Is low price the only way out?
Based on the changes in the macro consumption environment, in the past one or two years, the consumption concept of the new generation has become more and more rational. While satisfying their own pursuit of quality of life, spending as little money as possible has become the consumption attitude of many people. In this context, discounts have gradually evolved into a mainstream retail model in China, forcing many industries to change, including traditional supermarkets. However, with the recent announcement of the closure of low-priced supermarkets without warning, the pattern of domestic supermarkets may change.
The hard discount supermarket is out of the market in disgrace
On December 23, 2023, Biyide, a low-priced supermarket that focuses on hard discounts, released an announcement on its official WeChat public account. The announcement said that "Biyide Supermarket will be temporarily closed from December 22, 2023", and the payment will be made on December 22.
Just one day before this announcement, the official account was still updating preferential information such as big promotions and special sales as usual. The sudden official announcement of the closure of the store this time, Biyide did not publicly disclose the reason. However, judging from various sources, the core reason for this shutdown is the rupture of its cash flow.
According to public information, Biyide is affiliated to Yirui Trading (Shanghai) Co., Ltd., which was established in 2017 and is a hard discount store brand founded by German Philipp Spangenberg in China. As a pioneer of hard discount supermarkets in China, Biyide takes cost performance as its competitiveness, and its store form is a warehouse-type store, with a single store SKU of about 600, covering the needs of daily life. According to the official data of Biyide, the compound annual growth rate of sales from 2017 to 2021 is 120%, and its own brands account for about 40% of total sales.
In terms of site selection, Biyide is a bottom merchant along the street, with an area of about 200-300 square meters, only doing community stores, only doing mature communities, and achieving density coverage, close to each other. With the advantages of close to the community, efficient store operation, and selected SKUs, it was once favored by the market. During the period of rapid development, Biyide has opened more than 200 stores in Shanghai and Jiangsu.
In September 2021, Biyide received a long-term financing of hundreds of millions of yuan exclusively invested by Argan Capital, which was mainly used for offline store expansion. At that time, Philipp Spangenberg, the founder of BYD, said that BYD is currently focusing on store expansion in Jiangsu Province, and will gradually cover the Yangtze River Delta region and East China in the future, and is expected to achieve the goal of having 800 stores by 2025. But obviously, this "bold statement" has not had time to be fulfilled, and it will come to an imperfect end at the end of 2023.
There is a wind of supermarket discounts in China
In fact, in the discount supermarket track cultivated by Biyide, the competition has become more and more fierce in recent years.
As the originator of hard discount supermarkets, ALDI, a world-renowned retailer, piloted the first batch of two offline stores in Shanghai, China in June 2019. At present, in the Chinese market, ALDI has 90% of its products under its own brand, and follows the strategy of streamlining SKUs, keeping the number of store SKUs at about 2,000 to meet the basic daily needs of the majority of Chinese consumers, of which about 1,500 are daily necessities, and the rest are seasonal and festive categories that are limited to supply according to seasons and festivals, and meet the diverse needs of consumers through changing themes.
In terms of site selection, ALDI also chose to be located in nearby residential communities, residential buildings and commercial areas to better serve the surrounding residents. After more than 4 years of development, the number of stores in Shanghai has exceeded 50. In addition, we have also noticed that in 2023, more and more supermarket brands will test the discount format.
For example, in July 2023, Hema began to launch the "Yishan Price", and in less than a month, the scope of the "Yishan Price" was expanded to more than 10 cities, and in October, Hema began to implement a new procurement model, comprehensively carrying out discounting reforms, forming the "753 Commodity Price System", that is, KA products are 7% off the market price, private brands are 5% off the market price, and expiring goods are 3% off the market price.
At the same time, the expansion of Hema Outlet, a hard discount store brand owned by Freshippo, is also accelerating, with more than 60 outlets in Shanghai alone, and another 500 stores to be opened in 2024. Also in October, Yonghui Supermarket's official website issued a document stating that it would add "authentic discount stores" in stores nationwide, and simultaneously set up discount areas on online apps and mini programs to provide surprise discount prices for food and supplies.
Further back, the leading Hunan supermarket in bankruptcy and restructuring began to restart the first batch of stores in Xiangtan at the end of September, launching discount products as a selling point, and the average selling price of supermarket goods was reduced by about 15% compared with the past; Jiajiayue, which has more than 1,000 stores across the country, launched a new discount store format "Haohuixing Good Goods Discount Store" in June this year, and all the goods in the store from production to packaging to logistics are handled by Jiajiayue, mainly selling its own brand.
Driven by the concept of rational consumption, discount retail has risen strongly, and supermarket brands have collectively sought change in order to find their own second growth curve. But it's not easy to do a good job in discount retail. Without strong cost control and supply chain management, although the exploration of discount formats in supermarkets can bring customer flow in the short term, in the long run, it is easy to fall into the same dilemma as Biyide.
The warehouse membership store has been soaring
It is also worth paying attention to the warehousing member supermarket, which presents a completely different development state from the traditional supermarket. Judging from the current market, warehouse membership stores are being led by Costco and Sam's, and continue to prosper and grow.
Among them, Costco, which will open its sixth store in Chinese mainland in Shenzhen in the middle of this month, will open a total of 3 stores in 2023, and has opened stores in Pudong, Shanghai, Ningbo, Zhejiang, and Hangzhou. You know, in the 4 years from entering the Chinese mainland market in 2019 to 2022, it has only opened 2 stores.
It is understood that in addition to the upcoming Shenzhen Longhua Costco, it will also enter the Nanjing market in 2024, and the Costco Nanjing store will be unveiled in May this year.
And Sam, Costco's opponent, is also accelerating the expansion of stores in an all-round way. On December 28, 2023, Sam's Club Shanghai Jiading opened, bringing the number of Sam's Club's stores in China to 47, covering 25 cities in China. Not only that, Sam is also eyeing China's sinking market. At present, Sam's has started to sign stores in Dongguan Liaobu, Jiaxing Jingkai, Shaoxing Yuecheng, Jinan Lixia, Wenzhou Lucheng and Jinjiang Chidian.
With the opening of Costco and Sam's, more new players have also poured into domestic warehouse membership stores, such as fudi warehouse membership stores, Hema X membership stores, Sun Art M membership stores, etc. One of the most representative local forces is the FUDI warehouse membership store. In the more than 2 years since FUDI opened its first store in Beijing in May 2021, it has opened a total of 4 member stores and 2 FUDI+ selected supermarkets.
Among them, in 2023, Fudi will open its fourth store in Wukesong Wanda Plaza in Beijing's West Fourth Ring Road, which is also the flagship store with the largest area, the most complete categories and better selection among its member stores. In addition, during the year, Fudi also opened two FUDI+ select supermarkets in Beijing - FUDI+, which is designed for the city's landmark shopping mall, and strives to provide a different "immersive scene consumption experience".
According to the latest plan, in 2024, Fudi will further accelerate, 5 new Fudi member stores and 10 new Fudi+ will be unveiled in Beijing, and the expansion of the national market will also be launched. Whether it is a foreign brand or a new local force, they all have their own advantages in the warehouse membership store track. In the future, as the industry gradually matures and the market gradually expands, how to maintain the advantages of the supply chain and retain consumers with better goods, services and experiences is a problem that brands cannot ignore. In the retail industry in 2023, the trend of discounting is intensifying due to the increased price sensitivity of consumers. Supermarket brands create different discount consumption scenarios in different ways, and the core purpose is to impress a new generation of consumers who take "cost-effective" and "practicality" as their consumption criteria. However, it is important to grasp that discounting should not be a simple dimensionality reduction attack of price wars, but the essence behind it is a profound change in the retail supply chain, logistics system and even a wide range of business model innovation.
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Author | W Picture | From the official channels of each brand
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