“Community small supermarkets are experiencing a wave of 'renaissance.'” In Shanghai, Aldi and Hema NB are seizing community retail scenes with small-store formats, aiming to win over the 'delicate poor' demographic. Nearly 1,000 kilometers away in Zhengzhou, chain discount stores are equally thriving, with regional brands like Zhekou Niu, Duoledun, and Yicangyiku engaging in 'alley battles' across various communities. Not only new formats, but traditional supermarkets are also making a comeback, accelerating their small-store layouts. For instance, in September 2024, Zhongbai Group reopened 12 Zhongbai community supermarkets, getting closer to community consumers; in December, Zhejiang Lianhua Huashang opened its first small-format store, 'Lianhua Fude,' planning to open 50 more 'small supermarkets' next year. In fact, from the most traditional 'mom-and-pop stores' to the mini-store formats of various brands during the new retail era, and now the discount stores and community outlets popular on streets and alleys, community small supermarkets at your doorstep have always been a mainstream format. But after the consumer market underwent supply-demand upgrades, why has the community small supermarket become a focal format again? Compared to the past, what innovations and upgrades does this wave of community small supermarkets bring? Bold Exploration and Setbacks Since the concept of new retail was proposed, new and old retail brands have launched a vigorous exploration of the community small supermarket format, then known as mini-stores. The reasons behind this format exploration are not hard to understand. At that time, internet traffic was shifting to an era of stock, and giant companies began seeking growth in offline and online-integrated areas. Community scenes with concentrated populations and older community retail formats were markets worth transforming and with greater potential. In 2019, Hema began exploring the Hema mini format, claiming that 'Hema mini's sales per square foot within three months of opening could exceed that of Hema's large stores.' The following year, Hema announced plans to open 100 more mini-stores. Similarly, in 2020, Xiaorunfa opened its first store in Nantong, focusing on community fresh food consumption. At its peak, there were 103 Xiaorunfa stores nationwide. Traditional chain supermarkets also joined the 'mini-store' battle. In 2019, Yonghui Superstores expected its mini-store format to open over 500 stores cumulatively; Walmart restarted its small-format 'Huixuan' stores in 2018, planning to open 500 Huixuan stores within 5-7 years. The mini-store innovation of that time was indeed grand, but now it seems like a mess. Upgrading traditional community stores, pre-packaging previously messy bulk vegetables, replacing dim incandescent bulbs with warmer lighting, and redesigning store layouts and shelf arrangements to make space more rational—these changes can indeed bring some customers back to supermarkets in the short term. But beyond surface changes, both new and old retail formats made a mistake: using big-store thinking for small stores, turning mini-stores into scaled-down hypermarkets. The two differ significantly in product selection logic, supply chain management, and labor efficiency control, which mini-stores often overlooked. For example, a traditional hypermarket has tens of thousands of SKUs, but a community small supermarket has only about a thousand SKUs, mainly to meet daily consumption needs of community residents. Additionally, fresh produce accounts for a higher proportion than in hypermarkets, and community daily consumption demands higher freshness, leading to higher turnover rates for fresh produce, which severely tests a store's inventory management capabilities. A retail professional also pointed out that large stores focus more on the front end, while mini-stores emphasize the back end. Moreover, the cost per square meter for mini-stores is higher than for hypermarkets, requiring stricter control over labor costs and efficiency. Therefore, the mini format demands higher single-store operational capabilities. Retail innovators who blindly pursued scale effects almost all failed with mini-stores. Data shows that in the first half of 2020, Yonghui mini-stores suffered losses of up to 130 million yuan; by 2021, only 33 Yonghui mini-stores remained. Hema mini, after announcing its '100-store' plan, opened only 14 stores in a year. Ultimately, former Hema CEO Hou Yi left only one remark: thinking that 'Hema mini-store was the best business model' was a misjudgment. However, not all community small supermarkets were 'cannon fodder' for format innovation. In Hefei, home to Fresh Legend, data shows that in 2019, only 16% of people frequently bought vegetables at community fresh food stores; by 2021, this number had grown to 30%. To some extent, the pandemic changed people's consumption habits. Due to reduced physical activity range, community supermarkets closer to home became more favored. At the same time, under the new round of consumer market changes, the retail format has entered a cycle of transformation. According to the 'Chain Supermarket Operation Report (2022)' released by the China Chain Store & Franchise Association, under the guidance of relevant policies, supermarket companies are striving to expand into new tracks through multi-brand, multi-segment formats, and multi-store types, with accelerated development of membership stores and community commerce models. But this time, what's different? Market Evolution, Starting Anew In recent years, 'value for money' has become one of the most watched buzzwords in the consumer market and retail brands. 'Middle-class consumers have a very deep understanding of what good products are... Consumers are more rational; they don't want to pay 'IQ tax' anymore. They want good products but at lower prices,' said Zhang Yibo, Managing Director of BCG. According to Deloitte's 2023 survey, 'rational pragmatism' is becoming the mainstream consumption concept among Chinese consumers, with 41% of respondents agreeing that 'what I buy is what I truly need,' and 36% saying 'I enjoy finding products and brands with the best value for money.' 'You can buy expensive, but you can't be overcharged' has become a new consumption trend. During the pandemic, as offline entities suffered, brand suppliers became more willing to reach new channels. For larger channels, they could adopt specific cooperation methods, even giving up some pricing space, such as launching customized products with channels. At the same time, compared to 2016, public domain traffic dividends have become scarcer. As online traffic shifts to private domains, offline formats are further moving towards community scenes with concentrated populations. The rise of bulk snack stores is a typical case, which also drives a new round of community small supermarket format transformation. Aldi, which entered China five years ago, also started its discount transformation in 2023, launching its 'Super Value' series of private-label products. The 9.9 yuan 500ml 52-proof pure grain liquor and 8.9 yuan 950ml fresh milk became bestsellers. It plans to enter Suzhou and Wuxi in 2025, expanding beyond Shanghai for the first time. Kantar data shows that in the first three quarters of 2024, nearly a quarter of Shanghai households bought fresh produce at Aldi. Correspondingly, Hema NB had opened over 200 stores by the end of December 2024, and has already expanded beyond Shanghai, focusing on the Yangtze River Delta market. Hema's new CEO Yan Xiaolei also stated internally that Hema NB will open 300 stores by the end of fiscal year 2025. Not only offline retail brands, but Dingdong Maicai also opened its first offline outlet store in December 2023, mainly to meet community residents' fresh food consumption needs. Not only in Shanghai, but in Hefei, Fresh Legend, founded in 2015 and positioned as a community fresh food discount supermarket, has already opened over 200 stores locally. There are many entrants. Compared to the former mini-stores, this round of community small supermarket innovation focuses on 'discount' and 'affordable prices,' with a prominent feature being the strengthened layout of private-label brands. By optimizing distribution costs and retail channel fees, they achieve higher product cost-performance. In the past, branded products were more expensive not only due to huge marketing investments but also because they had to pay inventory fees and shelf fees to supermarkets. Supermarket private-label brands not only avoid extra costs and lower prices but also have more flexible pricing control and save some distribution costs in turnover. Continuously developing differentiated private-label products and pursuing extreme operational efficiency have become core capabilities for the current community small supermarket format. It is understood that Aldi's private-label brands currently account for over 90% of its store products. Qingmei Membership Store, mainly in Shanghai's community market, has about 90% of its products self-produced and self-sold by Qingmei Group. Qingmei has about 10,000 mu of high-standard vegetable facility farmland in Shanghai and is a national key leading enterprise in agricultural industrialization. Across the retail industry, enhancing private-label capabilities is an irreversible trend. Data from 2021 shows that the top 100 supermarket companies have an average of nearly 1,000 private-label SKUs, accounting for about 4.7% of sales, with a continuous growth trend. Behind strengthening private labels, various retail brands are paying more attention to supply chain capabilities in this round of innovation, which is also a key step to improving operational efficiency. Compared to the new retail era's emphasis on internet thinking and digital operations, this 'renaissance' of community small supermarkets places more importance on products and operational capabilities, which is a return to and deepening of the essence of retail. But the road ahead is still long. Epilogue As mentioned earlier, community supermarkets are not a new concept. Besides Fresh Legend in Hefei, there are numerous regional and local small supermarket brands. A typical example is Qian Dama, whose core market is South China. By emphasizing 'not selling overnight meat,' it aligns with local residents' high demands for fresh ingredients, making it a leading community chain small supermarket brand in the region. Not only horizontal competition, but vertical competition is also fierce. Around the community consumer market, from a format perspective, instant delivery to home via front warehouses, targeting different consumer needs, has become a major competitor to community small supermarkets. In terms of categories, bulk snack brands have taken away market share for daily snack consumption and are also expanding into new formats like discount supermarkets. As China's urbanization rate steadily increases, the competition for community retail scenes will continue to intensify. According to NielsenIQ analysis, the increase in high-density residential areas has brought more community consumption traffic. In 2023 alone, community stores accounted for 52% of the national modern trade channels, up 6% from 2020. In the future, this number will certainly continue to grow. Given the highly fragmented nature of China's retail brands and consumption scenes, community small supermarkets will face more competitors. But China's retail industry has already gone through an intense and brutal competitive era. What we need to see is that behind this rise of community small supermarkets is a massive shift in consumption trends in China's retail market, providing greater opportunities for transformation in traditional product supply chains and retailer-supplier relationships. Currently, only retail formats that truly solve consumer needs and have comprehensive strength in products, services, and operational capabilities can have the opportunity for a 'renaissance.' 【New Order · Symbiosis】 ****The 10th China FMCG Innovation Conference Time: March 17-19, 2025 Location: Chengdu, China