Image source@Visual China
文 | 观潮新消费，作者 | 青翎，编辑 | 杜仲
It's rare that when a store closes its doors, the comments surrounding it are not a refund of the card and a refund, but a pity.
Biyid is an exception.
On December 23, Biyide, a low-cost supermarket that focuses on hard discounts, issued an announcement announcing that it would suspend business from December 22.
The news came unexpectedly, and many old customers expressed shock at the news, "I was still shopping yesterday" and "I didn't say no". In Xiaohongshu's more than 400 notes on "Biyide", the regret is overflowing.
One of the notes "Suggesting crowdfunding to revitalize Biyide" reads: "I suggest that each person contribute 10 yuan to crowdfund to revitalize Biyide...... Dia is gone every day, Biyide is gone, whose world will be in the future, there will never be cheap and good things again. As of press time, the note has been liked by 126 people.
(Source: Little Red Book)
When China's retail industry collectively transitioned to discounts, Biyide, as a pioneer in the industry, was the first to fall in this cold winter.
Poor people lose "paradise"
Biyide's temperament is very similar to the description of Po in "Flowers" - not loud.
In 2016, the company landed in China and focused its strategy on Shanghai. In keeping with the local character, founder Philipp Spangenberg named the supermarket "Biyide", which means "cheap" in Shanghainese.
It does not unpack the goods neatly and arrange them on the shelves, but directly cuts the packaging box into a semi-opened form and displays it to consumers, which is not so much a store as a warehouse.
Store decoration is also saving, except for the necessary shelves without any decoration, some stores do not even have ceilings, the huge yellow signboard except for "Supermarket Biyide Supermarket", there is no other brand symbol.
Biyide also doesn't like to advertise, the official public account basically maintains a state of updating every Monday, and 4-5 pieces of information are practical promotions each time, and there is not a word about the brand itself.
Even the official announcement of the suspension of business maintained a "silent" attitude, not telling the reason, only informing. Even the information was only a paper photo of the announcement, and I didn't even bother to type.
(Source: Biyide public account)
For consumers, Biyide has also achieved the ultimate "door-picking", never providing bagging services, and the clerk will concentrate the waste cartons at the entrance of the store or outside the door for consumers to take for free.
Although there is no advertising, but by word of mouth, Biyide has taken root in Shanghai, where every inch of land is valuable, and gradually extended its territory to the Yangtze River Delta, at its peak, the number of Biyide stores exceeded 200.
The reputation of Biyide comes from the low price, 1.3 yuan for 550 ml of Nongfu Spring, 5.9 yuan for a bottle of 330 ml of Perrier, 2.5 yuan a bottle of 500 ml of Coke...... Biyide's consumers jokingly call it a "poor man's paradise".
The low-priced style of play comes from its master, ALDI, the originator of hard discounts in Germany, and Philipp Spangenberg, the founder of Biyide, was a senior executive at ALDI in Germany, and before coming to China, he copied a local version of ALDI in Turkey, which was later acquired by ALDI.
The success in Turkey gave Philipp Spangenber the idea of rebuilding ALDI in China, and in October 2016, the first BHID store was set up in Putuo, Shanghai.
In 2021, discount stores represented by Good Sale, Prosperity Bazaar, Ottler, etc. began to become popular and favored by investors, and Biyide also won an exclusive investment of hundreds of millions of yuan from Argan Capital at this time, and Philipp Spangenberg, who was charged with money, said that he would expand to 800 stores in 2025.
But before the vision of 800 stores could be realized, Biyide was on the verge of collapse. According to the "21st Century Economic News", Jia Hongbin, the former CEO of Biyide, responded that the core reason for the shutdown was the disruption of cash flow.
A "Notification Letter" from Yirui Trading (Shanghai) Co., Ltd., the parent company of Biyide, to suppliers circulated on the Internet, which mentioned that the company had been in a state of loss for a long time, and the cash flow was broken, which made it difficult to continue business activities.
Jia Hongbin mentioned that Biyide has been in an overall loss-making state since it entered China in 2016. However, before the suspension of business, about 80 of the 161 stores had achieved store-level profitability.
It is not difficult to speculate on the logic of the cash flow fracture of Biyide, the gross profit of retail enterprises with a hard discount model is often not high, and small profits and quick turnover are the only rules of survival, and more sales means more stores, but Biyide takes the direct sales model, without the help of franchisees, it is difficult to expand stores in the short term, and the voice of upstream suppliers is weaker.
However, even if you can't get a very low price, it won't collapse, after all, it's cheaper than Yide than ordinary retail stores, but in 2023, the retail industry will blow a discount wind, whether it is Hema, the leader of new retail, or Yonghui, Wumart, and Jiajiayue in traditional supermarkets, all of them are in transformation.
The giants are large in size and have enough ammunition, and after they are gone, the disadvantages of Biyide as small players are more prominent, and there is no follow-up financing and blood transfusion, and the family background is insufficient.
If you don't fight a price war, you have no advantage, and you have no bottom when you fight a price war. In the final analysis, the volume of Biyide cannot support the scale effect of the giants, and under the squeeze of the giants, more and more "Biyide" will appear in the future.
ALDI has transformed twice
Ma Xintong, the founder of Discount Cow, mentioned in his personal Xiaohongshu account that he had been working in Biyide for three months before founding Discount Cow, "In fact, the inspiration for Discount Cow is Biyide." Ma Xintong said.
(Source: Screenshot of Xiaohongshu video)
However, after several months of work experience, Ma Xintong realized the shortcomings of the Biyide model, "The Chinese team of Biyide pursues discount dogmatism and completely copies the European model, whether it is employee management, product structure construction, or store area selection, rent selection, there is no localized adjustment." ”
In contrast, its chef ALDI did not rush to copy the way of doing business in Germany when he first came to China.
Unlike Europe and the United States, China's community retail format is developed, chain convenience stores, mom-and-pop stores are blooming everywhere, and Shanghai, where Yide is located, is the base of Lawson and FamilyMart, and the community group buying business of Internet giants has also been in full swing in the past few years, and there are too many stronger competitors than Yide in positioning community supermarkets.
When ALDI opened its first store in Shanghai in 2019, the mainstream of China's business was consumption upgrading, and ALDI, which was engaged in the "poor" business, decided to change its face and put a lot of effort into store and service upgrades, positioning itself between supermarkets and convenience stores, and more inclined to import boutique supermarkets, which is different from ordinary community stores.
Chen Yougang, chairman of ALDI China, once explained that ALDI is characterized by adapting measures to local conditions, and in his opinion, the price in the Chinese market is not the lowest but lower, "ALDI is not the best way to compete in the Chinese market. ”
In order to meet the consumption needs of Chinese, ALDI actively deploys local products, and is familiar with weekly specials, monthly limits and online shopping malls, especially through the "Aojia Canteen" to provide more fresh food, which is convenient for urban families to consume nearby and improve stickiness.
Chen Yougang mentioned that the reason why the concept of community canteens was put forward and raised to a relatively high height was that the Chinese market had an irreversible trend of catering retailization and retail catering due to the development of takeaway.
"If retail does not actively think about the path of catering, the future space will become smaller and smaller."
In addition to product selection, ALDI has also upgraded and optimized store decoration and services. Not only is it convenient for the people, but it also invites young artists to paint an art wall full of old Shanghai style story elements in the store.
In addition, ALDI's stores are also equipped with user experience experts, who not only undertake the task of introducing products to customers and recommending combinations, but also responsible for recruiting new members and increasing customer loyalty.
Compared with traditional supermarkets, ALDI is closer to consumers and has a higher turnover rate of goods, while compared with community convenience stores, ALDI stores with more SKUs and services are larger, and ALDI does not need to bear high fulfillment costs compared to community group buying on the Internet.
However, in the past five years, China's consumer market has undergone drastic changes, and cost-effective consumption has begun to gain the upper hand.
In 2023, ALDI put forward a new slogan of "Good Quality, Low Price", and launched a lower-priced "Value Value" series in October, covering hundreds of items from meat, poultry, eggs and milk, fresh fruits and vegetables to daily use.
In the discount war around cost performance, ALDI's biggest advantage is more than 100 years of experience.
The core of hard discounts is to cut the cost from all aspects, and the way to deduct the cost to the extreme is to do its own brand, it is understood that more than 90% of ALDI are self-operated products. In addition to first-tier brands, all Chinese stores use their own brands, and private label products account for more than 70%.
According to global consulting firm A.T. Kearney, Costco and Sam's own brands account for 30%-40% and 20%-30% respectively. Hema CMO Zhao Jiayu also revealed that Freshippo's own products account for 35%.
In addition, there are less than 2,000 SKUs in ALDI's thousands of square meters of stores, of which there are usually only 1-2 SKUs in a single category. According to the book "The Road to Simplicity: The Management Law of German Retail Giant ALDI", ALDI has estimated that the annual sales of a single SKU are more than 12 times that of Wal-Mart, and the cost advantage brought by scale can be imagined.
However, as mentioned earlier, the key to cost advantage depends on the scale, and ALDI has more than 10,000 stores around the world, which is comparable to Wal-Mart, which is also the key to its hard discount play to be proud of the global retail industry.
But in China, ALDI currently has 50 stores in China, all of which are located in Shanghai. At this size, there is uncertainty about whether ALDI will be able to maintain its bargaining power in the supply chain.
Discount era with private labels
Whether it is the fall of Biyide or the turn of ALDI, it shows that the competition around "discounts" is becoming more and more fierce.
In 2023, Hema will first offer a "moving price" for Sam, and then under the dual pressure of consumers and suppliers, it will forcibly announce a comprehensive discount, and at the same time, traditional supermarkets such as Yonghui, Wumart, and Jiajiayue have also started discount reforms.
In terms of e-commerce giants, when the market value of Pinduoduo exceeds that of Ali, it is still being used as an after-dinner conversation, and Alibaba's 1688 industrial white label products are also being bought by young people looking for replacement.
The discount of the snack track is one step ahead of the integration period, the head is huddled, the middle waist is struggling to survive, the traditional giants BESTORE and the three squirrels have also played the low-price card, and the battle between the old and new kings started at the end of the year.
Beginning with the establishment of Guangzhou Friendship Store in 1981, China's retail industry has undergone more than 40 years of development and is now beginning to move towards an era of comprehensive discounting.
Qicheng Capital once mentioned that discounting is essentially to act as an agent for consumers, and the retail side replaces the brand side to complete a series of work such as product selection, promotion, and fulfillment.
Behind this is the current situation of oversupply in the commodity market, and it is the oversupply that gives discounts room to survive.
In fact, the hard-discounted style of play has long been around in China, and it was neither Biyid nor ALDI that was first introduced to China, but Spain's Diatiantian.
In 2003, Dia entered the Chinese market as a community retail discounter, and became popular in Beijing and Shanghai with its low price, with more than 450 stores.
However, in the face of the highly developed supply chain and the emergence of domestic products and foreign capital in the Chinese market, it is obviously difficult for Diya to stand out as its own brand.
In 2018, Dia Tiantian was sold to Suning by Carrefour, and the only more than 300 stores were finally transformed into "Suning Xiaodian", and Dia Tiantian has also become a thing of the past in China.
Chen Liping, a professor at Capital University of Economics and Business, once mentioned that Dia Tiantian's poor management has a lot to do with China's business environment. "Chinese supermarkets mainly adopt the investment model, and do not pay attention to the establishment of a procurement system for their own goods. ”
However, time has passed, and in the era of cost performance is king, as a key move of discounting, no channel dares to ignore the construction of its own brand.
Especially for traditional supermarkets, in the face of years of declining performance, reform has to be launched.
According to the statistics of the Retail Research Center of Lianshang.com, in the first half of 2023, 6 percent of the 13 supermarket listed companies have experienced a year-on-year decline in revenue, and 4 percent of the companies are in a deep loss situation.
Peng Jianzhen, secretary-general of the China Chain Store & Franchise Association, mentioned that if retail enterprises only stay as porters of goods, the degree of participation in value creation is very low, and the substitution between channels is too strong, then it will be difficult for retail enterprises to survive in the market.
Therefore, from the upstream into the retail enterprises, until the completion of the consumer's purchase, in the circulation link, retail enterprises must create their own unique value. ”
Zhuang Shuai, an expert in the retail industry, also mentioned that for retailers, the creation of their own brand can first achieve product diversity and differentiation, secondly, because it can increase gross profit by eliminating many intermediate links, and finally can enhance brand loyalty.
As early as 1996, Shanghai Hualian created "diligence and thrift", the first private label in the industry.
After that, Rainbow Department Store, Dashang Group, RT-Mart, Yonghui and Wumart have opened the road of their own brands. In the first half of 2023, Yonghui Supermarket's own brand sales accounted for 4.64% of the total revenue, and the person in charge of Wumart also said that its own brand SKU accounted for only 8%.
According to the "2023 China Supermarket Private Label Case Report", the sales of private brands in China's top 100 supermarkets in 2022 accounted for only 5%, compared with 29% of all retail sales in the United States in 2022, and the overall market share of private label products in 17 European countries reached 38.1%.
epilogue
Rome was not built in a day, and "Private Label Revolution" mentioned that European retailers have gone through a century of development from the initial imitation of brand owners to the gradual development of a characteristic and differentiated development path.
In China's retail market, private brands are also getting more and more attention, and Hema has been building its own brand as its core strategy since its inception, and launched its first private label product "Wuchang Rice" in 2017.
As of the end of October 2022, Freshippo's private label product categories have reached more than 1,200 kinds, giving birth to 10 "box brands" with sales of more than 100 million yuan.
From "referee" to "athlete and referee", with the advent of the discount era, the private label revolution in China's retail industry is also accelerating.