Click to read the original article for details. The two benchmarks of the new retail industry have successively encountered bottlenecks. At the beginning of this year, affected by consecutive losses, Yonghui stripped the "Super Species" business segment from its listed system; just a few days ago, a Hema Fresh store in Kunshan, Suzhou, closed after only eight months of operation. In fact, it's not just these two benchmarks; from unmanned supermarkets to unmanned shelves, countless players under the banner of new retail have retreated in defeat. Now, with more and more voices of doubt, new retail, which has been around for nearly three years, seems to have quietly entered a "three-year itch" cycle. So, where is the crux of the industry's problems? And where is it headed in the future? I think it's time to reflect on the industry. The Hype of Offline The revival of offline stores has been a notable feature since the advent of new retail. Once upon a time, under the impact of the "Internet+" wave, traditional retail was in a state of lament and desolation. Most retailers, mainly department stores and supermarkets, saw continuous declines in performance, some even ending in store closures, including well-known supermarkets like Walmart, Carrefour, and CP Lotus. In contrast, e-commerce was booming, with advantages like convenience and low prices. More and more people were keen on online shopping with home delivery, and countless couriers were busy shuttling through streets and alleys. Under this stark contrast, offline retail faced pain and confusion about the future. Some even proclaimed that "e-commerce has risen, retail is dead." However, many failed to realize that the rise of e-commerce was largely due to the internet's traffic dividend, and online traffic is not inexhaustible. As the dividend waned and costs rose, the rapid momentum of e-commerce was inevitably curbed. At this point, retail giants turned their attention back to offline, attempting to turn traditional stores into new traffic entrances. Besides the thirst for new traffic, offline also holds the following two significances for retailers: First, the offline market is larger. Although e-commerce once battered physical retail, the true power of seemingly thriving online retail is not as strong as people imagine. According to the National Bureau of Statistics, in 2018, China's total online retail sales of goods and services reached 9.0065 trillion yuan, accounting for less than a quarter of total social retail sales in the same period; in other words, over 75% of the entire retail industry's scale was completed offline. This highlights that the offline retail market is much larger than online. Second, offline experience is irreplaceable. Currently, consumers have become the starting point of all business value. With rising income levels and improved quality of life, people's consumption concepts are changing, placing more importance on consumption experience, and mere high cost-performance is gradually failing to meet consumer demands. At this point, despite the many conveniences of online shopping, consumers cannot judge quality, size, or preference through direct contact with products, exposing the hard flaw of insufficient online consumption experience. Conversely, whether geographically, psychologically, or functionally, offline stores are closest to consumers and offer more direct sensations and services. Moreover, they are important scenes for emotional connection and catharsis. Not to mention how much one can buy, for many, the sheer joy of shopping is enough. It is for this reason that various players have rushed to focus on offline. Quietly, physical retail has not only welcomed a "second spring" but also stood at the forefront. The Dilemma of Heavy Assets In the race to lay out offline, players have spared no effort, from BAT to Meituan and Xiaomi, all joining the battle for physical resources. For example, Alibaba invested in New Hua Du and Gaoxin Retail, Tencent continued to consolidate its alliance with Yonghui Superstores, and various retail convenience store owners "overnight" became "employees" of internet giants; while giants like Suning, which already had many stores, focused on consolidating advantages and expanding their territory. Additionally, many merchants carried out major renovations of existing stores from "face" to "substance," and did not forget to play novel tricks like "unmanned" formats. The players' various efforts drove the comprehensive upgrade of retail terminals, and consumers truly felt the arrival of the new retail era: For example, the birth of fresh food supermarkets allowed people to feel as if they were in an aquarium, feasting their eyes on various aquatic products while realizing the dream of "strolling and eating"; For example, bookstores began selling coffee, and large shopping malls featured indoor gardens and ice rinks. While shopping, people could also enjoy a one-stop service of eating, drinking, and having fun; For example, more and more black technology appeared offline. In stores, consumers could not only genuinely feel the presence of products and services but also have the opportunity to experience new gadgets like VR, face-scan payment, and robot guides; Another example: even in offices, unmanned vending machines or unmanned shelves are often seen, and the snacks and drinks displayed on them cater well to the needs of many white-collar workers. All the above has indeed greatly enhanced the shopping experience for consumers, and the renovated stores have also played a role in attracting traffic to a certain extent. From this perspective, promoting new retail development with offline as the entry point is successful. However, just as people were encouraged by the prosperity of offline, a discordant note appeared in the industry. In the first half of 2018, the once-popular unmanned shelves suddenly declined. Many companies were exposed to financing failures, layoffs, or even closures. Shelves from different companies in office spaces came and went until they disappeared. Meanwhile, statistics show that over 90% of fresh food e-commerce was in a state of deficit. The bottlenecks of Super Species and Hema Fresh mentioned at the beginning of this article expose the common problems of the industry. That is the importance of profit. Objectively speaking, stores are heavy-asset operations. Not to mention the costs of rent, labor, and operations, just the renovation, upgrade, and expansion of offline stores require large cash expenditures. Players with average financial strength cannot withstand it for long. Moreover, the construction of warehousing networks lags behind the rapid expansion of physical retail formats. If it's just one city, it's manageable, but if the target scope is nationwide or even overseas, the corresponding costs will inevitably rise further. It must be known that no matter how many new retail plays there are, it is ultimately a business; since it's a business, for merchants, the pursuit of profit maximization is always the eternal truth. No matter how eye-catching various new models are, once the gorgeous coat is removed, the base color is "interest." Even if emerging formats like unmanned shelves can gain capital favor in a short time, once the trend fades and capital withdraws, and the platform fails to find a profitable method, the ending is likely to be a mess and a quiet exit. So, focusing on offline is good, but it's not enough. Supply Chain is the Key So, besides seizing physical stores, what else do players need to do? My answer is: further upgrading supply chain construction and management. The so-called supply chain, in simple terms, refers to the network structure formed by connecting nodes such as raw material suppliers, manufacturers, distributors, and retailers involved in the production and circulation of a product to meet the needs of end users. This is a process of "four flows in one" (information flow, capital flow, logistics, and business flow). If any node has a problem, it will affect other links in the entire supply chain, thereby negatively impacting the value addition of all enterprises in the supply chain. It can be seen that since the birth of new retail, most changes and upgrades in the industry have occurred at the consumer end, with offline stores being an important part. However, new retail is still retail, and the industry must ultimately return to the essence of retail, which is to efficiently provide consumers with products and services that exceed expectations. To truly achieve "efficiency" and "exceed expectations," besides working on the retail terminals directly facing consumers, strong supply chain support is indispensable. Because before products finally reach consumers, they go through a series of processes such as production, processing, and transportation, all of which occur on the supply chain. Imagine, if someone wants the food they buy to be produced today or yesterday, can it be achieved just by improving the store's appearance? The answer is naturally no. At the same time, the most direct way for new retail players to profit is to reduce costs. However, under the premise of ensuring the quality of various products, there is little room for reducing raw material costs and production processing costs. Take the iPhone as an example: its various material costs are borne by multiple countries and regions, each fully leveraging its comparative advantages to provide the most cost-effective raw materials (such as screens, chips, processors, etc.) and labor, based on which production and assembly are carried out—this does not even include high R&D costs and other intangible costs. Since the costs of raw materials and production processing are difficult to reduce, we must start from other aspects, and the supply chain is precisely the key to solving the problem: it connects multiple complex entities related to the product, involving both enterprises and individuals; at the same time, for complex product supply chains, they may span hundreds or thousands of stages, with a cycle lasting several months or more, involving different countries or regions around the world. If upstream and downstream enterprises can coordinate and collaborate, transforming the originally loose relationship into a composite network, then operational efficiency can be improved, various costs in the circulation process can be reduced, and greater benefits and value can be brought to all related enterprises. However, it must be admitted that the vast majority of retail enterprises have not attached great importance to the supply chain. Upstream and downstream enterprises are still scattered and have not achieved good linkage. Their eyes are still on short-term interests, with weak awareness of win-win cooperation, obvious "information silo" situations, and insufficiently rapid response to market changes. When business performance is poor, enterprises still overly attribute reasons to explicit indicators like product prices and sales volume, often ignoring the high-cost problems caused by inadequate supply chain construction and management. Research shows that if a complete and effective supply chain management strategy is implemented, the benefits can be as follows: shipping capacity will increase by 16%-18%, inventory will decrease by 25%-60%, order fulfillment cycle will shorten by 30%-50%, forecast accuracy for market demand will improve by 25%-80%, overall productivity will increase by 10%-16%, supply chain costs will decrease by 25%-50%, and output will increase by 10%-20%... These data further confirm: When increasing sales and raising product prices become increasingly difficult, the competitiveness of the supply chain will become the key to standing out. In summary, whether it's selling personality and experience, or controlling costs and improving efficiency, the supply chain is undoubtedly the direct business carrier. This means that new retail players must not only lay out at the consumer end but also make efforts at the supply end. Therefore, how to build a new type of supply chain is not only the key to promoting the healthy development of enterprises but also the focus of industry competition in the future. How to Proceed Next? Today, the rapidly growing new retail has indeed encountered bottlenecks. But from another perspective, isn't it a good thing to expose shortcomings early? At least we can take this opportunity to understand: Relying solely on consumer-end changes and novel formats is not enough to support the healthy and sustainable development of new retail. So, what should true new retail look like? Looking at the development history of the retail industry, it can be found that no matter how forms and formats evolve, they cannot avoid the three keywords: cost, efficiency, and experience. According to this logic, new retail should, under the empowerment of emerging technologies such as artificial intelligence, big data, and cloud computing, reduce costs while achieving a dual improvement in supply chain efficiency for the B-end and consumer experience for the C-end. If these are achieved, the industry's prospects will naturally be limitless. So, it's time to consider building a new supply chain system—and the first thing to do is to conduct deeper digital transformation of enterprises in the supply chain. Due to the "strength" of consumers, the current retail industry must not only look at product sales but also wholesale, manufacturing, and design. In other words, production and circulation must be integrated. After retail terminals become data collection points and user experience centers, the upstream of the supply chain should also extend further, requiring the assembly of product design, marketing planning, creativity, etc., to improve service capabilities for consumers. The key to connecting the upstream and downstream of the supply chain lies in digitalization. At the same time, digitalization at the C-end has been quite effective, but digital transformation at the B-end is just beginning. The reason is that apart from core enterprises, most others in the supply chain are small and micro enterprises and traditional enterprises, with generally low informatization levels. Their internal business processes and information transmission methods are far from meeting the requirements of today's information age, making the entire supply chain unable to respond quickly to rapidly changing market demands. Increased demand uncertainty and reduced forecast accuracy are also key reasons for persistently high costs, inventory backlog, and difficulty in profitability. Therefore, digital transformation of upstream and downstream enterprises in the supply chain is the prerequisite for supply chain upgrades in the new retail era. This requires relying on information infrastructure such as big data, cloud computing, the Internet of Things, and intelligent terminals, conducting deeper data collection around people, goods, and venues, thereby forming a comprehensive digital system for consumers, products, services, marketing, channels, and logistics, achieving thorough data connectivity across the entire supply chain system. In this way, it not only shortens the response time of the entire product supply chain, reduces costs while improving efficiency, but also brings dual improvements in merchant profits and consumer experience. However, digital transformation is only the first step in supply chain reform. How to enhance trust and collaboration among enterprises in the chain, strengthen supply chain infrastructure construction such as warehousing and logistics, and improve the logistics distribution system are all key considerations for the future. Epilogue As we near the end, I want to say: our country is a huge market with a population of 1.4 billion, and everyone is entitled to enjoy the dividends of industry development. I believe the ultimate goal of each player is not limited to a few cities. Moreover, the development of anything will not be smooth sailing; setbacks are inevitable. This is only the third year, and there is still much to do, and the future is full of infinite possibilities. The road is long and winding; the journey of new retail has just begun. Source: Suning Wealth Information