Currently, under the relentless pressure of supermarket-like apps and platforms such as Meituan Flash Purchase, JD Daojia, Ele.me, Taobao Fresh/Taoxianda, Hema, as well as Pupu Supermarket and Dingdong Maicai, traditional supermarket giants including Walmart, Carrefour, Yonghui, RT-Mart, Lianhua, China Resources Vanguard, Better Life, and Zhongbai are finding it increasingly difficult to thrive. Compared to their dominant positions 20 or even 10 years ago, many traditional supermarket companies now find that even suppliers treat them with indifference.
Traditional Supermarkets Forced Online
In recent years, many tech companies claim to struggle with supply chain bottlenecks, but the most painful situation is faced by physical retail enterprises, especially traditional supermarkets. According to incomplete statistics, over the past three years, supermarket chains nationwide have closed more than 2,000 stores cumulatively. For example, Lianhua Supermarket, a state-owned supermarket giant, closed over 1,000 stores in the past three years (589 in 2020, 249 in 2021, and 198 in 2022). Similarly, Yonghui, one of China's top three private supermarket chains, closed nearly 400 stores, a one-third reduction from its peak. Additionally, Better Life, known as China's "first private supermarket stock" and the "Southwest King of Supermarkets," has also struggled, closing over 150 stores, nearly a quarter of its peak number.
The reasons for these store closures are numerous, but fundamentally, the internet has broken the limits of time and space, bringing a convenient "see-and-buy" shopping experience that has impacted traditional retail. Over the past decade, traditional supermarkets have been standard community amenities. On one hand, real estate developers needed supermarkets to boost property premiums; on the other hand, supermarkets relied on developers to strengthen their channel density in community settings. This mutually beneficial relationship, along with community residents, created a sustainable win-win-win, and the model persists today. However, with the maturation of e-commerce and local life platforms, in-store consumption is declining, replaced by the widespread popularity of on-demand home delivery. According to the China Chain Store & Franchise Association's "Chain Supermarket Operation Report (2020)," foot traffic in chain supermarkets fell by an average of 4.9%. By 2021, 68.39% of supermarket chains saw year-on-year declines in foot traffic. In 2022, 81.4% of supermarket chains reported decreases in customer visits.
Although foot traffic is declining, consumers are still choosing to shop online for groceries. As of now, JD Daojia has 78.6 million active users, while Meituan Flash Purchase has 230 million active users. Driven by the trend of instant consumption, national chain supermarket giants including Walmart, Carrefour, Yonghui, RT-Mart, Lianhua, and China Resources Vanguard have been forced to enter the online space, experimenting with home delivery and instant retail services. Statistics show that by 2020, 65.1% of the top 100 supermarket chains had implemented home delivery services. As a result, by February 2023, the number of small and medium-sized supermarkets and convenience stores on Meituan Flash Purchase had grown from 280,000 in January 2022 to 390,000 (as of April 2021, there were 920,000 supermarket and convenience store outlets nationwide). Based on this data, nearly half of all supermarket and convenience store outlets now offer instant delivery services.
Currently, whether for residents in first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen, or netizens in third-, fourth-, and fifth-tier cities like Linyi, Yichang, Enshi, Changde, Zhangjiajie, and Hegang, online shopping no longer requires waiting 3-5 days; "everything delivered in 30 minutes" is becoming a new daily consumption choice. While consumers enjoy increasing convenience and delivery riders for JD Daojia, Meituan, Ele.me, and Hema are busier than ever, traditional supermarkets like Yonghui, RT-Mart, and Better Life find themselves in an awkward position. They are the protagonists in this new wave of instant consumption, contributing effort, money, and resources, yet ending up with nothing. They have closed hundreds of physical stores and invested hundreds of millions in online platforms and products, only to face annual losses of hundreds of millions.
According to incomplete statistics, nearly 90% of supermarkets and convenience stores are currently in a state of periodic losses. Specifically, according to Yingshang.com, 13 listed supermarket companies, including Yonghui, Better Life, and Jiajiayue, generated total revenue of 204.64 billion yuan in 2021, with an average revenue decline of 6.96%. Their total net profit turned from a profit of 3.147 billion yuan in the previous year to a loss of 5.452 billion yuan, a year-on-year drop of 273.26%, with an average decline of 330.79%. More seriously, among the 13 listed supermarket companies, only four remained profitable: Hongqi Chain, Xinhua Du, Sanjiang Shopping, and Guoguang Chain, but all saw net profit declines. Among the nine loss-making companies, Yonghui, Better Life, Jiajiayue, Zhongbai Group, and Jingkelong all recorded their first annual losses since listing, with Yonghui suffering a massive loss of 3.944 billion yuan in 2021. Meanwhile, Renrenle's highest net profit plummeted by 2522.90% year-on-year. In 2022, the total revenue of 11 listed supermarket companies was 184.284 billion yuan, down from 191.257 billion yuan the previous year, an average decline of 6.15%; total net profit was -5.755 billion yuan, an average decline of 238.25% year-on-year. In terms of net profit, only four companies were profitable in 2022: Jiajiayue, Hongqi Chain, Sanjiang Shopping, and Guoguang Chain. Among them, Hongqi Chain performed best, with the highest revenue growth rate of 7.15% and the highest net profit of 485 million yuan, up 0.9% year-on-year. Conversely, Better Life hit rock bottom, with the largest revenue decline of 34.48% and losses expanding 12.8 times to -2.544 billion yuan. Additionally, Zhongbai Group's losses increased significantly by 13.2 times to -320 million yuan.
Although the data samples in this article are from the pandemic period, in fact, before the pandemic (pre-2020), most supermarket companies were already experiencing declining revenue and net profit. Therefore, for traditional supermarket companies, being forced online or into instant retail is an undeniable reality.
Traditional Supermarkets' Counterattack
In the article "All In Instant Retail: Better Life and Yonghui Have No Choice," we mentioned that the most direct ways for traditional supermarkets to expand online are only two: building their own platforms or joining third-party platforms like JD Daojia, Meituan, Ele.me, Duodian, and Douyin. Currently, most supermarkets and convenience stores have tried both methods, but so far, no self-built platform model has succeeded, including those of international giants like Walmart and Carrefour. According to incomplete statistics, there are approximately 300 supermarket-related apps on the market, most of which are from offline national chain supermarkets, small and medium-sized traditional supermarkets, convenience stores, and department stores. The author found that although there are various supermarket apps available for download, 90% of them have stopped updating. Currently, active apps include RT-Mart Youxian, Duodian, Yonghui Life, iBailian, and China Resources Vanguard. In the Apple App Store, RT-Mart Youxian has over 270,000 downloads, Duodian over 80,000, and Yonghui Life over 20,000. In the Huawei App Market, iBailian has over 20 million downloads, China Resources Vanguard over 50 million, RT-Mart Youxian over 100 million, and Yonghui Life and Duodian each over 400 million. Overall, if one were to download and install most supermarket apps, assuming 24 apps per screen, it would take at least 13 screens to install them all. Notably, these apps do not include other apps from supermarkets and convenience stores for membership points, logistics, and delivery. If a phone has less than 10GB of storage, these apps cannot all be installed.
In reality, for netizens in first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen, as well as residents in second-, third-, fourth-, fifth-, and sixth-tier cities, mainstream food delivery apps already cover the entire country, and most supermarkets have joined these third-party platforms. From this perspective, consumers clearly do not need to download so many individual merchant apps, as their need is simply to buy goods. These existing apps are highly homogeneous in functionality, product categories, brand selection, and product types, with only slight price differences. Additionally, the author found about 100 supermarket shopping mini-programs on WeChat, including store-based mall mini-programs. Apart from national chain supermarket mini-programs that are actively operated, most are not, such as the Jinan Haoyouduo Fresh Supermarket mini-program (certified to Jinan Yinhui Trading Co., Ltd.), the Ougang Supermarket mini-program (certified to Jiaxing Bailuke Supermarket Management Co., Ltd.), and the Fulian Chain Life Supermarket mini-program (certified to Wuhan Fumeng Trading Co., Ltd.), none of which sell any products.
Currently, in addition to the two online approaches mentioned above, most stores of supermarkets including Walmart, Carrefour, Yonghui, RT-Mart, China Resources Vanguard, Lianhua, Renrenle, and Zhongbai Supermarket have already connected to major platforms like JD Daojia, Meituan, Ele.me, and Duodian, providing home delivery services to consumers nationwide. Among these, Yonghui Supermarket is the most proactive in expanding online, with the fastest and largest-scale experimentation. According to Yonghui's Q1 2023 financial report, as of April this year, Yonghui had 966 e-commerce warehouses nationwide (as of end of 2022, it had 1,033 supermarket stores), including 156 full-warehouse (covering 22 cities), 161 high-standard semi-warehouses (covering 44 cities), 22 satellite warehouses, and 627 store-warehouses (covering 150 cities). With the company's full commitment, online business revenue in 2022 reached 15.936 billion yuan, a year-on-year increase of 21.37%. In Q1 2023, online business revenue was 4.02 billion yuan, with an average daily order volume of 469,000. During the reporting period, "Yonghui Life" self-operated home delivery covered 952 stores, achieving sales of 1.95 billion yuan, while third-party platform home delivery covered 942 stores, achieving sales of 2.07 billion yuan. Meanwhile, Jiajiayue provided home delivery services through third-party platforms like Meituan and JD, as well as its own Jiajiayue Youxian platform, reaching 511 stores (out of 960 total stores), with over half of its stores offering home delivery. Additionally, Renrenle has built a home delivery network through its "Renrenle Daodao" mini-program and official app, as well as third-party platforms like Meituan Waimai, JD Daojia, Ele.me, and Douyin, achieving revenue of 400 million yuan in 2022, accounting for over 10% of total revenue.
Overall, national and regional supermarket companies including Yonghui, RT-Mart, Lianhua Supermarket, China Resources Vanguard, Ginza Supermarket, and Zhongbai Supermarket are relatively fortunate, having achieved interim results. Among them, RT-Mart's online revenue reached 24 billion yuan, Wumart 18.878 billion yuan, Lianhua Supermarket 5.629 billion yuan, Tianhong Shares approximately 5.7 billion yuan (including shopping centers/department stores), Xingsheng Youxuan 3.388 billion yuan, Chongqing Department Store's online sales exceeded 2.8 billion yuan, Xinhua Du 2.2 billion yuan, Zhongbai Group's online sales reached 1.724 billion yuan, and Aeon's online revenue was 1 billion yuan. Additionally, Meiyijia's online retail sales reached 1.646 billion yuan, and Lawson's 1.385 billion yuan. According to the China Chain Store & Franchise Association's "2021 China Supermarket Top 100," online sales of the top 100 supermarkets reached nearly 100 billion yuan in 2021, up 40% year-on-year. Among them, nearly 40% of sample companies had online sales accounting for over 6%, and over 70% had online sales exceeding 10%.
Combining the above loss data, it is clear that whether it is international giants like Walmart and Carrefour or domestic leaders like Yonghui, RT-Mart, and Lianhua, everyone is currently in a passive position. Although the integration of online and offline seems to have opened up new opportunities, it has not yet formed a significant trend. Each supermarket's online business not only relies on offline store traffic but also depends on third-party platforms for comprehensive operations and fulfillment solutions. Therefore, in this new consumption trend of instant retail, traditional supermarket companies are far from being able to compete with internet giants like JD Daojia, Meituan Flash Purchase, Ele.me, Taobao Fresh, and Douyin Supermarket. Since they cannot compete, as these platforms grow larger, traditional supermarkets are likely to become cannon fodder in this game within a game.
Dependence on Third-Party Platforms
Unlike major brands entering offline supermarkets with strong bargaining power, giants including Walmart, Carrefour, China Resources Vanguard, Lianhua Supermarket, Yonghui, and RT-Mart find it difficult to negotiate on equal footing with platforms like JD Daojia, Meituan, Ele.me, and Duodian. Previously, a senior executive from a well-known supermarket company stated bluntly that the relationship between traditional supermarkets and platforms is essentially that of merchant and channel, so platforms do not give preferential treatment just because you are a chain supermarket. Currently, although most stores in the China Supermarket/Convenience Store TOP 100 have joined platforms like Meituan, Ele.me, JD Daojia, and Douyin, offering both in-store and home delivery services, online competition remains intense.
Recently, the author extracted data from Meituan, Ele.me, and JD Daojia and found that in the top 15 cities with dense new retail supermarket distribution, among the top 50 stores with over 10,000 orders, national chain supermarkets accounted for only 10%, with the rest being small and medium-sized supermarket stores. For example, in a residential area in Guangzhou, none of the top 20 stores offering home delivery were large supermarket chains; well-known brands like China Resources Vanguard, Lianhua Supermarket, Yonghui Supermarket, Metro, Meiyijia, JD Convenience Store, 7-Eleven, and FamilyMart all ranked below 20th. Similarly, in a residential area in Beijing, none of the top 50 stores offering home delivery were national chain supermarkets; brands like Jingkelong, Yonghui, Wumart, and Lotus were all ranked beyond 50th. In a residential area in Fuzhou, only 2 Lianhua Supermarket stores were among the top 20 stores offering home delivery, with the rest being small and medium-sized supermarkets. In a residential area in Wuhan, only 3 national chain supermarket stores were among the top 30 stores offering home delivery, with the rest being small and medium-sized supermarkets. Finally, in a residential area in Shanghai, among the top 50 stores with over 10,000 orders offering home delivery, Lianhua accounted for 29, Hema Fresh 1, RT-Mart 1, and the rest were small and medium-sized supermarkets.
Overall, large supermarket chains have not shown any advantage online; instead, community mom-and-pop stores or new pre-warehouse merchants have demonstrated strong internet operations, capturing a large number of young consumers' orders. Facing the trend of "10,000 stores to home," traditional supermarket companies, having no competitive advantage online, will inevitably face dual pressures. On one hand, they must address the short-term challenge of escaping the vicious price competition with 10,000 stores on the same starting line; on the other hand, they must worry about building a long-term competitive moat. Currently, both challenges seem unsolvable. Although traditional supermarket representatives like Better Life, Yonghui, and Gaoxin have invested over 1 billion yuan in home delivery services, their returns are incomparable to those of new retail players.
The author believes that offline traditional supermarkets and convenience stores choose to join these platforms for two core reasons: first, they lack their own online channel networks, and the cost of building and managing such channels is too high. Developing a decent app (scoring above 80) requires hundreds of staff, with initial development costs ranging from hundreds of thousands to over a million yuan. This forces many companies to settle for third-party platforms. Second, the mainstream consumer base is on these platforms, which provide store operations, product management, membership systems, digital marketing, digital supply chains, and last-mile delivery support. Joining these platforms helps companies save time and gain more experimentation opportunities.
In summary, it is not easy for most supermarket companies to break free from dependence on third-party platforms. Over the past decade, under the wave of e-commerce, the people, goods, and places in traditional retail have been re-matched and recombined online. For traditional supermarkets selling goods, they now lack advantages in all three factors, making them feel constrained. Conversely, platforms like JD Daojia, Meituan Flash Purchase, Ele.me, Taobao Fresh, and Douyin Supermarket have massive traffic (tens of millions), abundant goods (most brands have directly or indirectly entered these platforms), and flexible venues (apps can launch marketing activities or product collection pages for different groups and scenarios within hours). For example, during annual promotions like 618 and Double 11, opening any app reveals at least a dozen promotional activities targeting different groups. Such operational efficiency is unattainable for traditional supermarkets in the short term.
Therefore, for listed supermarket companies like Yonghui, RT-Mart, Better Life, Jiajiayue, Hongqi Chain, and Zhongbai Group, to avoid becoming more passive in this instant retail game, they need strong teams and, more importantly, the suppliers who fought alongside them offline. In recent years, management changes have been frequent at traditional supermarket companies including Yonghui, Better Life, China Resources Vanguard, Chongqing Department Store, Zhongbai Group, Jingkelong, Chaoshifa, and Tianhong Shares. For instance, Zhongbai Group issued 11 personnel change announcements in 2022, including the departure or transfer of the chairman, vice general manager, directors, supervisors, and board secretary. Similarly, Chongqing Department Store saw the departure of its chairman, vice general manager, financial director, board secretary, and supervisors within a month around September 2022. Additionally, since 2021, Yonghui Supermarket's management has been in turmoil, with the CEO, board secretary, and vice presidents all leaving. Regardless of whether these management changes were voluntary or forced, they indicate that traditional supermarkets' layout in instant retail has reached the mid-game. In the second half, whether traditional supermarket companies can break the deadlock where internet platforms dictate terms will be the biggest highlight of their online expansion.