DRASTIC SHIFTS IN THE CHINESE SUPERMARKET SECTOR

I tried to capture everything happening in the Chinese supermarket sector in one slide.

Supermarkets move to focus on three positionings:

HIGH QUALITY AND EXPERIENCE

▶️ High-quality products, including private labels, lots of ‘ready to eat’ products and catering facilities in the stores. Includes the supermarkets with fast delivery of internet companies that appeared in the late 2010s: Alibaba’s Hema (Freshippo) and JD’s 7Fresh.

▶️ Meituan also tried in the late 2010s with Xiaoxiang (Ella) but failed, but is now giving it another go by opening a new Xiaoxiang store in Beijing after having rebuilt Xiaoxiang into a successful instant retail concept. Pupu, another instant retail platform in southern China, is doing the same by opening a Pupu Supermarket in Fuzhou.

▶️ Traditional supermarkets Yonghui and Wumart have studied Pangdonglai, a successful supermarket from Henan that focuses on employee satisfaction and extreme customer service. They have renovated stores in Pangdonglai-style, hoping it will stop their diminishing sales.

COST EFFICIENCY

▶️ Discount community supermarkets that appeal to a more price-sensitive target group.

▶️ Several years ago, Alibaba’s Hema launched Hema Outlet and later rebranded it to Hema NB and now Chaohesuan.

▶️ JD and Meituan launched discount chains, Huaguan and Happy Monkey, respectively, and wisely immediately went for a separate brand from their existing formats.

▶️ Traditional hypermarket Walmart is also opening community stores. Aldi, which started as an upmarket format in the late 2010s, is now rolling out a format more like its European discount stores.

SPEED

▶️ This mostly concerns self-operated front-end warehouses (dark stores) located close to consumers (1.5-3 km) that deliver in around 30 minutes.

▶️ Meituan’s Xiaoxiang and Pupu are very successful. Walmart’s Sam’s Club became a leading player with the combination of large stores in the suburbs and ‘cloud warehouses’ with 25% of the SKUs that could deliver the fast-mover very fast.

▶️ Having seen this, Hema, 7Fresh, and traditional supermarkets Yonghui and Wumart have also opened front-end warehouses. This offers faster delivery than they offered from their stores and allows them to penetrate city districts without building new stores.

China’s internet companies are rolling out more and more offline supermarket concepts.

▶️ It’s become increasingly expensive and difficult to acquire new customers online.

▶️ Offline recruitment in high-frequency user scenarios, such as supermarkets, has become more efficient and offers opportunities to draw users into the broader ecosystems of Alibaba, JD, and Meituan. Alibaba and JD tried to do the same thing with this year’s food delivery war, with doubtful success.

Dingdong Maicai is missing from the chart. It mostly stuck to its front-end warehouses and is focusing on internationalisation. It has two outlet stores, but has not rolled this concept out.

-Ed