A set of data from McKinsey is changing the face of China's county towns. It predicts that by 2030, over 66% of China's personal consumption growth will come from markets in third-tier and below cities, county towns, and townships. For a time, the 'sinking market' became a new trend in the national consensus. Public opinion praised it, capital rushed in, and brands went down-market. Everyone was convinced that county towns would be the core battleground for boosting consumption in the next decade. But when we actually took a tour of county towns, we found that many storefronts had already pulled down their rolling shutters, and printed 'prime location for transfer' signs were even fading. Most of the stores still open had empty seats and owners scrolling through Douyin. The wave of store closures in county towns is far more brutal than we imagined.
The Glorified Value Trap Becomes Crowded After Capital Goes Down In the market perception of a few years ago, county towns were typical value traps. Big cities have high rents, expensive labor, and fierce competition. County towns, on the other hand, seem to have low rents, a slow pace of life, and stable consumer demand. Many locals who worked outside, and white-collar workers tired of urban involution, chose to open stores in county towns. But unexpectedly, major chain brands also quietly caught wind and began a frenzied down-market expansion. Data from Can Yin Lao Ban Nei Can (Catering Boss Insider) shows that as of the end of 2025, Mixue Ice City's stores in third-tier and below cities accounted for a stable 58% of its total; Gu Ming's township stores accounted for as high as 44%. KFC accelerated its down-market expansion in 2025, with over half of its new stores located in third-tier and below cities. Even brands like Starbucks and Naixue Tea, which were once cautious about down-market, began to densely deploy in top 100 counties. Commercial real estate giants are also in sync. Wanda, Wuyue, China Resources Mixc Lifestyle, Intime Commercial Management, and others are competing fiercely, opening one-stop complexes in county towns, creating a strong passenger flow siphon effect. According to reports from Winshang.com, with 2023 as a watershed, the expansion path of new shopping malls shifted from broad networking to precise positioning, with site selection increasingly focusing on 'effective sinking markets' with active economies and strong commercial carrying capacity. On the surface, county commercial prosperity looks thriving. Business districts are getting bigger, brands are increasing, and streets are becoming livelier. But behind the bustling street scenes often lies a slum. The influx of a large number of players directly squeezed the originally loose market space. Limited local customer flow is continuously diverted; homogeneous categories pile up in competition, with price wars and promotional battles unfolding in turn. The China General Chamber of Commerce once provided data showing that the annual closure rate of physical stores is as high as 37%, with an average of 28 stores closing every hour. Among them, the catering industry has become the hardest hit, with nearly 10,000 stores closing, 60% of new stores failing to survive more than one year, and some popular franchise categories having an average lifespan of only 3-5 months. Many people enter with the illusion that 'county towns are easy to make money,' but they don't realize that capital has already arrived first.
The Real World Behind the Rolling Shutters The Sacrificial Victims of County Towns Under Capital Walking the streets of county towns, transfer notices are not mainstream but are the most eye-catching. Some media have described that many stores' operating periods are not as long as their renovation time. After a grand opening with gongs and drums, there is a brief bustle of buy-one-get-one-free and recharge 100 get 200, and then one day, without warning, they suddenly close. In this wave of closures, two types of people are hurt the most: one is the entrepreneurial novice full of hope, and the other is the local old merchant rooted in the local community. An entrepreneur from Guangdong, who emptied his savings and borrowed from relatives and friends, invested a million yuan to open a barbecue hotpot restaurant, but couldn't even survive the two-month rent-free period, and the equipment was eventually bought at a low price by second-hand recyclers. In a shopping mall in a county town in Sichuan, 10 of 20 catering stores closed within a year, including popular categories like internet-famous milk tea and chain burgers. The '2026 China Chinese-Style Catering White Paper' gave a brutal statistic: in 2025, China's catering closure rate reached 49%, with franchise stores accounting for over 70% of closures. The failure rate for franchise entrepreneurship in third- and fourth-tier cities is as high as 74%, with over 80% of losses concentrated in milk tea, burgers, coffee, and baking. These four categories have been called the 'bankruptcy four-piece set' by the self-media account @Flywheel飞未. Most of these novices believed the franchise recruitment propaganda, thinking that relying on brand effect would quickly recoup investment and make profits. But after opening, they found that within 300 to 500 meters, there were already two or three similar chain stores. Worse, some signed contracts with the headquarters claiming a total investment of 250,000 yuan, but before opening, they were forced to add another 450,000 yuan. The mandatory purchase of refrigerated cabinets was three times more expensive than market prices, electronic screens charged 40% more than peers, and the so-called 'headquarters supervisor' took 8% of monthly turnover, while daily turnover never exceeded 800 yuan. Compared to opening a store, brand quick-recruitment harvesting of county town leeks seems to make money faster. Besides the enthusiastic novices, local old stores that have been around for half a lifetime are also in a difficult situation. In county towns, grocery stores, small supermarkets, and breakfast shops along residential streets can still maintain relatively stable business. These stores may not make people rich, but they have the advantage of steady, long-term income. However, many traditional old stores are facing a cliff-like decline in customer flow. A noodle shop owner in Jiangxi who had been in business for 15 years once said that in the past, the old street was bustling with people, and his shop had business from morning to night. Now young people go to the newly opened shopping malls to eat, saying the environment is better, there's air conditioning, and more variety. His old shop can't sell half of what it used to sell in a day. Old shop owners want to lower prices to attract customers, but their profits are already thin, leaving no room for concessions. They want to transform and upgrade, but lack ideas and funds. Stuck between a rock and a hard place, they can only watch their business decline day by day. The dumpling shop next door has already posted a transfer notice, and the owner knows that his shop will eventually pull down the rolling shutter too.
Systematized Capital Is Crushing Individual Small Businesses How can scattered individual merchants compete with systematized capital? This is an inherently unequal contest. Generally, the opening of a new store by a giant signals a standardized battle involving site selection, supply chain, brand voice, digitalization, business model innovation, and market positioning. They have comprehensive advantages that individual merchants cannot match: For example, on the supply chain side, national centralized procurement lowers the cost of goods, and the profit margin per item far exceeds that of street-side shops. For instance, Mixue Ice City can control its material costs within 30% of the selling price, while the material cost for individual milk tea shops in county towns is generally over 50%. For example, on the operations side, the headquarters provides standardized management, marketing planning, and store training, so even inexperienced staff can operate according to procedures. Some chain brand headquarters regularly provide 'festival marketing plans' and 'member acquisition strategies,' and even send teams to guide stores on-site. These are resources that individual merchants cannot imagine. Another example is on the recruitment side, new commercial complexes naturally favor leading brands when recruiting tenants. To enhance the mall's prestige and gather foot traffic, developers offer chain brands generous rent reductions, renovation subsidies, priority locations, and other favorable conditions. Local small merchants and individual entrepreneurs not only receive no support but also face rising rents and the most brutal market competition. More fatally, many entrants greatly underestimate the current consumer demand in county towns. Today's county residents are no longer a consumer group that only pursues low prices. Young people who have worked or studied outside have brought back new consumption concepts, and local middle-aged and elderly groups are increasingly paying attention to consumption experience and brand reputation. Everyone wants affordability, but also values environment, service, and novelty. The traditional mom-and-pop store model and outdated business thinking can no longer keep up with the pace of consumption upgrading. Add to that the long-standing inherent problems: the continuous outflow of young and middle-aged people from county towns, shrinking the core consumer base; e-commerce live streaming continues to divert offline retail, further compressing the living space of physical stores. Multiple pressures stack up, making it increasingly difficult for already vulnerable individual merchants. McKinsey says the sinking market will carry the banner of China's consumption growth, and that judgment is not wrong. But we are still too naive; the market pie is growing, but that doesn't mean ordinary business people can get a slice. Most of the growth dividends flow to the head players who hold capital and have complete systems, not to the small shops on the street.
County Towns Are No Longer a Safe Haven The Hard Battle Has Just Begun Once, many people regarded county towns as a safe haven from involution. They thought that by leaving the fierce competition of big cities, they could earn a stable income in small towns. Now, reality has shattered this illusion. Unless you are a highly differentiated specialty store, or an old store that has deeply cultivated local relationships with real skills. The consumption story of the sinking market continues to unfold as predicted. In the coming years, it will remain the most dynamic sector of China's consumption. But the dividends for ordinary individual merchants have quietly come to an end. Capital will tread every small town, reshaping the rules of county commercial. And the rise and fall of rolling shutters also tells the story of countless ordinary people struggling and moving forward in the tide of the times.
References: [1] Winshang.com - 'The Battle for County Kings: China Resources, Intime Getting Fiercer...' [2] Can Yin Lao Ban Nei Can - 'County Catering Bosses Can't Smile Anymore' [3] Jin Cuo Dao - 'The New Wave of County Town 'Lie Down and Earn' Businesses Are Showing Their True Colors' [4] Phoenix Weekly - 'The 'Bankruptcy Three-Piece Set' for County Town Middle Class, It Ranks First' [5] Flywheel飞未 - 'From County Boss to Losing Family Fortune: Why Do People Line Up to Jump into Franchise Pits?' [6] Lianshang.com - 'Sam's Club, Hema, Meituan Opening Stores Madly, How Can Small Merchants Break Through?'