---
title: "Walmart Fully Exits Harbin: How Long Can Big Supermarkets Rely on 'Protection Fees'?"
description: "Walmart's store closures in China continue, with 16 stores closed in the first half of the year and all four Harbin stores shut in July, marking a complete exit from the city. Despite Walmart's polite remark about potential future re-entry, the closures highlight the decline of modern hypermarkets, which have relied on charging suppliers and consumers extra fees, a model that is no longer sustainable in the face of changing consumer behavior and competition."
author: "纳兰醉天"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-07-12"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/mAlhWekfizYhvqeukZc50Q"
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# Walmart Fully Exits Harbin: How Long Can Big Supermarkets Rely on 'Protection Fees'?

> Walmart's store closures in China continue, with 16 stores closed in the first half of the year and all four Harbin stores shut in July, marking a complete exit from the city. Despite Walmart's polite remark about potential future re-entry, the closures highlight the decline of modern hypermarkets, which have relied on charging suppliers and consumers extra fees, a model that is no longer sustainable in the face of changing consumer behavior and competition.

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"Walmart's store closure wave in China continues. In the first half of this year, a total of 16 stores were closed. After July, Walmart made another 'decision'—all four stores in Harbin were closed. This means that this time, Walmart has completely exited the Harbin market."
Although Walmart politely said that there might be opportunities to re-enter Harbin in other forms in the future, this is like cooking a duck in a pressure cooker—the meat is cooked, but the mouth remains tough.
In 2017, Walmart ranked first on the Fortune Global 500 list for the fourth consecutive year. However, the ranking cannot stop Walmart's global store closure wave; this ranking list is more like a fig leaf for Walmart.
Modern stores abandoned by the times
Earlier this year, an article titled "RT-Mart's Huang Mingduan: I Defeated All Competitors but Lost to the Times" went viral. RT-Mart, known as the most profitable hypermarket in China, was acquired by Alibaba. Six months later, Huang Mingduan, while endorsing the new RT-Mart after its cooperation with Alibaba, said: I didn't lose to the times; I regret not meeting Alibaba sooner.
Unlike RT-Mart's harmonious integration with Alibaba, Lianhua Supermarket was not so fortunate.
On December 13, 2016, Yonghui sold its 21.17% stake in Lianhua Supermarket to Yiguo Fresh. The investor behind Yiguo Fresh was Alibaba. Six months later, Yiguo Fresh transferred its 18% stake in Lianhua Supermarket to Alibaba Group.
Unlike RT-Mart's vibrant transformation, Lianhua Supermarket, once touted as Alibaba's 'experimental field' for offline store reform using Shanghai Lianhua's 3,000 stores to promote Alibaba's retail platform and achieve online-offline integration, has seen no substantial progress in its transformation after a year.
**Instead, Yiguo Fresh lost patience and recently transferred its remaining shares to Bailian Group, Lianhua's largest shareholder. From buying to clearing out, it took only a year and a half.**
Under the impact of the internet wave, hypermarkets also tried to join internet companies to avoid being abandoned by the times. They either built their own e-commerce platforms half-heartedly, like RT-Mart's Feiniu.com, or invested in emerging e-commerce platforms, like Walmart's acquisition of Yihaodian. But the result was that Feiniu.com, which burned several billion yuan, failed to carry RT-Mart's dream and was shut down; Yihaodian, after being acquired by Walmart for five years, was given to JD.com as a dowry at a half-price, and finally closed in September 2017.
Some say the decline of hypermarkets is due to the disappearance of China's demographic dividend, and because rents are rising. The 20-year leases signed when hypermarkets entered China are expiring, and the crazy rent increases are the main reason for store closures.
In my view, these two reasons contribute to the decline in sales of modern stores, but they are definitely not the last straw that breaks the camel's back. Why do I say this?
**Speaking of the disappearance of China's demographic dividend, China's birth rate has declined in the past two years, but per capita disposable income has risen. Sales of mom-and-pop stores are rising, small fresh food stores are increasing, and consumers' total purchase volume is rising. Why are modern stores' turnover and profits both declining?**
As for rent increases, as everyone says, profits and turnover are declining, but rents are only about to expire. Moreover, some new residential developments, to sell their houses at higher prices, will provide new locations for hypermarkets with almost negligible rent, which is no different from the rent 20 years ago. But what we see is more stores closing.
**The real reason that overwhelms modern stores is that consumers and suppliers no longer want to play with them.**
When monopolistic companies like China Mobile and China Unicom are lowering their fee standards, our modern stores are still living off 'protection fees.' If such enterprises are not abandoned by the times, are they kept for the New Year?
The days of collecting protection fees
Twenty-five years ago, when modern stores emerged as a novelty in China, Chinese consumers were immediately attracted by the bright environment, complete range of products, freedom of choice, and thoughtful service. It must be remembered that the contradiction between the people's ever-growing needs for a better life and unbalanced and inadequate development has existed for a long time.
However, at that time, Chinese consumers faced old department stores and shabby grocery stores, where you could only buy what was available, and even the authenticity of goods was questionable. If you wanted to browse a store, someone would always treat you like a thief, let alone provide enthusiastic service.
So it's no wonder that the emergence of modern stores re-educated Chinese consumers about consumption concepts, making them realize for the first time that they are 'God.'
But at that time, consumers didn't know that these services came at a cost, and it was a two-way charge.
Once, as a market that national brands had to compete for, the store was a brand display window. If you claimed to be a well-known trademark or provincial/ministerial quality product, did the modern store have a place for you? If not, you were bragging. However, store space is limited, while products are infinite. Why should your product get a good position and good shelf space? So the store charged a barcode fee and a shelf fee for every product. Because the supermarket has a birthday (store anniversary), and since it takes care of you all year, you should show your appreciation on its birthday, so it charges a store anniversary fee. And since there are so many products in the store, settlement is troublesome, so it needs a payment period—not long, just three months. There will always be products damaged or lost by consumers. Since it's doing you a favor by selling your goods, you can't expect it to bear these small losses, so you have to pay for loss prevention.
**As for consumers, you enjoy such a good shopping environment, so it's acceptable to pay a little more for it. We guarantee that the products you buy here are 'absolutely genuine.' Consumers who have been harmed by counterfeit goods are willing to pay an extra 3-5 yuan.**
This is also why modern stores have always been 3-5 yuan more expensive than surrounding small shops and wholesale markets.
Imagine: distributors provide lower supply prices and still pay various exorbitant fees, while consumers pay high prices. Doesn't this feel like China Mobile's former two-way charging?
But in this service-oriented era, China Mobile and China Unicom are finding ways to lower fees, while modern stores are charging higher and higher fees.
Modern technology is so advanced that getting a barcode is a matter of minutes, but stores still charge for each barcode in each store. Stores have installed many systems, but distributors' payment periods have never been shortened. Instead, they have facilitated the stores' unilateral terms: if you don't comply with their deduction requirements, you can't settle your account.
A distributor who could perfectly become a city agent with 1 million yuan, once they enter a big store, that money becomes just a number pressed in the store, with no interest, no appreciation, and could become zero at any time if the store goes bankrupt.
**For consumers, ask the people around you: how long has it been since they last visited a hypermarket? Because they don't want to be props in the store anymore. Why do I say this? You should know that every design and every display in the store is carefully planned; you are just following the route they designed, appearing where they want you to appear.**
Marketing textbooks often cite a classic case: the store found that beer and diapers sell well together. This is because when a father goes to buy diapers for his child, he can also buy the beer he needs. I tell you, stories are just stories. In modern stores, beer is in the beverage section and diapers are in the baby care (or daily chemical) section. How could these two products be placed together?
Consumers don't understand why they have to walk through the first and second floors before finding the elevator to the third-floor supermarket. A housewife who wants to buy a dessert for herself and then oil for the family has to walk through the entire store. An expectant mother who wants to buy milk powder and then diapers for her child should be able to do it in a turn, but in the whole store, she has to cross 'mountains and seas.'
So consumers realize that they are the ones being designed. They pay relatively high prices but don't receive corresponding service. Modern stores are gradually following the path of the grocery stores and department stores they once eliminated.
The current closures are just the price they pay for their 'hegemony' over manufacturers and distributors, and for their disrespect to consumers.
Does the store have a future?
Because of the stores' arrogance, their fresh food sections have become Hema and Super Species; their milk powder sections have become maternal and child specialty stores; their cosmetics sections have become beauty stores; their food and beverage sections have become mom-and-pop stores. It's just that Blue Moon's transformation didn't succeed, otherwise their daily chemical section would also have been reshuffled.
**Why did the pseudo-concept of unmanned supermarkets flash by in China? Because the reason stores can't survive is not labor costs, but that supermarkets haven't effectively connected manufacturers and consumers.**
When Alibaba was reforming RT-Mart, it set an example: reduce or even cancel various fees for manufacturers; use cloud computing to analyze consumers' related purchases and provide reasonable display combinations.
Respecting manufacturers and distributors, and truly considering consumers' perspectives—this is the future of hypermarkets. Otherwise, hypermarkets can only become 'summer resorts' for the elderly and 'chicken farms' where people queue for free eggs...
Source: Kuaixiao
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