Dear readers, I am Yuan Lai from New Distribution. Today, I believe no distributor boss would say that today's market is the same as the past. The changes are too big and too fast. This is the lament I heard from bosses when I visited distributors over the past year. In the past, distributors' business perspective was mostly focused on upstream manufacturers. Because past business growth was driven by brand manufacturers, there was no need to look at external market changes; just follow the manufacturers' lead. But now, if distributors want to continue to achieve business growth, they must shift their perspective from upstream manufacturers to downstream retail.
Regarding changes in the external retail industry, combined with insights from external experts, I believe that in 2025, distributors should focus on retail changes in three areas:
- Mainstream supermarket reforms
- Expansion of discount supermarkets
- Growth of instant retail
Let me elaborate on each.
Mainstream Supermarket Reforms Supermarket reforms have been a hot topic since March 2024 when Pangdonglai announced assistance in reforming Bubugao, and then in June, reforming Yonghui Superstores. Just recently, on February 6th, Wumart Supermarket (ranked 6th in China's top supermarket list in 2023) fired the first shot of the year by "learning from Pangdonglai's reforms." It's evident that mainstream supermarket systems have reached a stage where they must change and adjust. Some industry experts even say that some supermarket chains are critically ill and need to be admitted to the ICU. This year, I shared at many manufacturers' annual meetings: in the seller's era, mainstream supermarkets were brand-centric, charging manufacturers various fees such as entry fees, display fees, and barcode fees. Retailers actually profited by providing a sales platform for manufacturers. By providing a sales platform, supermarket stores didn't need to consider whether consumers needed certain products or what new product demands existed. Product launches were left to manufacturers, relying on brands to manage products, and in-store sales assistants were often dispatched by brands. I won't elaborate on why reforms are happening at this time. My core point is: the trend of supermarket reforms began to spread nationwide in 2024, and 2025 will be the true year of implementation and execution.
Naked procurement, direct sourcing Streamlining SKUs Reducing purchase and retail prices Reducing non-first-tier brand products and duplicate category displays Eliminating underperforming products Adding differentiated trendy products Reducing the number of suppliers
Establishing a core supplier system
......
The above measures will become normalized in supermarket reforms in 2025. I want to emphasize to all distributor bosses:
For distributors, in the past, supermarkets were like "landlords collecting rent"—as long as you paid enough, they didn't care about anything else. But now supermarkets are trying to change this, not only collecting rent but also auditing and making demands. In major FMCG categories, the goal of mainstream supermarket reforms is definitely: wide categories, narrow products. What does that mean? I previously communicated with Mr. Song from Shenzhen Xingzhidao Trading, who summarized it more vividly: rich but not repetitive products. Taking the oral care category as an example, besides toothpaste, there are toothbrushes, dental floss, mouthwash, breath sprays, electric toothbrushes, water flossers, oral care solutions, and even dentures. Additionally, there are different toothpastes and mouthwashes for adults and children. Categories should be wide, covering all types, but each subcategory should have only 1-2 SKUs. This places higher demands on every supermarket distributor. Duplicate category SKUs should be streamlined, and subcategories should be increased to give consumers more choices. Distributors who were entirely brand-oriented in the past will find this insufficient; every brand wants to put all its SKUs on the shelves, not necessarily to sell more but to occupy shelf space. Regarding supermarket reforms, during my visits to distributors in 2024, I saw many bosses who didn't take it seriously or even rejected it, thinking it was a passing trend. Here, I'd like to remind you: supermarket reforms are not a passing trend. "Reform" is a new term, but it's just a name for the upgrade of supermarket retail operations. Today it's called reform; next year it might be called something else, but the trend of mainstream supermarkets continuously improving operations and being consumer-oriented will not change. Optimizing and shortening the supply chain is definitely the direction. I suggest that all distributor bosses start actively adapting and embracing local supermarket reforms in 2025. Of course, some distributors might say their city's supermarkets haven't started reforms yet. Then it's time to build internal strength. Whether or not to learn from Pangdonglai's reforms, supermarkets must self-iterate and optimize; otherwise, they will inevitably be eliminated by market competition. Distributors should plan ahead.
Expansion of Discount Supermarkets On December 21st, Wanchen Group launched "Laiyoupin Discount Supermarket," and on January 22nd, Zhao Yiming's official account announced the launch of Zhao Yiming Discount Supermarket. Additionally, on September 27th, Snacks Youming fully entered the wholesale supermarket business. According to Kantar Consumer Index data, in 2024, the penetration rate of discount snack stores exceeded 30%, with significant sales growth in township markets. To expand the market, retailers are increasing investment in discount formats. Leading snack brands have successively entered the discount wholesale supermarket sector (i.e., discount supermarkets, a new industry term for distinction and attention). Besides selling beverages and snacks, based on community formats, they have added eggs, fresh milk, frozen and refrigerated foods, seasonings, grains and oils, daily chemicals, trendy toys, and short-shelf-life bread. This will not only directly impact existing small and medium-sized community supermarkets but also, like snack chains, the product circulation in discount supermarkets has little to do with local distributors. We believe that discount snack stores have successfully built a food and beverage circulation chain (with a markup rate of 1x-1.5x), which is more efficient and lower cost than the current mainstream food and beverage chain (2x). If snack chains can shorten the food and beverage chain, discount supermarkets can naturally do the same. If discount supermarkets are present in your city, from a distributor's perspective, my suggestion is: if conditions allow, join 1-3 discount supermarkets. Focus on learning; only by understanding their product structure and pricing can you help local community supermarkets respond.
Growth of Instant Retail On September 24th, Douyin's hourly delivery service was launched nationwide, intensifying instant retail. On October 15th, Meituan announced that its lightning warehouses exceeded 30,000, with a target of over 100,000 by 2027. Just a few days ago, JD.com's food delivery service officially launched, entering with a "5% commission" to attract merchants, a rate significantly lower than Meituan's and Ele.me's 6%-8%. We believe that with front-warehouse formats like PUPU Supermarket, Dingdong Maicai, Xiaoxiang Supermarket, and Sam's Club Cloud Warehouse gradually becoming profitable, coupled with Meituan, JD.com, Ele.me, and Douyin increasing investment in O2O instant retail, instant retail remains a significantly growing channel. According to Kantar data, in 2024, the front-warehouse model in instant retail performed remarkably, with annual sales growth exceeding 26%. Of course, compared to mainstream supermarket reforms and discount supermarket expansion, this seems less relevant to distributors' businesses. However, I suggest that distributors in provincial capitals or first-tier cities should pay close attention. Especially for categories like liquid milk, grains and oils, sanitary pads, and laundry and shampoo products. In particular, provide one-stop product supply chains to the chain merchants behind Meituan's lightning warehouses. I have come across daily chemical distributors who, through deep cooperation with O2O lightning warehouses, are trying to expand categories and build a daily chemical supply chain, and in the future, cover small and medium-sized supermarkets with their daily chemical product portfolio.
The above are the retail changes distributors need to pay attention to in 2025, with opportunities and challenges. Understanding retail industry changes in advance allows for proactive response rather than being passive later. Around these topics, from March 17-19, in Chengdu, at the 10th China FMCG Innovation Conference & the 4th China FMCG Hard Discount Conference & the 4th China FMCG Distributor Conference, we have organized special sessions on supermarket reforms, instant retail, and hard discounts for joint discussion. If you are interested in these topics, don't miss it!
【New Order · Symbiosis】 The 10th China FMCG Innovation Conference Time: March 17-19, 2025 Location: Chengdu, China