Image source @ Visual China
Text | Retail Business Finance, author | Boya, Editor | Crane Xiang
The people of the whole country have seen what has happened in Shanghai over the past month or so. Beijing is facing the risk of a new round of the epidemic, and Beijing citizens have not hesitated to choose "tun goods". We have seen many supermarket stores where fresh shelves have been bought out, frozen shelves have almost been emptied, and there are long queues at the cash register.
In the face of this social emergency caused by a short-term supply run, you will find that it is very uninteresting to distinguish between online and offline, or to suppress and rob offline business online.
The decline in the physical retail industry, especially the supermarket industry, in the past decade is essentially the lack of purchase value caused by the lag in supply capacity, and the rise in fixed costs of the physical industry, and the inverted relationship between the two is becoming more and more obvious.
The phenomenon of rushing to buy caused by epidemic prevention and control in various places in 2022 seems to have caused the physical retail industry to experience a short period of "warming", but this does not mean that the supermarket industry has returned to the "golden age". We see more of the "store closure tide" of Wal-Mart, Yonghui Supermarket, Lianhua Supermarket, Cr resources Vanguard and other enterprises. In 2021, the financial reports of a number of listed retail companies reported a double decline in revenue and profit.
China's brick-and-mortar retail industry, to be precise, has entered the "era of loss".
01 Phenomenon: Ice and Fire Dual Heaven
In Shanghai in March and Beijing in April, the supermarket industry experienced the "double 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 grab shopping funds, and many offline stores extended business hours. On April 23, a local epidemic broke out in Beijing, and there was a surge in consumption in the vicinity of the closed and controlled community in a short period of time.
According to the "Securities Daily", "China Business Daily" and other media reports, on April 25, some supermarkets such as Huamao Chengpin Supermarket and Shili fort in Beiyuan District of Beijing had vegetables, meat, eggs and milk sold out, and even there were cases of meituan, hungry and other errand-running takeaway brothers queuing up to purchase funds at the entrance of the supermarket. In Wumart Supermarket (Caibai Store), there are empty shelves in the commodity areas such as fruits and vegetables, dry goods, refrigerated areas, convenience foods, and flour.
On the 25th, Beijing Wumei supermarket Caibaidian photo / China Business Daily Ran Longnan
For consumers, supermarkets have complete goods and rich varieties, and the certainty of seeing is believing and taking the goods away meets the emergency hoarding needs of citizens in special periods. Especially after the surge in short-term orders on some e-commerce platforms, the inability to place orders or insufficient supply, and the delay in delivery, offline supermarkets have become the preferred channel for consumers to purchase materials.
On the surface, the decline of offline supermarket stores coincides with the prevalence of the O2O model (online ordering, offline fulfillment). The truth is that under the dual influence of the rapid development of e-commerce and the change of consumer groups, the advantages of supermarkets with high quality and low prices are no longer there. E-commerce platforms convert the high store costs and labor costs of offline physical stores into price advantages, 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 business of home category + home-to-home distribution, and met the needs of consumers for larger, more complete and more cost-effective all-scenario e-commerce shopping. Among them, the front-end warehouse model represented by Dingdong Grocery Shopping, through testing in Shanghai, verified that the home fresh purchase provided by physical retail can be replaced by online shopping. Coupled with the experience mentality created by Dingdong buying vegetables in "direct procurement at the source and rapid delivery", the fresh categories created by physical supermarkets have suffered a huge impact.
In 2020, the world entered the epidemic time, and the community group purchase promoted by the epidemic further intensified the supply competition of household purchases. Other types of small formats and convenience stores that have appeared around the needs of the community are also diverting the flow of customers from hypermarkets and supermarkets.
According to the latest data from the National Bureau of Statistics, according to the retail format, the retail sales of supermarkets, convenience stores, department stores, specialty stores and specialty stores in the retail units above designated size 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 large formats are not only difficult to compare with online formats; they are also far less popular than "small and beautiful" convenience stores, specialty stores and specialty stores.
The customer rate of the supermarket has been quiet for a long time, except for the rush brought about by the sealing control. This phenomenon of rush buying, everyone knows that it is a short-term effect. What we need to think about is how we can make the short-term effect long-term - re-attract the crowd since the real industry has really attracted people to buy.
02 Trends: Large store small chains versus small store large chains
Traditional supermarkets, including hypermarkets + general supermarkets, as well as medium-sized supermarkets and small community supermarkets. According to the "2021 Supermarket Format Survey Express" released by the China Chain Store & Franchise Association, in 2021, 67.1% of the sales of supermarket enterprises fell year-on-year, 72.2% of the net profit of enterprises fell year-on-year, and 68.39% of the corporate passenger flow fell year-on-year.
These retail enterprises that reported losses include: Gaoxin Retail, Yonghui Supermarket, Lianhua Supermarket, Zhongbai Group, Jiajiayue, Jingkelong, Hualian Zongchao, Renrenle and BBK 9 enterprises with net profit losses.
The explanation for the decline in performance given by these retail companies is nothing more than two major reasons:
First, due to the repeated epidemics, the decline in offline customers and the superposition of economic downturn, consumption expectations have weakened, competition in the retail industry has intensified, channel diversion has been serious, and revenue has generally declined;
Second, traditional store-type stores are cautious, and the increase in expenses caused by the implementation of the new leasing standards and the closure of stores to dispose of assets have a certain impact on turnover.
At the same time, the methods of change exploration given or already done by these companies also include the following two types:
First, the membership stores of large stores and small chains have gradually become the mainstream of consumption, and the advantages have emerged, and traditional supermarket companies regard "warehousing member stores" as a new growth point.
The 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 profits rely on membership fees. As a model and direction that is in line with the current consumption trend and recognized by the retail industry. In October 2020, since the opening of hema X member store, the first warehouse-based membership brand in China, "warehouse member store" has attracted much attention and become a hot word in the industry.
From 2021 to the end of March this year, more than 100 newly opened warehousing member stores (warehouse stores) across the country. Among them, local supermarket enterprises transformed by the traditional hypermarket model: Yonghui, Carrefour China (Suning Tesco), Beijing Hualian, Renrenle, etc. have tested this new format.
Of course, some people in the industry are not optimistic about supermarket companies getting into member stores, thinking that they are similar but not similar, and it is difficult to truly form a climate.
Second, the convenience store format of small stores and large chains is more convenient for instant consumption and has begun to take shape.
In addition to the list of losses in the physical retail industry, there is another bright spot: Hongqi Chain achieved a profit with a net profit of 480 million yuan. In fact, the business model based on convenience stores is the key to ensuring the stable growth of Hongqi chain revenue.
Relevant data show that in the first quarter of this year, the year-on-year growth rate of supermarkets in the retail industry 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 Hongqi chains on new formats such as community group buying and fresh e-commerce is relatively limited. Therefore, at the moment when the industry as a whole is declining, the red flag chain can still maintain growth.
Convenience stores are close to consumers, have high accessibility and high consumption frequency; warehouse-type member stores have rich SKUs, high quality and low prices, and grasp customer flow and member loyalty. The two physical retail formats have great potential for development, of course, how to further optimize based on the local environment has also become an urgent problem to be overcome in the transformation and transformation of current retail enterprises.
03 Direction: Where is physical retail headed?
The traditional supermarket format represented by the store model has experienced 20 years of golden age in the supermarket industry. External pressure from e-commerce group buying has crushed traditional supermarkets, and their internal profit models and backwardness in product selection management have also been exposed one by one.
Affordable is not as good as member stores, convenient is not as good as convenience stores, rich is not as good as e-commerce, core categories of fresh food is not as good as professional fresh stores, for consumers, daily shopping seems to find no reason to go to the supermarket. But it is undeniable that the offline model has a 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 form of urban retail go?
"Retail Business Finance" believes that regional brands and convenience store companies represented by Fat Donglai and 7-ELEVEn will become the next development form of urban retail.
First of all, around the regional characteristics of retail, we should adapt to local conditions and attach importance to the cultivation of retail corporate culture.
Regional retail brands represented by Henan Fat Donglai sell not only goods, but also the ultimate service experience. For consumers, fat Donglai's brand reputation in the local market for many years is through the full load of consumers, and the repurchase rate is close to 100%.
The thinking that this company brings to the retail industry is: while pursuing interests, how to focus on the growth of enterprises, the progress of employees, how to pay attention to the happiness of customers, the achievements and happiness of employees.
Secondly, around the regional specialization of retail, focus on creating a 365-day 24-hour service to meet the "daily + extraordinary" period.
The Nihon Keizai Shimbun once conducted a survey of Japanese consumers on "Why Do You Love Convenience Stores," and most people replied that it was always open during the day or late at night, and it could solve all the needs of everyday life.
Indeed, for student parties, single office workers, or the elderly living alone, from rice balls for breakfast, milk bread, bento box lunches for lunch, to beer snacks in the evening, three meals a day can be solved at convenience stores. Flexible and compact convenience stores do not need to bear the huge warehouse costs of large supermarkets, while meeting the daily needs of residents with strong supply chain capabilities.
In addition to daily needs, Japan's 7-ELEVEn has proposed the goal of "evolving into a social infrastructure service business", and the standardized chain operation mechanism of convenience stores that operates 24 hours a day is also in line with the standard of "social infrastructure".
The long-term process of urbanization has brought convenience stores more and more into part of urban infrastructure, undertaking important social functions of supply assurance, price stabilization and emergency risk avoidance in special periods.
Li Ling, a consultant of Lianshang Network, believes that in the face of the surging epidemic, supply assurance is the basis for strict control of the social side, and the whole society has also felt the importance of retail, and retail should become the same people's livelihood infrastructure as water and electricity, providing people with living security in the face of catastrophes.
The epidemic has brought a lot of impact to the retail industry, the transformation of new and old kinetic energy has also provided opportunities and platforms for the development of new formats, and retail enterprises represented by regional characteristics and specialization will also combine artificial intelligence, Internet of Things, data centers and other "new infrastructure" to evolve into the social infrastructure service industry while meeting the needs of consumers for one-stop service.
Resources:
Li Ling: Retail should become infrastructure like hydropower
Financial magazine "The former best in Asia, Lefu, is closed, and the golden 20-year lease of traditional supermarkets is gradually expiring"
The third eye looks at retail "Supermarket industry enters the "era of loss": more than half of the listed companies' revenue fell below ten years ago"