The supermarket industry is ＂breaking through＂ losses.

Author | Boya

Edit | Hexiang

Product | Retail-Finance

People all over the country have seen what happened in Shanghai in the past month or so. Beijing is facing the risk of a new round of epidemic, and Beijing citizens have chosen to "stock up" without hesitation. We have seen that many supermarket stores have empty fresh shelves, almost empty frozen shelves, and long queues at checkout counters.

In the face of this social emergency that triggered a short-term supply run, you will find it very boring to distinguish between online and offline, or that online is suppressing and robbing offline business.

The decline of the physical retail industry, especially the supermarket industry, in the past decade is essentially the lack of purchase value caused by the lag of supply capacity and the rise of fixed costs of the physical industry. The upside-down relationship between the two is becoming more and more obvious.

In 2022, the panic buying caused by epidemic prevention and control in various places seems to have caused the physical retail industry to experience a short-term "recovery", but this does not mean that the supermarket industry has returned to the "golden age". What we see more is the "store closing tide" of Wal-Mart, Yonghui Supermarket, Lianhua Supermarket and CR Vanguard. In 2021, many listed retail enterprises reported a double decline in revenue and profit.

China’s physical retail industry, accurately speaking, has entered a "loss era" in an all-round way.

Phenomenon: ice and fire are two worlds.

In Shanghai in March and Beijing in April, the supermarket industry experienced "two days of ice and fire".

At the end of March, on the eve of Shanghai’s "global static management", many citizens went to nearby supermarkets overnight to snap up materials, and many offline stores extended their business hours. On April 23, a local epidemic broke out in Beijing, and there was a sharp increase in consumption around the closed community in a short time.

According to media reports such as Securities Daily and China Business Daily, on April 25th, some supermarkets such as Huamao Chengpin Supermarket and Shilibao in Beijing Beiyuan area were sold out of vegetables, meat, eggs and milk, and even there were cases where Meituan, Hungry, and other errand boys queued up to buy materials at the entrance of the supermarket. In Wumeipin Supermarket (Caibaidian), there are empty shelves in fruit and vegetable, dry goods, cold storage area, convenience food, flour and other commodity areas.

On the 25th, Beijing Wumeipin Supermarket Caibai Store Map/China Business Daily Ran Longnan

For consumers, the supermarket has a complete range of goods, rich varieties, and the certainty of seeing is believing and taking the goods and leaving, which meets the emergency needs of citizens in special periods. Especially after the short-term orders of some e-commerce platforms surged, and orders could not be placed or the supply was insufficient, and the delivery was delayed, offline supermarkets became the first choice for consumers to purchase materials.

On the surface, the decline of offline supermarket stores almost coincides with the prevalence of online to offline (online ordering and offline fulfillment). The truth is that under the dual influence of the rapid development of e-commerce and the changes of consumer groups, the advantages of supermarkets that were originally inexpensive are no longer available. E-commerce platform transforms the high store cost and labor cost of offline physical stores into price advantage, and online shopping has gradually become an important position for consumers to buy department stores and even luxury goods.

In recent years, integrated e-commerce has in turn accelerated the family category+home-ready business, meeting the full-scene e-commerce shopping needs of consumers with greater, more comprehensive and more cost-effective. Among them, the pre-warehouse model represented by Ding Dong grocery shopping, through the test in Shanghai, verified the family fresh purchase provided by physical retail, which can replace online shopping. Coupled with the experience mind created by Ding Dong’s buying vegetables at the "direct source and quick delivery", the fresh products created by physical supermarkets have suffered a huge impact.

When the world enters the epidemic in 2020, the community group buying promoted by the epidemic further intensifies the supply competition of family purchases. Other small businesses and convenience stores that appear around the needs of the community are also diverting the flow of customers from supermarkets and supermarkets.

According to the latest data from the National Bureau of Statistics, the retail sales of supermarkets, convenience stores, department stores, specialty store and specialty stores in 2021 increased by 6.0%, 16.9%, 11.7%, 12.8% and 12.0% respectively over the previous year. Judging from the growth data, hypermarkets, supermarkets and big formats are not only difficult to compare with online formats; It is far less popular than "small and beautiful" convenience stores, specialty store and specialty stores.

The visitor rate of the supermarket has been quiet for a long time, except for a grab brought by the blockade. Everyone knows that this snap-up phenomenon is a short-term effect. What we need to think about is, since the real industry has really attracted people to snap up, how can we make the short-term effect long-term-attract people again.

02 Trend: Big Store Small Chain and Small Store Big Chain

Traditional supermarkets include hypermarkets+general supermarkets, as well as medium-sized supermarkets and small community supermarkets. China Chain Store & Franchise Association issued the "2021 Supermarket Format Survey Express", showing that in 2021, 67.1% of supermarket enterprises’ sales decreased year-on-year, 72.2% of enterprises’ net profit decreased year-on-year, and 68.39% of enterprises’ passenger flow decreased year-on-year.

These retail enterprises reported losses, including: Gaoxin Retail, Yonghui Supermarket, Lianhua Supermarket, Zhongbai Group, Jiajiayue, Jingkelong, Hualian Comprehensive Supermarket, Renrenle and BBK.

The reasons for the decline in performance given by these retail enterprises are nothing more than two reasons:

First, affected by the repeated epidemic, the decline of offline customers and the economic downturn, consumer expectations have weakened, competition in the retail industry has intensified, and channel diversion has been serious, and revenue has generally declined;

Second, the traditional stores are cautious in expanding their stores, and the increase in expenses due to the implementation of the new lease criteria and the closure of stores to dispose of assets have a certain impact on turnover.

At the same time, these enterprises have given or are already doing change exploration methods, including the following two types:

First, the member stores of big stores and small chains have gradually become the mainstream of consumption, and their advantages have emerged. Traditional supermarket enterprises regard "warehousing member stores" as a new growth point.

Member stores represented by Costco and Sam in the United States have inspired China’s physical retail industry. This format is dominated by middle-class families with cars, and the profit depends on collecting membership fees. As a model and direction that conforms to the current consumption trend and is recognized by the retail industry. In October 2020, since the opening of Box Horse X Member Store, the first domestic warehouse membership brand, "Warehouse Member Store" has attracted much attention and become a hot word in the industry.

From 2021 to the end of March this year, there were more than 100 newly opened warehouse member stores (warehouse stores) in China. Among them, local supermarkets, such as Yonghui, Carrefour China (Suning.cn), Beijing Hualian, Renrenle, which transformed from traditional hypermarket mode, have tried this new format one after another.

Of course, some people in the industry are not optimistic about the clustering of supermarket enterprises into member stores, thinking that they are similar in shape but not in spirit, and it is difficult to really form a climate.

Second, the convenience store format of small stores and large chains has become more convenient for instant consumption and has begun to take shape.

In addition to the loss list of the physical retail industry, there is another bright spot: Hongqi Chain achieved profit with a net profit of 480 million yuan. In fact, the convenience store-based business model is the key to ensure the steady growth of Hongqi chain’s revenue.

Relevant data show that in the first quarter of this year, the year-on-year growth rate of supermarkets above designated size was 3.2%, while convenience stores still maintained a growth rate of 10.1%, which is the highest growth rate in physical retail.

Thanks to the good growth momentum and policy support of the convenience store industry, the impact of new formats such as community group buying and fresh e-commerce is relatively limited. Therefore, in the current downturn of the industry as a whole, Hongqi Chain can still maintain its growth.

Convenience stores are close to consumers, with high accessibility and high consumption frequency; Warehouse member stores have abundant SKUs, high quality and low price, and master the passenger flow and member loyalty. The two physical retail formats have great development potential. Of course, how to further optimize them based on the local environment has become an urgent problem to be solved in the transformation and transformation of retail enterprises.

03 direction: where is the physical retail going?

The traditional supermarket format, represented by the store model, has experienced 20 years of gold in the supermarket industry. The external pressure from e-commerce group purchase has defeated traditional supermarkets, and its internal profit model and backward product selection management have also been exposed one by one.

Affordability is not as good as member stores, convenience is not as good as convenience stores, richness is not as good as e-commerce, and core categories are not as good as professional fresh stores. For consumers, daily shopping seems to find no reason to go to the supermarket. However, it is undeniable that the offline model has human touch and convenience, and physical retail still has vitality.

So, what kind of offline supermarket can survive? In other words, where will the future urban retail form go?

"Retail Business Finance" believes that regional brands and convenience store enterprises represented by Fat Donglai and 7-ELEVEn will become the next development form of urban retail.

First of all, around the regional characteristic retail, we should adjust measures to local conditions and attach importance to the cultivation of retail enterprise culture.

The regional retail brands represented by Fat Donglai in Henan sell not only commodities, but also the ultimate service experience. For consumers, the brand reputation of Pangdonglai, which has been deeply cultivated in the local market for many years, is returned by consumers again and again, and the repurchase rate is close to 100%.

What this enterprise brings to the retail industry is: how to focus on the growth of the enterprise and the progress of employees, and how to pay attention to the happiness of customers and the achievements and happiness of employees while pursuing benefits.

Secondly, around the regional specialized retail, focus on creating 365-day 24-hour service that meets the "daily+extraordinary" period.

"Nihon Keizai Shimbun" once conducted a survey of Japanese consumers on "Why do they like convenience stores?" Most people answered, because it is always open during the day or at night, and it can solve all the needs in daily life.

Indeed, for the student party, single office workers or elderly people living alone, from breakfast rice balls, milk bread; Lunch box lunch to beer snacks at night, three meals a day can be solved in convenience stores. Flexible and compact convenience stores do not need to bear the huge warehouse cost of large supermarkets, and at the same time meet the daily needs of residents with strong supply chain capabilities.

In addition to daily needs, Japan’s 7-ELEVEn has put forward the goal of "evolving into social infrastructure service business", and the standardized chain operation mechanism of convenience stores operating 24 hours a day is also in line with the standard of "social infrastructure".

With the long-term process of urbanization, convenience stores have become more and more a part of urban infrastructure, and they bear the important social functions of ensuring supply, stabilizing prices and emergency hedging in special periods.

Li Ling, a consultant of Lianshang. com, believes that in the face of the surging epidemic, ensuring supply is the foundation of strict control in the society, and the whole society also feels the importance of retail. Retail should become the livelihood infrastructure like hydropower, providing people with living security in the face of major disasters.

The epidemic has brought a big impact on the retail industry, and the transformation of old and new kinetic energy has also provided opportunities and platforms for the development of new business enterprises. Retail enterprises represented by regional characteristics and specialization will also combine the "new infrastructure" such as artificial intelligence, Internet of Things and data centers to evolve into social infrastructure service industries while meeting consumers’ one-stop service needs.

References:

1. Lianshang. com Liling: Retail should become an infrastructure like hydropower.

2. Financial magazine "Carrefour, the largest in Asia, closed down in the past, and the 20-year lease of traditional supermarket gold is gradually expiring"

3. The third eye looks at the retail "The supermarket industry has entered a" loss era ":more than half of the listed companies’ revenues fell below ten years ago"