Tian Yu recently felt frustrated shopping at 'Hi-Tech Go' (嗨特购). She bought a box of face masks and two bottles of orange juice, but at checkout, she found an extra 4 yuan on her bill. The reason was that the store differentiates between member and non-member prices. If she got a 99-yuan membership card, she could enjoy lower member prices. She found this hard to understand: "I came to a discount store to get a bargain. Why do I have to pay for a membership to enjoy the low prices?" Similarly, on Xiaohongshu, posts complaining about 'Hi-Tech Go' membership are popping up. In the past two years, discount stores have sprung up everywhere. Stores like 'Hi-Tech Go' sell near-expiry products, surplus stock, out-of-season items, and slightly defective goods that brands or manufacturers regularly clear out, making them a 'paradise' for young people to get bargains. 1.8-yuan bottles of Evian water, 2.8-yuan Genki Forest drinks, half-price face masks... Young shoppers are snapping up products from various brands at 'cabbage prices' in these stores. In the retail industry, paid membership has always been an important way to lock in users and increase customer loyalty. Now, in discount stores like Hi-Tech Go, this is causing some users to feel excluded and dissatisfied, even exclaiming they 'can't get the wool anymore'. Behind the membership system, from removing near-expiry labels to ramping up private labels, the discount store ecosystem that rose with the pandemic is undergoing dramatic changes. 99-Yuan Membership Young Shoppers at Discount Stores Are Not Buying It When Tian Yu was checking out, her shopping joy vanished. The staff reminded her that the prices displayed in large black font on the tags were member prices, while the smaller fonts on the left and right showed the distributor's suggested retail price and non-member price. On Xiaohongshu, bloggers with similar experiences to Tian Yu also complained about Hi-Tech Go's membership card. Their complaints mainly focus on two points: first, the non-member price font is too small and easy to overlook; second, the 99-yuan membership card is not a stored-value card. The membership card displayed at Hi-Tech Go stores shows that users who get the 99-yuan card can enjoy four benefits: a 50-yuan discount on purchases over 100 yuan on the same day, a 30-yuan discount on purchases over 100 yuan the next day, and a weekly coupon of 10 yuan off purchases over 50 yuan. Despite the multiple coupons and monthly member days, Tian Yu still can't accept it: "My feeling is that you have to pay to get discounts. They might as well call it a membership discount store." A Hi-Tech Go store owner said that currently 70% of products in the store are member-priced, mainly to lock in regular customers and increase repurchase rates. The member price tags were introduced this year because previously, the 'black gold price' was not intuitive for many users. Besides Hi-Tech Go, 'Discount Cow' (折扣牛) has adopted a stored-value membership card model. Their membership card stored value ranges from 100 yuan to 1,000 yuan. A Discount Cow store owner said that if the total purchase amount is less than the balance, you can enjoy member prices. For example, if you store 100 yuan, your daily purchase must be less than 100 yuan. The owner also emphasized, "Our membership is simple, no tricks, just store value and spend." Currently, other discount stores' membership models have not caused controversy on social platforms. 'HotMaxx' (好特卖), which is positioned in first- and second-tier cities like Hi-Tech Go, has a membership system more similar to Miniso's model. A store owner said users can become members by following the HotMaxx mini-program and enjoy benefits like free shopping bags, and on weekly member days, they can get random discounts. Public information shows that Hi-Tech Go's membership card was launched during the Spring Festival in 2022. On the Black Cat complaint platform, searches for 'Hi-Tech Go' show complaints concentrated on membership card tricks and refund difficulties. To some extent, young people are疯狂扫货 in discount stores with the mindset of 'buying means earning'. Although the price difference between member and non-member prices for most products is only 1-2 yuan, and for some face masks it's 6-10 yuan, it still 'hurts' their bargain-hunting psychology. Hi-Tech Go's previously disclosed user data shows that post-00s shoppers account for over 20% of purchases. Most Hi-Tech Go users are women aged 18-35, with an average order value of 48 yuan, corresponding to 8-9 items. Hi-Tech Go users visit the store an average of 1-2 times per month. Hi-Tech Go founder Zhang Qiang once said that users come to discount stores with a shopping psychology of 'buying entertainment'. "Products that cost 8 yuan elsewhere are 4 yuan here. It's like going to an outlet mall; after buying, you feel you've gotten a bargain." Cai Jingzhong, partner at Wujie Innovation Capital, believes that soft discount stores, due to unstable supply sources, cannot form a stable product structure, making it hard for consumers to repurchase and leading to low user loyalty. Moreover, discount stores like Hi-Tech Go mainly sell snacks. In comparison, in life discount stores that sell grain, oil, rice, and noodles, consumers may be more accepting of memberships because one purchase can basically recoup the cost. Not only membership controversies, but users of near-expiry stores are also finding that the thrill of bargain-hunting is diminishing. Wang Qi, a veteran discount store enthusiast, said that many products in the stores are actually imitations of popular bestsellers, and behind them are private-label products produced in cooperation with suppliers by HotMaxx, just at lower prices. From visits to several Hi-Tech Go and HotMaxx stores, staff all said that there are almost no near-expiry products in the stores. The 'traffic-driving' products of the two also differ: at Hi-Tech Go, various big-brand samples and beauty products are placed at the entrance, while at HotMaxx, toys and blind boxes are at the entrance. Hard Times: Near-Expiry Discount Stores Seek Change Hi-Tech Go and HotMaxx are representatives of soft discount stores, which mainly sell low-priced genuine products through various surplus channels, typically like TJX in the US and Don Quijote in Japan. Hard discount stores, on the other hand, select limited items, increase private labels, and improve operational efficiency to achieve extreme cost-effectiveness, like Sam's Club, Costco, and ALDI. In the past year, 'Hi-Tech Go' and similar stores have not had an easy time. Hi-Tech Go stores at Beijing's World Trade Center and Chaoyang Joy City have closed. Last September, HotMaxx and Hi-Tech Go announced franchise openings. Data from Zhaimei Canyan shows that as of now, 136 Hi-Tech Go stores are still open, 9 are temporarily closed, 499 HotMaxx stores are open, and 9 are temporarily closed. A Hi-Tech Go franchise recruiter said that initially, they tested stores in many shopping centers, and during the pandemic, there were rent discounts. Now, if costs cannot be covered, they will close promptly. He believes one advantage of opening franchises now is that increased purchasing volume lowers procurement costs. "The company has also hinted internally that if various strategic progresses go well, there may be an IPO plan." For 'Hi-Tech Go' and similar stores, they were beneficiaries of market dividends. Since the pandemic outbreak, logistics and physical store operations were hindered, leading to a large backlog of goods in warehouses and stores. The increase in unsold goods gave the near-expiry business more room to grow. A steady stream of near-expiry products is the store's 'golden sign'. 1-yuan bottles of Genki Forest sparkling water, 2-yuan boxes of Baicui cookies, 7-yuan Zhong Xue Gao ice creams... These products, close to their expiry dates but very cheap, precisely hit young people's desire to save money. A 2022 discount retail research report by Shanghai Securities showed that the near-expiry product market grew rapidly to 31.8 billion yuan in 2020, and is expected to exceed 40 billion yuan by 2025. Near-expiry stores once became a hot track in the investment circle. Brand discount stores like Hi-Tech Go and HotMaxx, with capital support, expanded rapidly. Supermarkets like Hema, Renrenle, Jiajiayue, and Suning also entered the discount store market to get a piece of the pie. In fact, near-expiry products are just one type of surplus goods. Other damaged products and non-best-selling items from big brands also continuously flow onto discount store shelves. They can attract users with prices 30%-50% lower than supermarkets and convenience stores. Moreover, many unsold products from new consumer brands are also sources of near-expiry goods. Therefore, near-expiry discount stores are also known as 'brand graveyards'. However, as more players enter, supply sources are limited, and surplus goods are hard to find. A discount store founder said that surplus goods are obtained through opportunistic purchases, which are very unstable. For example, this year, advertising agencies may have many products for barter from advertisers, but next year they may not. In the second stage of development, they reduced near-expiry products to about 20%-30%, using them only as 'traffic drivers', and instead sold low-priced, high-margin beauty, daily chemical, trendy toys, and other products to generate revenue. A supplier said that imported products, national trends, and internet-famous foods are popular in discount stores, satisfying young people's desire for 'new, novel, and special'. Now, in the third stage, near-expiry discount stores are starting to build their own private labels. Tianyancha shows that Shanghai Xinguo Supply Chain Co., Ltd., which owns HotMaxx, has applied for the 'Xiaqu' trademark. Beijing Youpin Kuma Technology Co., Ltd., which owns Hi-Tech Go, has registered several food and daily chemical trademarks such as 'Qiangxiaolu', 'Mutou Qiqi', 'KASUREOO', 'Yikou Le', 'Chubensheng', and 'Xiaoshi Wanxiang'. In private-label products, Hi-Tech Go tends to 'imitate'. For example, Hi-Tech Go's Qiangxiaolu is extremely similar in packaging and product to the popular internet-famous product Wangxiaolu. On Hi-Tech Go shelves, Qiangxiaolu is placed alongside Wangxiaolu to 'pass off as the real thing', attracting users with lower prices. A Hi-Tech Go franchise recruiter revealed that if some big-brand products cannot be purchased at low prices, the company will choose to create similar private-label brands instead. For example, if they can't get Watsons dental floss sticks, they will cooperate with manufacturers to produce similar dental floss products. Are Discount Stores Still a Good Business? Unstable supply sources remain the 'Damocles sword' hanging over soft discount stores. After all, the better the sales of regular-priced goods, the fewer surplus goods are available. With the pandemic easing and improved logistics and inventory turnover, surplus goods are further reduced. The industry has already begun to reshuffle. In the past year, brands focused on near-expiry products, including Boom Boom Mart and Bengong Snack Innovation Lab, have collapsed. Consumer investor Wang Lei believes that due to the complex distribution system and extremely fragmented near-expiry supply sources in China, it is difficult for any soft discount store brand to monopolize supply sources like foreign soft discount brands to lower procurement costs. Moreover, the entry barrier for near-expiry discount stores is low, leading to a situation of 'too many monks, too little porridge'. Furthermore, he believes that Hi-Tech Go and HotMaxx stores have mainly been located in shopping centers in first- and second-tier cities, where users are more focused on 'trying new things'. Apart from near-expiry products, if they cannot create a hit product, user repurchase rates will be low. "So far, no soft discount store in China has reached the scale of 800 stores, nor has a good single-store model been developed." On the other side of the coin, hard discount stores are experiencing a boom. They target lower-tier markets, open stores densely, and some brands have opened over a thousand stores in a year. Brands like Aotle, Snacks Youming, and Zhao Yiming Snacks continue to attract capital. Cai Jingzhong, partner at Wujie Innovation Capital, believes that soft discount store procurement is more like 'sweeping the market'. Often, it's based on 'opportunistic purchasing' to find surplus goods, and the large procurement team also increases costs. The advantage of hard discount stores is a more stable supply chain. The core is cooperating with factories to find products that make customers 'scream'. Cai Jingzhong analyzed that hard discount stores require low-cost operations, refined management, and efficient supply chains. Brands need a high ability to understand user needs "to see what consumers like, lead trends, and develop products that others cannot imitate." Currently, with the development of private labels, HotMaxx and Hi-Tech Go can be seen as a combination of 'soft discount + hard discount', and they are continuously transforming. A Hi-Tech Go employee said the company plans to add products like headbands, earrings, and necklaces to increase female user stickiness and gross margin. According to multiple Hi-Tech Go staff, Hi-Tech Go's gross margin is currently around 30%. Wang Lei said that domestic soft discount stores face many challenges and are still in a process of 'trial and error' and transformation. Whether they can eventually become China's version of 'Don Quijote' is a big test for the founding team. He is more optimistic about the market development of hard discount stores, estimating that the national hard discount snack retail market has nearly 40,000 stores. (Note: Tian Yu, Wang Qi, and Wang Lei are pseudonyms.)