Introduction: Competition in the supermarket industry should not be underestimated Author 丨Jia Yongshun Editor 丨New Distribution Distributor transformation is a significant trend in the FMCG sector. Many companies are exploring how to adapt to market changes and meet consumer demands through transformation. During the second phase of the 2023 Xuzhou study tour organized by Li Feng's New Distribution,特邀导师金通公司总经理贾永顺现场详细介绍了经销商转型开生鲜超市需要避开的一些坑,包括商品定位、动线布局、营销宣传等方面。 Distributors transforming to open fresh food supermarkets is a challenging yet promising field. By learning from real cases and avoiding common mistakes, distributors can better seize market opportunities and enhance competitiveness. The following content is compiled from Jia's speech (with edits): Distributor Development: From Large Distributors to Platform Operators Five years ago, 80%-90% of the channels between brand owners and consumers were served by distributors. Now, supply channels have become fragmented, and distributor channels are being compressed. Consequently, distributor profits are declining due to price comparisons across various channels. Despite this, distributors' task targets have not been reduced, making business increasingly difficult. If they were to abandon the brands they represent, could distributors survive? How? Transformation is about finding the answer. It is clear that distributors are not without a way out. Business is becoming more specialized, and as the industry changes, distributors' mindsets must also change. Traditional distributors can develop towards manufacturers, doing OEM and private label; they can also develop downstream, opening diversified industries. Currently, customers purchasing from various online platforms has become mainstream. Therefore, a major development trend for distributors is from large distributors to platform operators. As long as they have a platform, channels, and sufficient professionalism, the probability of successful transformation is high. Jintong Company has evolved from single-product, single-operation to multi-brand, multi-category divisional operations, and then to related diversified industrial operations. Currently, Jintong Company is building its own supermarket channels. Its supermarket chain, Jintong Wanjia, already has 7 stores (6 in operation, 1 under construction), with 2022 revenue exceeding 80 million yuan, and 2023 is expected to break the 100 million yuan mark. Pitfalls to Avoid When Opening Fresh Food Supermarkets! 1. Business Positioning and Site Selection When distributors open supermarkets, they easily turn them into exclusive stores for clearing warehouse stock. From a retailer's perspective, they should focus on consumers' three meals a day. Although there is no huge profit, income is relatively stable. Based on this, Jintong Wanjia positions itself as a community fresh food enhanced store that addresses people's livelihood, rigid demand, and high frequency, striving to be a warm and lively supermarket. In terms of site selection, Jintong Trading's practical experience is: it is best to choose locations in new urban areas (corners), urban-rural fringes (outbound direction), old urban areas (near schools), and townships (town centers or farmers' markets). New urban areas usually have high development potential and population flow, while areas near schools have more foot traffic. Urban-rural fringes are also a good choice, attracting consumers from both urban and rural areas. In the central areas of new urban zones and urban-rural fringes, you can better capture peak-hour consumer demand. 2. Product Positioning First, remove product-oriented thinking and focus on product structure. Do not think that because you are an agent for Haitian, you will not sell Chubang or Lee Kum Kee. For consumers, the richness of product categories and brands is very important. Product structure means complete functionality. For example, in the cleaning supplies category, provide tools for washing dishes, pots, and toilets; in the clothes hanger category, provide hangers for jackets, underwear, etc. Additionally, product specifications should be complete. But completeness does not mean selling everything; it should be positioned according to the specifications and prices suitable for different business districts. Use sales analysis to adjust the turnover rate of products on shelves and eliminate slow-moving items. Second, differentiated operations bring profit growth. Best-selling products in the supermarket serve to attract traffic. In every category, there must be top-selling items, and these should not be priced high, otherwise, you will push customers away. Price competition in retail is unavoidable. Running a supermarket always requires giving customers a feeling of getting a bargain. Do not be overly concerned about profit; focus on foot traffic. We divide products into A, B, and C categories. A is for traffic attraction, B has gross margins controlled at 10-20%, and C at 40-50%. As a distributor, if you never lose money, you will eventually incur losses. In retail, some products must be sold at a loss! Third, quality is king, price is secondary. Whether consumers have money or not is not your concern; they do not lack money for food and drink. So even when doing promotions, you must stock good-quality products. This is a long-term process of building reputation. 3. Traffic Flow Layout Design Traffic flow layout refers to how customers navigate after entering the store: where vegetables are placed, where fruits are, where dairy drinks are, where meat is. If the traffic flow layout is unreasonable, the cost of later modifications will increase significantly. The rationality of the traffic flow layout determines the lifeline of supermarket operations: foot traffic, average transaction value, and sales. Jintong Trading achieved rapid sales growth within a month by adjusting the layout. Principles for traffic flow layout:

  1. Transparency: Customers' sight lines should not be blocked when entering.
  2. Relevance: Products should be related and combined, such as meat with vegetables, fruits with snacks.
  3. No dead corners, no clustering: Customers should be able to visit all areas. Even if they do not buy a product, the layout should make them pass by. If all traffic-driving products are placed together, people will cluster there, and other areas will have few visitors, which is a failed case. Different supermarkets have different average transaction values, mainly depending on two factors: traffic flow layout design and product structure. 4. Marketing and Promotion Display, hygiene, pricing, freshness, and staff are silent marketing. If even hygiene is not up to standard, any promotion is useless. So, basic work must be done well. In the future, traditional promotional posters will become less effective. WeChat community operations replicating community group buying tactics are more professional and effective. Combined with Douyin short video traffic, including same-city promotion and live streaming, the effect is even better. Finally, create your own supermarket membership day to plant a seed in consumers' minds. How does Jintong Company create membership day? They mainly target housewives and middle-aged and elderly groups who are price-sensitive. They choose Tuesday, the worst business day of the week, as membership day to offer discounts. They select a few single items from non-food, fresh food, and food categories, lower the prices, and highlight all discounted products in the display. Since it is a promotion, sales must be generated. Workflow: Operations department formulates Tuesday special offers plan – stores participate in product selection – procurement confirms next Wednesday's promotional items – planning department creates promotional materials – stores order, promote, and execute. Everyone works back-to-back, and no one can let the team down. At the same time, set up special offer awards and single-item breakthrough awards to motivate the team. 5. Digital Tool Selection If the digital system is not chosen properly, later replacement will be troublesome. There are five points to note: 1) Support chain store expansion, with data uploaded to headquarters in real time. 2) The headquarters server should preferably be a cloud server. 3) Support the headquarters distribution system module. Centralized procurement and unified distribution must have a distribution center module. In the future, chain stores will definitely adopt centralized procurement and unified distribution, with the headquarters system continuously strengthened and store rights gradually reduced. 4) Can interface with a split-account system module. In the early stages of opening a supermarket, it is best to adopt a single-store partnership model or an individual business model, but there must be a collection system so that daily revenue returns to one account. This allows single stores to get loans, and the headquarters also has cash flow. 5) Can interface with bank-related payment software. Purchasing your own revenue system is expensive. Banks have such cooperation, which can reduce fees. 6. Management System Building After opening three stores, the headquarters system must implement separation of operations and procurement. This means marketing and procurement should be divided into two departments, and power should be separated; otherwise, management problems are likely. Additionally, when opening chain stores, minimize contact between stores and suppliers. Why? All suppliers deliver goods to the distribution center, and the price is reduced by 3-5 percentage points as a distribution fee, greatly reducing management loopholes in stores. Opening chain stores requires an investment mindset. The more stores you open, the more the headquarters' costs are diluted, ultimately improving the management system and reducing supply chain costs. Final Thoughts In the future, the development direction of supermarkets is to establish process-oriented, standardized management systems and achieve scale operations. The core is to build efficient management systems and supply chains, reduce costs through scale, and increase profits. At the same time, strengthen supply chain management for fresh products to ensure quality and stable supply. When opening a supermarket, consider adopting a franchise trusteeship model, providing management output and one-stop distribution services to help franchise stores improve operational efficiency and profits. During supermarket operations, it is necessary to establish process-oriented, standardized management systems and engage in continuous learning and improvement to adapt to market changes and enhance competitiveness. By continuously improving team capabilities and practical experience, achieve supermarket upgrading and development. Competition in the supermarket industry is not to be underestimated. To stand out, you must continuously learn and innovate, providing unique services and products. Only through continuous improvement and enhancement in practice can you succeed in the market. Extended Reading