Entered the industry in 1999, ran supermarket businesses for 25 years. Last year, handed over the traditional business to the team, started from scratch, and explored the hard discount format.
From August 20 to 22, the 6th China FMCG Conference, themed 'Navigating the Era of Shrinkage', was held in Shanghai. During the conference, over 100 guest speakers and more than 2,000 manufacturer representatives and FMCG professionals from across the country explored how distributors and brand owners can seek growth in the current environment.
Among them, Mr. Lin Yongqiang, Chairman of Guanpaike, delivered an insightful speech titled 'Traditional Retail Transformation: Guanpaike's Hard Discount Proposition'.
The following is a summary of Mr. Lin Yongqiang's sharing, as reported by New Distribution, to benefit our readers.
I entered the industry in 1999 and have been in the supermarket business for 25 years. In April last year, I began exploring and opened my first hard discount store. Over the past year or so, I have gained many insights.
In exchanges with friends from traditional retail, most of them convey anxiety.
Over the past year, Guanpaike has delved into hard discount exploration. First, we conducted software selection and found Lemon (Lemeng) by chance. After joining the Lemon system, we received many value-added services, which allowed me to connect with partners in snack discount and various discount businesses.
As an old retail person and a discount person, my identity has been constantly switching. In the first half of this year, I made a decision to transfer all my business and equity to the team.
We were originally a regional retailer, reaching a scale of about 2 billion yuan in 20 years. While the traditional business was still profitable, I completely handed it over to the team, retaining only the Guanpaike business. This period has been particularly interesting and exciting for me, and I have become more determined and confident.
Here, I would like to share Guanpaike's methods and choices.
Guanpaike's Hard Discount Proposition
Guanpaike operates as a big-brand hard discount store. The underlying logic of hard discount may require many private labels to support it.
In Guanpaike's view, in the 1.0 stage, choosing big brands makes it easier for customers to perceive prices, without needing much consumer education.
Secondly, operating as a big-brand hard discount also helps differentiate from soft discount or other discount store formats. Our locations are in shopping malls.
Quality first. Guanpaike serves the middle class or quasi-middle class, who are more cautious in consumption but still have high requirements for quality. Therefore, the first principle in Guanpaike's business logic is quality first.
Price comparison across the entire network. We understand prices in all consumer scenarios to see if Guanpaike's pricing can impress consumers; if there is no benchmark price in the market, we internally discuss what price would impress consumers.
However, achieving price comparison advantages across the entire network is not always possible. If we cannot achieve the price advantage across the entire network, we abandon the single product.
Traditional Thinking Cannot Do Discount Business Well
Guanpaike's business logic is simple.
Traditional retailers or traditional supermarkets cannot do discount store business well.
Traditional thinking, or traditional organizational methods, are too complex. Therefore, I completely abandoned my traditional business, hoping to organize and build my business from a completely new perspective. Thus, many choices in categories and operating area had to be abandoned.
Traditional business believes fresh produce is the category with the highest stickiness, but fresh produce is relatively complex and difficult to manage, so we abandoned fresh produce and reduced the area to about 300 square meters. Wide categories, shallow assortment, only big-brand classic items.
Involving snacks, beverages, personal care, and kitchen, SKUs are controlled at 2,000. The decoration is simple, with only shelves and lights; the cash register is sponsored by the banking system, and hard decoration costs within 30,000-40,000 yuan. This is a huge difference from the traditional supermarket construction cost of 15 million yuan per store.
Human resources are also extremely conserved, with all processes designed to save labor. Each store has a standard staffing of five people, using self-checkout, with only one person at the checkout line, and the rest restocking shelves, with no other job types.
Symbiosis and Co-creation: Creating a Better Experience for Consumers
The core part of hard discount is rebuilding the supply chain relationship for discount stores.
Traditional supply chain relationships are extremely complex, with trade mechanisms requiring dozens of pages of contracts to explain how to interact with the supply chain. We used to joke that this relationship was like a 'mother-in-law and daughter-in-law relationship,' where at the end of each year, we had to communicate with suppliers about whether this year's contract was fulfilled and what to do next year.
Now, the relationship with suppliers is simple: we tell suppliers our needs—first quality, second price. If they can meet these, you propose all trade terms, whether you want cash or advance payment.
When quality and price requirements are met, we collaborate with suppliers to face the C-end and serve the C-end well. Creating value for the C-end, even negotiating packaging and transportation methods with suppliers to save costs, should be what we do.
This seems simple, but there is a lot of room for savings in the middle chain. Many products do not need to pass through the warehouses of middlemen and distributors; they can go directly from factory to store, with warehousing and distribution.
Restrain profits, solidify store-end and backend profits, and use the costs mined from the channel to reduce front-end retail prices.
For many products, 30-40% of prices are still opaque, and there may be excess beyond normal gross margins. If we can save on this, reducing the regular profit portion, then the selling price can be further reduced.
Switching from our original supermarket stores, the consumer profile was mostly customers aged 60 or 70. At Guanpaike stores, most are post-95s and post-00s, young and very calm.
Under the influence of current content e-commerce, there is a lot of impulsive consumption, which is extremely harmful to customers, as they regret purchases afterward. Guanpaike is the opposite; we bring customers a lot of experiential value.
Finally
In the future, discount transformation will be a normal action, and even traditional retail will undergo a lot of transformation.
Supply chain efficiency and operational efficiency will also be key to whether everyone can stand firm in this industry in the future. For Guanpaike, we focus more on operational efficiency; in the supply chain, everyone will level out in the future, but operational efficiency may vary greatly.
Guanpaike has just entered this field. The term 'hard discount' was not so popular at first, but by this year, at every meeting, the stores we open must add the three characters 'hard discount'.
Hot words have their positive side, but they also carry uncertainty. Personally, I still believe that we should adhere to long-termism. After completing 1.0, we need to consider how to do 2.0. In the future, we need to help customers select products, manufacture products, or customize products. These are all things to consider.
In the current Chinese market, people are increasingly indifferent to brands, but I continue to build consumer brand awareness. Only by building brand awareness can we bring long-term traffic compounding.
Guanpaike has a small dream: to save 30% of daily expenses for every family. Today, we have achieved this.
Comparing all local consumption scenarios, Guanpaike can provide customers with products and prices that are at least 30% different, and this difference has brought us a lot of customer recognition and support.
PS: Friends interested in the on-site speech content can follow the recent push of the New Distribution WeChat official account. We will organize and publish the guests' speeches for the benefit of readers.
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