores appear to be a 'low-price business,' but in reality they are 'low-price, high-quality'—beyond low product prices, their product quality and operating costs are not low.
The pandemic since 2020 has made discount stores a new trend in the retail sector. But within just one to two years, a large portion of the first batch of startups entering the discount store space have already collapsed, such as the highly visible Boom Boom Mart, whose parent company declared bankruptcy in March last year; the soon-to-expire food discount chain 'Bengong Snack Innovation Studio' has faced a similar fate. Against the backdrop of economic downturn and sluggish offline retail, discount stores are considered a new direction for transforming chain retail formats, but in the post-pandemic era after two years of the trend, the discount store model has undergone some changes. Taking brands like HotMaxx and Hi-Tech Go, which were among the first to explore the soon-to-expire discount store model, as examples, they have begun their transformation journey, with the following major changes: First, the proportion of soon-to-expire food in these stores has significantly decreased, while new brands and private labels are taking up an increasing share of shelf space. Second, the proportion of daily chemical products in discount stores continues to rise. Taking Hi-Tech Go and HotMaxx as examples, the proportion of soon-to-expire food in these two brands has dropped to as low as 5%. Third, the proportion of private-label products in stores is also on the rise. For instance, Hi-Tech Go's private-label products account for 20%-30% of its offerings. Unlike the early model of soon-to-expire product collection stores, these changes indicate that soon-to-expire discount stores are also transitioning towards lifestyle discount stores. Of course, as the retail loop gradually improves, the significance of soon-to-expire discount stores will be continuously diminished. Essentially, soon-to-expire discount stores exploit information asymmetry to pick up bargains on soon-to-expire products and offer them in a collection store format. However, with the entry of physical supermarkets such as Hema, Renrenle, Huaguan, and Jiajiayue, soon-to-expire products now have a 'new channel' for merchants to digest themselves, and soon-to-expire discount stores will face a situation of 'no products to sell.' This is also one of the reasons why more and more soon-to-expire discount stores are beginning to transform. The entry of physical supermarkets has accelerated the transformation of the discount store model and made competition in this track more intense. As one of the hottest offline retail formats, many physical supermarkets are also testing the waters in this track.
Wumart opened 'Meitao'; Jiajiayue opened its first discount store in Jining, the Shengtai Plaza store, with an operating area of nearly 3,000 square meters, stocking over 5,000 SKUs, covering almost all categories of a hypermarket; Renrenle opened its first membership discount store in Xianyang in Northwest China, and also opened membership discount stores in Shenzhen and Tianjin; in addition, Hema opened its first Hema Fresh Outlet store in Shanghai, and has since expanded to multiple cities including Beijing, Wuhan, and Xi'an. Huaguan opened its first discount store in Fangshan District, Beijing, with warehouse-style displays, streamlined product categories, and a focus on bulk packaging to meet consumers' daily household shopping and group purchase wholesale needs. Under the three-year pandemic and changing macro environment, the discount format has encountered a relatively favorable development node. Regarding the influx of supermarkets, Chen Yuefeng, founder of Lingchuang Media, once stated: First, consumer mindsets have changed, which has transmitted to the entire market format, and it has changed accordingly. The popularity of the discount format actually indicates that a discount consumption mindset is forming; people hope to compress more living expenses without reducing their basic quality of life. This change in consumption mindset heralds a change in the entire industry market. 'The accelerated layout or trial of the discount format by supermarkets is, I think, a tentative strategy for some retail enterprises under the current poor performance. This strategy does not necessarily require them to achieve profitability or meet certain standards,' Chen Yuefeng said. The discount format has coincidentally encountered a relatively good timing. Compared to three to five years ago, when consumption was upgrading and economic development was orderly, the environmental changes in the past three years have instead given rise to opportunities for the discount format. Second, the improvement of industry chain capabilities matches the development of the format. Manufacturers can produce such products for supply; previously, soon-to-expire products were sold at low discounts as a traffic-driving tool, but now they are specifically producing discount products, with increasingly complete categories, which provides a certain guarantee for the development of the format. 'In addition, from a price system perspective, it has a certain appeal to consumers and can meet their needs after current consumption changes. So, overall, it should be a relatively good time, but how long this period will last—if the economy continues to decline, the discount format will have a relatively long development cycle,' Chen Yuefeng said. Low prices are just the surface of discount stores; for discount stores, product selection capability and turnover efficiency are the core competencies of business operations. The key for chain supermarkets opening discount stores is to break through low-cost operations, whether in rent, labor costs, or product procurement, all pursuing the lowest prices to remain profitable while keeping product prices competitive. At the same time, he said, 'If discount stores are simply handling overstocked inventory, that only reflects unscientific procurement work; only when operations have problems will a large amount of product backlog occur.' Many industry insiders view discount stores as a business exploring lower-tier markets. For example, Hema CEO Hou Yi once stated that the Outlet store will be Hema's most important strategic project for exploring lower-tier markets. Compared to membership stores like Hema X, Outlet stores do sacrifice some product freshness to provide consumers with lower-priced products, but this does not mean that discount stores are equivalent to low-price businesses. Some industry insiders also believe that discount stores are not solely aimed at lower-tier markets. Looking at the major players in the current domestic discount retail market, they are mainly divided into national and regional categories. Taking the regional brand Xiaoxiang Life as an example, it has two sub-brands: Xiaoxiang Life and Huimai Miao. Xiaoxiang Life completed its layout in Nanjing, Yangzhou, and Hefei in 2021, while Huimai Miao focuses on lower-tier cities like Zhenjiang and Jiangyin. 'Whether it's brands like Xiaoxiang Life and HotMaxx that transformed from snack discount stores, or fresh food supermarkets that originally targeted white-collar consumers, even if they offer lower-priced discount products, their target consumer group remains the original white-collar group in first- and second-tier cities,' the insider said. The rise of discount stores found a breakthrough point in the contradiction between consumers' upgrading demands and their spending costs. As consumers gradually return to rationality, they have more demand for low-priced products, but they still place great importance on product quality, pursuing 'high cost-performance' and emphasizing the consumption experience. Therefore, the underlying logic of discount stores is that they cannot be viewed merely as a 'low-price business,' because the model under that concept has already been proven unviable—in 2017, Chengdu Carrefour tried opening a discount store in a 'store-in-store' model, mainly selling poorly performing inventory and seasonal items, but the store suspended operations the following year. The key point is that low-priced products actually place higher demands on merchants' operational capabilities—why are soon-to-expire products not selling even at a discount? The answer is obvious: products that don't sell well themselves won't necessarily sell elsewhere. Therefore, the low-price product business requires higher standards for supply chain, product selection, and inventory management; relying solely on the gimmick of 'discounts' is not enough to sustain a business. From a management perspective, discount stores must maintain 'high turnover' to survive, but 'high turnover' means merchants must open stores in bustling locations to maintain stable high foot traffic, which also entails greater cost pressure. This is also why domestic discount stores currently tend to be located in first- and second-tier cities. So, discount stores appear to be a 'low-price business,' but in reality they are 'low-price, high-quality'—beyond low product prices, their product quality and operating costs are not low. Without a strong supply chain and product selection capability, discount store inventory will only accumulate and eventually become dead stock; without refined store management capabilities, a single store's scale cannot achieve the goal of 'fast turnover.' Under the influence of multiple factors, discount stores are just 'high-quality' stores disguised in 'low-price' clothing, which poses a greater test for practitioners. The economic downturn has to some extent given rise to the discount store format. But what model will this format take in the future? Many foreign cases provide their proof. During economic downturns, many retail brands have risen: Japan's business supermarkets and discount supermarkets rose during economic downturns, such as MUJI and Don Quijote, representatives of discount retail stores; Germany's ALDI and LIDL (also known as 'poor people's supermarkets') are similar. Chen Liping, a professor at Capital University of Economics and Business, proposed a clear viewpoint as early as 2019: the future development of China's retail industry will definitely be an era where low-price retailing prevails. First, China's economy has actually passed its peak and is beginning to decline, as is residents' income; after 10 years, China will enter an aging stage, and income reduction is a certain process. 'This society has a huge demand for low cost and low prices.' Second, the fundamental proposition for China's retail industry in the future lies in how to achieve a commercial revolution through product development and private labels. Chen Liping stated that China's retail industry has now begun to enter an era of promoting format innovation through product revolution. Use low prices and professional quality in physical stores to drive the entire retail revolution. In fact, many domestic discount store brands are also focusing on private labels. Of course, regardless of the stage of private label development, such considerable gross margins at least point in the right direction. Looking back, the first person in China to publicly declare that 'discount stores are the future' was Wang Wei, founder of Fresh Legend. As early as 2017, Wang Wei proposed that discount stores are the future and will overtake hypermarkets. Under his leadership, Fresh Legend's private label products now account for more than 50% of its offerings.
For private label products, price and quality inherently conflict, and a balance must be sought between the two. Therefore, many discount stores, in pursuit of cost-effectiveness, shorten the circulation chain, directly find source manufacturers, propose 'production standards,' and thereby achieve the goal of 'optimal price, highest quality.'
Wang Wei emphasized that the essence of discount stores is not cheapness, nor beauty or variety, but simplicity and scale. 'Simplicity brings high efficiency, and scale under density has more advantages. In summary, it's the lowest comprehensive cost and higher efficiency.' Of course, amidst the waves of elimination, who can successfully transform and stay in the game—capital and enterprises participating in the track are all seeking answers.
How to integrate the supply chain, enhance scale and brand operation capabilities, and improve operational efficiency is likely an unavoidable threshold for doing discount stores well in the post-pandemic era.


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671