Source: Retail Observation (ID: onRetailing)
Physical retail is entering the 'Fulfilment 2.0' era
Over the past decade, traditional retail has witnessed changes unseen in the past 100 years: from making money effortlessly, to being beaten by e-commerce, to store closures, and then a turnaround as the value of stores was reassessed. Eventually, e-commerce and physical stores came together, finding new value through digital, intelligent real-time connections and smart matching—this is 'Fulfilment'.
Goldman Sachs analyst Matthew Fassler once said that physical retail stores must transform: 'Physical retail is not dying; it is evolving.'
In other words, beyond the traditional sales function, stores must also become logistics centers and display centers. This is a reinterpretation of 'fulfilment': how to achieve new delivery around people through the iteration of goods and places.
Sun Art Retail, the domestic supermarket with the highest market share, recently released its financial report. Let's take Sun Art Retail as an example to examine the transformation and value reassessment of the physical retail industry.
Experience Fulfilment 2.0: Creating 'Familiar Surprises'
The essence of physical retail is an experience venue. Consumers not only want to see familiar products and experiences but also hope to discover surprising ones, thereby enjoying a 'familiar surprise'.
'I've been killing fish at RT-Mart for ten years; my knife is as cold as my heart.' This phrase originated from a video of a fishmonger at an RT-Mart supermarket, where a middle-aged man's comment to the camera sparked netizens' creative adaptations.
After this 'casual remark' went viral online, RT-Mart officially embraced the meme, playing along with young people.
In August, RT-Mart launched 1,000 limited-edition 'I've been killing fish at RT-Mart for ten years' T-shirts, priced at 66.6 yuan each, sold at Shanghai stores. Even the fishmongers in the supermarket wore work uniforms printed with the phrase, and young shoppers who discovered it filmed videos that sparked heated discussions.
In September, RT-Mart applied to register the trademark 'I've been killing fish at RT-Mart for ten years,' clearly indicating plans to develop this IP further with co-branded products and events.
Bringing online 'familiarity' offline creates 'surprise.' Essentially, this shows traditional retailers' genuine attention to social traffic. It may seem like a 'small step' for retailers, but it's actually a 'big step' for traditional physical retailers in their internet and online transformation, creating new traffic by engaging with trends.
Experience delivery cannot be just about price or special holiday promotions; it should involve creating and riding trends, playing with traffic, and even becoming traffic itself.
From September 29 to October 4, at the 17th China International Cartoon and Animation Festival, a cosplayer dressed as an RT-Mart fish-cutting station, cosplaying 'I've been killing fish at RT-Mart for ten years,' attracting onlookers at the event.
Later, a netizen posted on Douban that the RT-Mart fish cutter stood alongside Iron Man and Spider-Man, becoming a highlight of the expo, with netizens joking about 'Fish Killer Man.' Eventually, 'Fish Killer Man' even trended on Weibo.
So, products can go viral, and experiences can too. Designing and managing such experiences is a form of re-delivery of experience—this is the first step in traditional physical retail transformation.
Service Fulfilment 2.0: A New 'Haven' for the Elderly
If online-offline experience integration is 'Fulfilment 2.0' for young people, traditional supermarkets also serve an important customer group: the surrounding middle-aged and elderly.
With the development of the digital economy, many elderly people face difficulties in using the internet and smartphones, and may not want to ask their children for help, becoming 'refugees' of the digital era. They encounter inconveniences in daily life such as travel, medical care, consumption, and civil services, highlighting the 'digital divide.'
This year's Double Ninth Festival, RT-Mart released the 'Report on 'Old Drifters' Shopping at Supermarkets.' The report showed that the proportion of elderly customers shopping before 10 a.m. in first-tier cities was 15 percentage points higher than the national average; 60% of respondents said they visit RT-Mart more than three times a week, and nearly 70% said they chat with familiar staff.
An RT-Mart store employee said that some elderly regulars have a routine of three points in their daily lives, and sometimes they come not to buy things but to take the free shuttle bus and chat with familiar staff as a way to pass time.
▲ Outside the store, RT-Mart provides shuttle services for elderly customers; inside, it offers magnifying glasses.
In response, RT-Mart stated it will organize more leisure activities for the elderly in stores, such as calligraphy, painting, and paper-cutting, making RT-Mart an important social venue for seniors. For example, this year's Double Ninth Festival, RT-Mart's Shanghai stores partnered with nearby barbershops to provide free haircuts for seniors aged 60 and above who moved with their children, truly becoming a 'good neighbor' in the community.
As aging deepens, the needs of the elderly will evolve. In the future, providing new 'demand fulfilment' centered on stores will become a must-answer question for physical stores. RT-Mart's answer is undoubtedly worth referencing for more traditional retail stores.
Product Fulfilment 2.0: From RT-Mart to RT-Mart Super and Little RT-Mart
From a global perspective, traditional physical retail is both connecting online and moving toward smaller formats: selecting targeted SKUs based on local consumer demands and appearing near consumers in small-store formats.
In the U.S., Amazon, the online giant, targeted offline traffic by opening Amazon Go convenience stores in January 2018, with areas of 140-280 square meters, offering about 1,000 SKUs, focusing on a 'grab-and-go' experience.
In September of the same year, Amazon launched Amazon 4-Star, where all products are those most liked by nearby customers and rated above 4 stars on Amazon's website.
Similarly, Nike, Target, and Macy's are all transitioning to smaller stores to establish new connections with consumers.
Sun Art Retail is also doing this. While restructuring traditional RT-Mart hypermarkets, it has begun to develop new formats, including medium-sized supermarkets 'RT-Mart Super' and small supermarkets 'Little RT-Mart,' and has opened fresh food supermarkets based on consumer demands. It also cooperated with Cainiao to enter the community group buying market, becoming a last-mile node for community group buying.
According to Sun Art Retail's 2020 financial report, RT-Mart stores focus on category upgrades, emphasizing categories that cannot be replaced online, with scenario-based displays to enhance experience and give consumers reasons to visit. In the 15 months ending March 31, 2021, 38 stores were upgraded, and the pace will continue at 40-50 stores per year.
Data shows that since 2015, the average area of Sun Art Retail's hypermarkets has significantly decreased. On one hand, in 2019, it handed over its home appliance business to Suning for operation, focusing on category, function, and mind-share restructuring. On the other hand, it began entering small and medium formats.
Currently, the medium-sized 'RT-Mart Super' focuses on second- and third-tier cities, building fresh food supermarkets close to young consumers through core category construction. Its area ranges from 3,000 to 5,000 square meters, selling about 15,000 SKUs, with fresh food and daily distribution accounting for about 57% of revenue, and FMCG at 38%.
Sun Art Retail stated that each RT-Mart Super will create a more differentiated product structure based on the business district and customer positioning.
Meanwhile, the small-format 'Little RT-Mart' focuses on 'complete categories and affordable prices,' with areas of 200-500 square meters and about 1,000 selected SKUs. Data shows that fresh food and daily distribution products account for 75% of sales, with sales per square meter reaching 12,600 yuan, exceeding RT-Mart's 9,100 yuan and RT-Mart Super's 11,500 yuan.
It is worth noting that Sun Art Retail's operational thinking has also begun to change.
In its latest financial report, Sun Art Retail stated that it will integrate store street renovations into the 2.0 version of hypermarket restructuring, transforming store streets from 'traffic monetization' to 'traffic entry points,' introducing brands like Costa and Paris Baguette that young consumers like, and using the space saved by SKU selection for new traffic and experience monetization.
Logistics Fulfilment 2.0: The Last Mile of Logistics Delivery
In the era of 30-minute home delivery, stores are not only fulfilling traditional tasks of display and sales but also evolving into logistics delivery centers. To meet this 'race against time' delivery experience, Sun Art Retail has also reformed its stores.
On one hand, Sun Art Retail has set up quick-pick warehouses in stores, stocking key and high-frequency SKUs based on historical consumption data of surrounding consumers, reducing ineffective walking for pickers and enabling front-line delivery personnel to handle more orders while achieving 30-minute delivery. Data shows that Sun Art Retail has established quick-pick warehouses in over 490 stores.
On the other hand, Sun Art Retail uses hanging chains for rapid in-store order assembly.
For individual consumer needs, store staff can pick items in the store and send them via hanging chains to packing points—people pick, chains transport, greatly improving efficiency. This logic has been quite effective at Alibaba's Hema Fresh, and Sun Art Retail has completed hanging chain renovations in over 370 stores.
After addressing consumers' immediate needs within 3 kilometers in 30 minutes, stores can also become core nodes for traditional 'retail capabilities' like half-day, next-day, or two-day delivery.
To this end, Sun Art Retail has integrated Alibaba's data, shared Tmall products, and provided delivery services to users within 5-20 kilometers around stores, expanding store service capabilities and acquiring new users.
Sun Art Retail's financial report shows that during the reporting period, both online and offline customer traffic increased, with online orders from RT-Mart Youxian APP, Taoxianda, Ele.me, and Tmall Supermarket growing 25% year-on-year, and daily orders per store (DOPS) reaching 1,400.
In today's increasingly expensive online traffic, the value of offline physical stores is being rediscovered. Whether they can effectively combine new technologies and models will determine if stores can rejuvenate.
In this process, it is essential to redefine the delivery capability of offline stores, transforming them from sales floors into experience venues for products, convenience, and even logistics.
This transformation battle will not be achieved overnight. Clearly, Sun Art Retail is on the right path. Through continuous small-step, fast iterations, it will inevitably adapt to local conditions and customer needs, ultimately finding the best practices for transforming China's physical stores with local characteristics.
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