Two pandemics triggered key turning points in the history of China's retail development. In 1995, Carrefour fired the "first shot" in seizing the Chinese market. At that time, Carrefour was at its peak; wherever it opened, surrounding businesses withered. At the turn of the millennium, the trendiest thing was to stroll through a hypermarket with a shopping cart on weekends, then carry bags and ride the free shuttle bus home. From the perspective of the "more, faster, better, cheaper" consumption utility, the emergence of large supermarkets first broke through "more." Open shelves defeated the "three-foot counter" of mom-and-pop grocery stores, maximizing consumers' curiosity and purchase desire, opening a new world for Chinese consumers. The market wouldn't have just one player. Soon, foreign supermarkets flooded in, and local supermarkets rose, with mid-to-large supermarkets centered on the hypermarket model pushing more Chinese families to adopt shopping carts symbolizing quality of life. In 2002, Carrefour, as a pioneer, first entered Hunan Province in central China. This supermarket giant accelerated its "rural encirclement of cities" strategy—at that time, it faced frontal pressure from Walmart and Metro, and flanking attacks from regional local supermarkets. What Carrefour didn't expect was that a bigger crisis was brewing, which directly slammed the brakes on its city-conquest plans. SARS arrived. This pandemic, which broke out in Guangdong and quickly spread to Southeast Asia and globally, brought offline entities to a standstill. E-commerce platforms born during the epidemic and thriving afterward plunged traditional supermarkets into a long twilight. Similarly, the COVID-19 pandemic produced different results. When cross-regional logistics were delayed or halted due to the pandemic, people discovered that locally available goods with instant delivery were the source of certainty. "Delivering everything via food delivery" became a weapon for traditional supermarkets to recover and counterattack e-commerce. In the "more, faster, better, cheaper" retail demand coordinate system, offline supermarkets, traditional e-commerce, and instant retail are staging a new drama—traditional supermarkets, which have been in China for nearly 30 years, are fighting old rivals in traditional e-commerce while making new allies in instant retail. Amid the turbulent tides, new stories are unfolding.

01 "Cheaper": The Fundamental Logic Behind E-commerce's Rise The fall of hypermarkets dates back to the SARS outbreak in 2003. That spring, a female employee of Alibaba returned to Hangzhou after attending the Canton Fair, was diagnosed with SARS, and hundreds of Alibaba employees were quarantined. Jack Ma sent a brief email from Lakeside Garden, filled with exclamation marks, calling the quarantine an "enviable opportunity" to boost morale. "We can not only accumulate a lot of experience for ourselves and our country in working from home under special circumstances! It also fills the gap and sets a Guinness record for nearly 400 people worldwide working from home without preparation to maintain the world's largest commercial website!" Three days after the quarantine, Taobao, which would change Alibaba's fate, went online, ushering China's retail industry into the e-commerce era—because of SARS, many people were forced to use the internet, and Alibaba's performance didn't decline but set new records. From a human nature perspective, "cheaper" takes precedence over "more, faster, better," being the most fundamental and basic need. Traditional supermarkets have higher operating costs than e-commerce. Including store rent, labor and material costs, and distributor and middleman commissions, a product costing 10 yuan might be priced at 40 yuan. The user value of e-commerce platforms lies precisely in price comparison advantages. E-commerce has low marginal costs and significant scale effects. Once sales scale is achieved, channels can further dilute fixed costs of infrastructure construction and gain stronger bargaining power with upstream manufacturers. Online shopping, born as a reluctant choice during SARS, deeply tapped into people's psychology of enjoying convenience while getting good quality at low prices. Typing on keyboards replaced walking to supermarkets; e-commerce gradually transformed from a business model into a lifestyle. Another competitive edge of e-commerce lies in the "more" quadrant. Virtual space offers richer supply; e-commerce moved supermarkets online, creating a more borderless shelf. On Zhihu, the question "What products on Taobao make you exclaim, 'Ah, almighty Taobao!'?" has 3,448 answers: a translator found a Slovak language scholar, a netizen craving hometown food bought roadside pancake, a flower enthusiast bought five ladybugs to prevent aphids... Actually, even without the pandemic, China's e-commerce would have flourished. The reason is simple: e-commerce defeated supermarkets fundamentally because its significant advantages in price cost, product richness, and customer coverage compensated for its "not fast enough" timeliness disadvantage. Alibaba Group's e-commerce transaction volume (GMV) for fiscal year 2016 exceeded 3 trillion yuan. Reaching this scale took Taobao 13 years, while Walmart took 54 years. From then on, the gap between e-commerce and supermarkets widened.

02 "More": An Old Concept No Longer Sexy After more than two decades of supermarkets in China, the market has produced a new generation of consumers who are no longer sensitive to "more." Fewer people visit supermarkets, and large supermarkets collectively face a "midlife crisis." How to address the new generation's "want this, want that, and want more"? One approach is to root in lower-tier markets, targeting groups still fresh to "more." But e-commerce, the old rival, is also grabbing rural areas. Around 2012, Taobao and JD.com joined the "wall-painting" war, with the main goal of capturing rural markets. Slogans like "To live better, get on Taobao" and "Stop running around for work, start a Taobao store" appeared in villages across China. That year, spending by consumers in county areas on Taobao increased 87% year-on-year. If e-commerce's downward expansion mainly seeks to tap traffic and solve consumer mindset issues, then traditional supermarkets' downward expansion is harder, needing to overcome supply chain challenges. Third- and fourth-tier cities are a huge market, but due to less developed logistics and warehousing facilities compared to first- and second-tier cities, there's a market gap. Considering supply chain management difficulties, the downward path for large supermarkets is destined to be a process that is urgent but asset-heavy and long-term. The China Chain Store & Franchise Association released the "2021 China Supermarket TOP100," showing that in 2021, the overall performance of the top 100 supermarket companies was not optimistic, with sales declining. Including Yonghui Superstores and RT-Mart, ranked second and third, 62 companies saw negative sales growth, nearly double the number from the previous year. According to the latest financial reports of listed supermarket companies, in the first half of 2022, among 17 listed supermarket companies, only 3 achieved positive growth in both revenue and net profit. Another approach is to pivot to "proximity," transitioning to warehouse club models. In May last year, Yonghui Superstores began experimenting with warehouse stores. As early as 1996, Sam's Club started its difficult path of warehouse stores in China, and in recent years finally "saw the clouds part and the moon shine," taking a trendy route focused on private-label hit products. Whether warehouse membership stores can be the antidote for traditional supermarkets remains to be seen. But analyzing the many efforts of traditional supermarkets reveals a common logic—frantically "opening warehouses" to get closer and closer to consumers. Warehouse membership stores expanded aggressively in 2021, engaging in a "scale war." In October and December 2021, Carrefour opened two warehouse membership stores in Shanghai's Pudong and Qingpu districts. This September, Carrefour's membership store in Nanxiang, Jiading, and Zhongshan Park in Changning District also opened, with "covering central urban areas within an hour" becoming the new goal. Carrefour China's former CEO Tian Rui publicly revealed plans to expand 100 paid membership stores in first-tier and new first-tier cities over the next three years. "The goal is to have a Carrefour membership store within a 15-minute drive for consumers." Sam's Club also adopted a new "compact store" strategy this year. Since May, Sam's Club has opened cloud warehouses in Shanghai, Wuxi, Changsha, and other places, offering over 1,000 high-repurchase items covering almost all fresh categories and daily goods like mother and baby, personal care, and dry goods. Members can order online and enjoy "one-hour express delivery" to their homes. Use spatial proximity to trade for time speed. Supermarkets hope to increase city layout density by opening more stores, shortening the chain to reach consumers. Behind the large-scale expansion, it's clear that in the "more, faster, better, cheaper" evaluation system, the most important factor has essentially become "faster." Each new store means new site selection, along with new cost assessments of sales per square meter and labor efficiency. Whether there's a better way to help stores share area and volume pressure is the pressure behind "faster."

03 "Faster": Supermarkets' "Instant" Counterattack Is there a way to help supermarkets improve consumers' "faster" experience while minimizing innovation costs? Carrefour's former China president Thierry Garnier once likened China to a "retail laboratory." On this land of endless new formats, instant retail has arrived. In the first half of 2022, due to repeated outbreaks in many places, traditional e-commerce fell into logistics difficulties of not being able to ship or receive goods. More and more people began using food delivery as express delivery. Behind "fastest 30-minute delivery" is consumers' pursuit of fulfillment certainty. For traditional supermarkets, instant retail expands the business radius in time and space, filling the "all-weather, all-channel" operational links. This new retail format, which uses instant logistics and other fulfillment capabilities to expand and connect physical merchants, warehouses, and other local retail supply to meet consumers' instant needs, is called instant retail. Looking back at the development of retail, online and offline were often parallel lines, not intersecting or even compressing each other's space. Instant retail seems to be the first to fully connect offline and online, even making offline entities, including traditional supermarkets, one of the biggest beneficiaries of retail transformation. The relationship between instant retail and supermarkets is more like teammates than rivals. The differences can be seen from several aspects: First, traditional e-commerce squeezes offline orders, keeping traditional supermarkets under pressure. Instant retail's home-delivery model achieves new growth at the lowest cost, helping local merchants win back some of the cross-regional supply and consumption that traditional e-commerce took. Pei Liang, president of the China Chain Store & Franchise Association, believes that instant retail creates a 1+1>2 capability through cooperation between platforms and offline retailers. Even if offline store traffic decreases, fixed costs remain unchanged; converting part of operating costs to online can release existing capacity and optimize resources. Second, from the consumer perspective, instant retail compensates for traditional e-commerce's shortcomings in "immediacy" and "credibility," which are precisely the core competitiveness of local supermarkets, further strengthened by the instant delivery of food delivery platforms. Third, e-commerce retail excels at "festival-style" peak consumption, while instant retail excels at capturing the most down-to-earth needs, reflecting traditional supermarkets' insight into local users. "Local specialties" are an important aspect of regional supermarkets entering communities and attracting citizens, such as Panggezhuang watermelons and Pinggu peaches in Beijing supermarkets. Returning to "faster," e-commerce platforms meet planned needs for 1-3 day delivery, while instant retail cultivates the consumption habit of "I want it now." For example, when you urgently need mosquito repellent on a night with mosquitoes buzzing, the first thought is to order takeout from a nearby supermarket, not to wait for a discount on an e-commerce platform to buy a box. That's the difference between instant needs and planned stockpiling. Through past experience in food delivery, platforms like Meituan and Ele.me have basically solved the time challenge of instant retail, delivering in as fast as 30 minutes, continuously optimizing delivery services in labor costs, route planning, and intelligent scheduling. As urban life pace accelerates and time costs rise, the "faster" brought by instant retail gives traditional supermarkets more confidence to break out and counterattack. This trend is reflected in the performance reports of leading supermarket companies. Many listed companies in the A-share supermarket and department store sector highlighted in their semi-annual reports the trend of online-offline channel integration represented by "instant retail." Jiajiayue, a leading chain supermarket, disclosed in its semi-annual report data on online channels via platforms like Meituan, with online sales and order volume growing over 80% year-on-year in the first half.

04 "Better": The Potential Point for Counterattacking E-commerce Jack Ma and Wang Jianlin once had a classic 100 million yuan bet, which expired this year. In 2012, the two ambitious business tycoons attended CCTV's Economic Person of the Year awards. Wang Jianlin said that if e-commerce's market share exceeded 50% in ten years, he would pay Ma 100 million yuan; otherwise, Ma would pay Wang. Some call this the official declaration of war between traditional business and internet e-commerce. Over the past decade, most believed e-commerce had overwhelming advantage. But that doesn't mean traditional supermarkets have no power to fight back. E-commerce relies on national long-distance logistics; traditional supermarkets need to find new growth amid the pincer attack—using local supply plus instant delivery to meet the growing local instant demand. Additionally, e-commerce's "cheaper" is best suited for standardized products, with category limitations and difficulty in achieving high-frequency purchases, as JD.com's practice in 3C demonstrates. Traditional supermarkets excel in fresh food (fruits, vegetables, meat, aquatic products), which doesn't fit this rule; these products have high loss rates, and the key is both "faster" and "better." Instant delivery can solve the "faster" problem, and as the distance between supermarkets and consumers narrows, supermarkets need to make "better" the next potential point for counterattacking e-commerce. By leveraging instant retail to capture more and finer consumer preferences, and once sales volume accumulates to a certain level, they can smoothly transition to C2M models, turning private labels into online hits, actively creating differentiation, and extending the quality ceiling and category possibilities of "better." It's clear that local supply as the foundation is a broad consensus among retail practitioners; instant retail as new growth is the real question for retailers seeking transformation. Throughout China's retail history, large supermarkets represented by Carrefour opened a colorful treasure box for Chinese consumers, winning with "more"; traditional e-commerce moved the "borderless shelf" online, leveraging channel advantages for low prices, breaking through the basic consumer need of "cheaper"; instant retail is more like an assistant that responds to calls, fitting the "faster" need, integrating into daily life, and beginning to capture people's subtle, urgent, and experiential needs. Currently, instant retail is still in its early stages. From an economic perspective, it will be a supply-led market in the short term, and as the trend of "ordering everything via food delivery" becomes more significant, supply scarcity will further intensify. For traditional supermarkets, this is a window period not to be missed. It's foreseeable that traditional supermarkets, joining hands with instant retail, will bring new momentum to the retail market.

References:

  • Sanxiang Metropolis Daily: Economy | Trapped in operating difficulties, Changsha Carrefour's 16-year-old store to close?
  • Jiafang Research Society: A Brief History of Chinese Supermarkets: How to Grow Under the Pressure of Walmart and Carrefour?
  • Yuanfeng Digital: The Curtain Falls on Physical Stores? Yonghui Superstores' market value evaporates over 70 billion, closes nearly 400 stores
  • Retail Business Review: Besides faster delivery, what's the real difference between instant retail and platform e-commerce?
  • 36Kr Hunan: Another Carrefour store closes; do young people still go to supermarkets?
  • Rui Company: Traditional supermarkets, no way out?
  • Yicai.com: Yonghui Superstores: From new retail back to traditional supermarkets
  • Jinduan: Deep Dive: The trillion-yuan instant retail market, local supply determines the future
  • CICC Insight: Research Framework for Trading Platforms: Based on the "more, faster, better, cheaper" model

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