Chain merchant super ferry robbery 2021

Image source @ Visual China

Text | itlaoyou-com

"Community group buying for another year or two, supermarkets of more than 500 square meters are basically out of play." Ye Guofu, CEO of Mingchuang Premium, said so.

The end of the year has come, Ye Guofu's words are still fresh in people's minds, and the chain supermarkets in 2021 have also fallen to the bottom.

The two major leaders in the supermarket industry, Yonghui Supermarket and Gaoxin Retail, the former's stock price fell continuously; the latter's semi-annual report for fiscal 2022 showed that net profit fell by 87.6% year-on-year.

Under the leading enterprises, the chain supermarkets are "miserable", and even Wang Filling, chairman of BBK, has also cried out: the supermarket format has reached the darkest moment of life and death.

2021 is indeed an important year for the rapid change of the retail format, the rapid development of community e-commerce, cannibalizing the market cake of comprehensive hypermarkets, and the passenger flow and profits of almost every supermarket are declining.

What is the way out?

There are supermarkets that focus on warehousing and member stores, there are players who reconstruct digital retail links, and there are also companies exploring new formats such as community convenience stores, but there are various challenges on different roads, can chain supermarkets still overcome difficulties?

Darkest hours

Today, there are fewer and fewer people who love to visit big supermarkets.

The latest data for 2021 is not yet available, but it can be seen from past data. According to the China Chain Store & Franchise Association, the passenger flow of chain supermarkets decreased by an average of 4.9% in 2020.

Whether in the front warehouse, community group purchase, or in the fresh shop at the doorstep, consumers can buy a large part of the goods at a more preferential price than the chain supermarket in the most convenient way.

There are more new channels, consumers are picky, and chain supermarkets are no longer the first choice. In 2020, the overall sales of the top 100 domestic chain retail enterprises were 2.4 trillion yuan, down 7.2% year-on-year, which was the first decline since the statistics were established in 1997.

In fact, the decline in customer flow and sales of chain supermarkets is not a "new thing".

According to data from the China Industry Information Network, since 2017, the number of supermarket chain stores, the number of employees, and the sales of goods in China have declined year by year.

Some people in the retail industry also said that since 2013, the passenger flow of hypermarkets in first- and second-tier cities has declined significantly, basically falling by 5-10% per year, and from 2015 to 2016, it began to be transmitted to fourth- and fifth-tier cities.

It is not difficult to understand that since 2013, vertical e-commerce, new retail, social e-commerce and other models have risen, in the context of the era of supply over demand, once chain supermarkets in the market share "exclusive eight buckets", today's user groups are also continued to be diverted by different formats.

However, in 2021, the decline in the performance of commercial supermarkets has reached a record high.

According to the data of the third quarter report of each chain supermarket in 2021, RT-Mart opened 3 new stores and closed 2 stores; Jiajiayue opened 22 new stores and closed 5 stores; and Lianhua Supermarket opened 240 new stores and closed 166 stores.

The number of stores opened is comparable to the number of stores closed, which is almost the norm for chain supermarkets in 2021, and the number of stores closed by many leading supermarket companies last year even exceeded the sum of previous years.

As of the third quarter of 2021, Yonghui Supermarket closed a total of 23 stores last year, while Yonghui only closed 8 stores in 2020 and only 2 stores in 2019.

Another company, Renrenle, closed 19 stores in the first half of last year, more than the total number of stores closed in the previous three years and about 36% of the total number of stores closed in the past seven years.

Local supermarkets closed their stores and "crossed the robbery", and foreign supermarkets also had a bad life.

Throughout 2021, Carrefour closed 8 stores, completely withdrawing from Hangzhou, Jinan and other cities; Wal-Mart closed a total of 30 stores, and the total number of stores also fell below the "400" mark.

Both inside and outside, the storm of new formats such as community group buying has swept the chain supermarket track, the main customer base has been lost little by little, and a large number of commercial supermarkets are trapped in the whirlpool of losses.

Taking Yonghui Supermarket as an example, in the first three quarters of 2021, Yonghui's net profit attributable to the mother fell by 207.37% year-on-year, with a total loss of more than 2.1 billion yuan, which is also the first time that Yonghui has suffered a loss since its listing in 2010.

Another leading supermarket, RT-Mart, although it retained its profits, but between March and September 2021, its net profit fell by nearly 90% year-on-year.

At present, due to the rise of various vertical formats, user demand is highly differentiated, buy 3C home appliances have JD.com, buy fresh Dingdong to buy vegetables, community group purchases, buy beauty, buy cat food and dog food, consumers can find relevant vertical e-commerce.

Shopping scenarios are highly dispersed, and the corresponding online channels can basically meet the needs of users; not to mention, the new formats represented by community group buying are impacting the basic disk of chain supermarkets with stronger cost-effective advantages.

Chain supermarkets must change.

Jiajiayue said in the 2021 semi-annual report that more than 900 stores have provided online ordering and in-store pick-up services; Gaoxin Retail, which is controlled by Ali, also said that it is cooperating with Ali's community group buying business.

But does the logic of "if you can't fight and join" really apply to chain supermarkets?

Confrontation between old and new

The rise of community group buying has diverted a large number of users from commercial supermarkets.

In this regard, the feeling of FMCG brands is the most intuitive. Zhang Xin, secretary of the board of directors of the listed company Haitian Flavor Industry, said at the 2021 semi-annual report performance conference that haitian's offline channel share accounted for about 25%, and the community group purchase in the second quarter was very serious to this proportion.

The reports of securities companies also pointed out that since March 2021, the sales of soy sauce offline supermarkets have dropped by 5%-10% compared with the same period in 2019; and in 2021, the community group purchase channel will divert 12.63% of soy sauce sales.

Internet giants with the advantages of capital and traffic attack community group buying, under the stimulation of high cost performance of goods, consumers also vote with their feet, have flowed to new channels.

But the diversion effect of community group buying is only the tip of the iceberg against traditional supermarkets.

The most critical changes occur in the supply chain.

In 2001, when the local supermarkets were not yet involved in the fresh category, Yonghui opened fresh food in the store, seized the policy opportunity of "agricultural reform super" to rise rapidly, and began to set up an agricultural product procurement team around 2003.

Based on the self-built procurement team, Yonghui on the one hand through the collection mode to go deep into the production area, on the other hand through the joint venture, equity into the way of binding upstream suppliers, and then through the establishment of toB fresh processing plant (color food fresh), the collection of fresh products channel diversion.

In the past, Yonghui's supply chain model has greatly compressed the fresh circulation link, and it is the existence of "top students" in a number of retail enterprises.

Today, the emerging community e-commerce model has begun to "reduce the dimension and attack" chain supermarkets.

In terms of fresh direct procurement, community e-commerce has done more thoroughly than commercial supermarkets: Dingdong buys vegetables to invest 2 billion yuan in Shanghai Jinshan to build its own agricultural planting base; each community group purchase is to cooperate with the government of the place of origin, contract the source production capacity, and go deep into the production area to supervise production...

According to the official data of Dingdong Shopping, the proportion of direct procurement of fresh produce on the platform has reached 79.1%, and in mature areas such as Shanghai, it has reached 85%.

At the same time, in the production and marketing and circulation links, community e-commerce provides a new path: social collaboration and sales to determine the procurement.

The central warehouse of community group buying from the professional logistics park leasing, the grid warehouse adopts the franchise system, and the self-pick-up point proportional commission, which mobilizes a large number of idle social resources in the entire circulation link and reduces the performance cost to about 1 yuan.

Because the cost of circulation is greatly reduced, community group buying can cede more profit margins to source merchants and consumers, and the cost-effective advantage of goods can be established from it.

The community group purchase "same-day order, the next day self-pick-up" model, basically realized the "sales to determine the procurement", suppliers only need to send goods to the warehouse according to a certain amount of estimates, the risk of inventory backlog loss can be greatly reduced.

The ultimate compression of circulation links to create the ultimate cost performance of goods, which is a new model led by community e-commerce.

In contrast, the chain supermarket is still a product of the traditional circulation era, and some suppliers have said that when the product enters the supermarket channel, it is necessary to communicate with the person in charge of different positions, but everyone has different demands and performances, and the requirements of the operation end and the procurement end are difficult to meet at the same time.

Chen Hui, chairman of Anhui Xinlian Poultry Industry, told Dige Network that in the past, when supplying supermarkets, it was necessary to pay bar code fees, admission fees, advertising and marketing fees during the promotion period, and equipped with special marketing personnel, which cost high.

In the face of the violent impact of community group buying, many chain supermarkets that have been established for decades can only be "elephant turns", slow and faltering, and are soon left behind by new players.

The retail format is undergoing iteration, what "posture" can chain supermarkets use to catch up with this wave?

Don't ask about the future

2021 is the "first year of warehousing member stores" for local supermarkets.

In the past year, Hualian Zongchao, Jiajiayue and Renrenle have all opened their first discount clubs; METRO's 16 member stores have opened simultaneously in one day; and Yonghui Supermarket has opened 55 warehouse discount stores in six months.

After seeing the first store of Costco Shanghai with a full flow of customers, seeing the Sam's Club store where Internet celebrities have punched in, local chain supermarkets have also begun to make efforts to store large stores, regarding it as a "life-saving straw".

In addition, some traditional supermarkets are constantly improving their digital capabilities: Wuhan Zhongbai Supermarket announced that it will invest 100 million yuan to set up Zhongbai Digital Intelligence Technology Company to promote the company's digital transformation; Xinhuadu announced that it intends to divest the retail business sector and focus on the business layout based on Internet marketing.

Yonghui Supermarket, which used to "break the sand" in the new retail field, announced a change of coach in August last year, followed by Li Songfeng, who joined the company for less than a year and was the former chief technology officer.

The technical leader is at the helm, which is the first time within Yonghui, and it also shows Yonghui's determination to promote technological transformation.

With the development of warehousing discount stores and the digitization of retail, chain supermarkets seem to have found an "antidote", but the real situation is far less optimistic.

The goods of the warehouse club are cost-effective, and the business logic behind it is "selected sku + private brand", which is a big test of the supply chain capability for chain supermarkets.

In the same category of dozens or even hundreds of SKUs, choose the top two or three on the shelves, behind which is an extremely complex operating mechanism, the platform for accurate positioning of consumer demand, rapid analysis of front-end precipitation of data, timely feedback to the back-end, to ensure that the goods continue to sell hot.

The "selected procurement" model is the ultimate test of the ability to integrate production and marketing, and the private brand building of the warehouse member store is a game that races against time.

Costco's own brand "Kirkland" and Sam's Club's "Member's Mark" occupy an important share in the sales scale of their respective brands, but they have been established for more than 20 years, and continue to iterate and optimize in round after round of research and development, trial and error and adjustment.

If chain supermarkets want to strengthen warehouses, they must win the war of supply chain.

Similar to the layout of warehouse stores, retail digitalization is also a long-term game, testing the organizational ability of enterprises.

Technology tools are an important means of digital transformation, but digitalization is not only the application of technology tools, as Yonghui Chairman Zhang Xuansong said, "Can't say that getting an APP is new retail." ”

Retail digitalization superficially tests technical capabilities, but in essence tests organizational capabilities, whether an enterprise from top-level thinking to mid-level strategic planning to bottom-level execution, whether it has enough innovation, whether the management structure can be more flat and efficient.

The change of the core of the internal organization can truly shake the genes of the chain supermarket.

In 2021, Yonghui "moved the knife" Yonghui life business, using its App as the online entrance of the self-operated platform, providing fulfillment services by Yonghui stores, and gradually transforming into a service platform that provides trading middle office and commodity middle office; based on this strategy, Yonghui Yunchuang's operating loss will be significantly reduced by more than 50%.

Transforming the logic of opening a store into a back-end service logic, Yonghui Supermarket has a "standing", but can it break through the siege?

Today, chain supermarkets are not without insight into the rapid changes in retail formats, but a number of retail enterprises born at the end of the last century and the beginning of this century, when the major new formats with stronger combat strength emerge in an endless stream, the innovation vitality of chain supermarkets has lagged far behind.

In the past year, chain supermarkets have reached the darkest moment, and new community e-commerce formats such as front warehouses and community group buying are still gaining momentum and the line of fire is attacking, and the original limited market cake continues to be cannibalized by players from all walks of life.

In 2022, the situation of chain supermarkets may be even worse.