Introduction: Only retailers that achieve online-offline integration can truly succeed in online business.
Author 丨Ming Cong Editor 丨Zhao Shengnan Reviewer 丨Wang Qiang Layout 丨He Wen
In recent years, local retail enterprises in lower-tier markets have become increasingly struggling, facing multiple pressures. On one hand, national chain supermarkets continue to expand downward, squeezing market share; on the other hand, new business models such as Taobao, Pinduoduo, and Lightning Warehouse's home delivery services, as well as low-price competition from community group buying, are emerging one after another. These have caused continuous impact on local retail enterprises. To protect their existing market, local retailers have begun to seek new growth points.
Online Development: A Long and Arduous Road
I have observed that many local retail enterprises are beginning to imitate national chain retailers from first-tier cities by establishing an online presence and attempting to enter the home delivery service sector. For instance, national chains like Yonghui and Hema are models to learn from. However, strategies that suit national chain enterprises may not necessarily fit local retailers. They have encountered many difficulties in practice, including both external objective factors and internal issues. Although these local retailers offer home delivery services, they fail to meet the diverse needs of consumers. Moreover, due to the unique characteristics of lower-tier markets, consumers have low awareness of online consumption, and logistics services are relatively lagging, which constrains the development of online business. On the other hand, internally, there are problems such as disconnection between online and offline operations, lack of online genes, hindered incremental expansion, and insufficient capital.
1. Disconnection Between Online and Offline
The issue of online-offline disconnection is not new; national chain supermarkets faced this challenge years ago. For example, when Better Life (Bubugao) developed its online business, it established a separate e-commerce company and invested substantial resources but failed to establish a good service coordination mechanism with its offline stores, leading to issues like untimely delivery and lagging after-sales service for online orders at offline stores. During the period when online channels were frantically absorbing traffic, demand exceeded supply, leading many retailers to believe that online was paved with gold. They began to set up independent online business departments with high sales targets. Looking at past cases of national chain supermarkets, treating online as an independent department and operating it separately has a very low success rate. While independent online operations can bring some business growth, they also increase costs, such as hiring personnel, increasing warehousing capacity, and improving transportation efficiency. More importantly, separating online and offline operations can lead to inefficient supply chains, affecting management and service levels, and thus impacting the overall operational efficiency of the company. Today, these problems are recurring among local retailers in lower-tier markets. I have seen many local retailers that still have not resolved the online-offline disconnection issue. Commonly, online teams use WeChat mini-programs, official accounts, Douyin stores, and other channels for sales without integrating with physical stores, leading to wasted team resources.
2. Lack of Online Genes
Due to differences in market levels, online business in lower-tier markets is relatively underdeveloped. Moreover, local retailers almost entirely lack online genes and have a shortage of e-commerce talent. Online business has its unique characteristics compared to traditional offline business, and the logic and strategies are completely different. Traditional offline retail operations revolve around customer traffic, location, and store management, while online business requires attention to which marketing activities attract consumers and whether logistics and delivery are timely. In such circumstances, having offline personnel with almost no relevant experience attempt to conduct online business is bound to be fraught with difficulties.
3. Hindered Incremental Expansion
As mentioned earlier, local retailers attempt online channels to expand incremental business, but for many companies, their online business merely divides the existing offline market share and does not generate incremental growth beyond that. Consumers in lower-tier markets are more sensitive to price and practicality, so local retailers often use various discounts, gifts, and other promotions to attract online consumers. However, this approach may erode traffic that originally belonged to offline stores, thus not significantly contributing to overall revenue.
4. Insufficient Capital
The fundamental reason many local retailers fail in online business is insufficient capital. After all, trying online business is a money-burning process. Unlike traditional offline business, which is steady and conservative, online business requires bearing high promotion costs and investing substantial resources for early-stage traffic generation, such as coupons and aggressive promotions, with minimal returns in the early stages. Compared to national chain enterprises, local retailers clearly lack working capital. Many local retailers may choose to interrupt or give up due to financial pressure, but often re-enter due to market pressure. This not only wastes energy and resources but may also drag down offline business.
Online-Offline Integration
The development stages of online business vary across different city levels. Local retailers can learn from the successful experiences of national chain retailers. However, due to differences in region, company situation, strength, and customer habits, they cannot directly copy their strategies. National chain retailers have strong brand influence and financial support, enabling them to occupy more resources and promote new businesses faster, while local retailers are more attuned to local consumer needs, each with their own characteristics and advantages. When learning from the successful experiences of national chain retailers, it is necessary to extract the essence and discard the dross to solve the current problems faced by local retailers. The problems currently faced by local retailers, whether it be online-offline disconnection, lack of online genes, or dividing existing market share without incremental growth, are essentially caused by the separation of online and offline operations. Looking back at the history of national chain retailers expanding online business, we find that only enterprises that achieve online-offline integration can truly succeed in online business. For example, Yonghui Superstores, which was deeply entangled in the online-offline relationship, initially had its online team focus on e-commerce platforms and its own APP, such as social e-commerce promotions and mini-program activities, while physical stores promoted products through in-store promotions and poster campaigns. There was no interoperability between the two, no synergy, and this directly led to a sharp increase in operating costs. As Yonghui gradually deepened its online-offline integration, consumers can now scan QR codes of products in physical stores through the Yonghui APP to purchase, or after shopping in physical stores, check points balances and receive coupons in the APP. They can also provide more accurate product recommendations and services through online activities or stored personal information, with mutual traffic generation between online and offline. Today, Yonghui's online business has achieved some success. According to public financial reports, Yonghui Superstores' online business achieved sales of 15.936 billion yuan in 2022, a year-on-year increase of 21.37%, accounting for 17.69% of total revenue. In the first quarter of 2023, the company's online business sales reached 4.02 billion yuan, with a 6% increase in average order value.
Online-offline integration can improve service quality, ensure price consistency, and reduce communication costs. Currently, many local retailers are beginning to change. For example, a local supermarket I serve, based on its store location, uses corresponding Douyin accounts, video accounts, and mini-programs to publish store-related videos or products to increase store visibility and consumer attention. After trying for a period, the online store has gained increasing consumer attention. Consumers can directly order products online and choose in-store pickup or home delivery. On one hand, this gives customers more choices; on the other hand, it utilizes existing store and operations teams, saving operating costs. Ultimately, even if online does not convert, it leaves a deep impression on consumers, helps maintain customer relationships, and encourages them to visit physical stores later, driving the positive development of the entire store.
Final Thoughts
For physical stores, online erosion of sales is inevitable. Rather than resisting and waiting for business to be divided, it is better to actively embrace and achieve online-offline integration, just as the saying goes: If you can't beat your enemy, join them. Facts have proven that embracing online can indeed drive overall business positively. However, embracing online should not be blindly optimistic; extra attention must be paid to cost investment to avoid overlapping resources, waste, and losses. While controlling investment, it is also necessary to consider developing online marketing strategies that suit one's own characteristics and consumer needs, create store highlights, and build brand power locally. Additionally, continuously focus on the integrated management and service quality of online and offline operations to truly achieve online-offline integration and bring comprehensive development opportunities to physical stores.