Snack shops that “occupy” towns

In today's rural market, competition among snack discount stores is becoming increasingly fierce. Many leading brands have moved down to occupy prime positions, but most of them face limitations in consumer groups and capabilities.

The leading snack discount stores occupy the most conspicuous “golden locations” in towns and villages.

1. Occupy the “golden location” of towns and villages

"This location is considered the best in our town." Wang Yang, who runs a supermarket in the town, pointed to the Haoshanglai snack store that was being renovated across the street and told "Spirit Beast".

The store under renovation is located in a small town in Binzhou, Shandong Province. The site is at the intersection of the town's commercial street. Wang Yang said that the location is the most conspicuous "golden location".

Wang Yang said that in the first half of this year, there were three or four mass-market snack stores in this small town, but they were basically small brands. In addition to snacks, some stores also had a fresh food area. When they first opened, they would give away watermelons, vegetables, etc. with purchases of over 30 yuan.

"I didn't expect that the leading discount snack brands would squeeze into this small town so quickly." Wang Yang said that the big stores have good locations, and the leading discount snack brands are well aware of the importance of store location to discount snack stores. Therefore, they are willing to take up a prime location of at least 200 square meters.

"At the end of last year, I saw that the snack discount stores in the county were doing a booming business, so I had the idea of ​​opening a store. I didn't expect that not long after the Chinese New Year, there were several stores in our township that were being renovated and prepared to open. In this situation, I didn't dare to rush into opening a store, so I wanted to wait and see for the time being," said Wang Yang.

According to him, a franchised snack discount store not far from his store did not do as good a business as the snack discount stores in the county town after it opened.

"That store can sell about 700 yuan a day, with a gross profit of about 16%. After deducting the monthly rent of 1,700 yuan, the wages of two employees, plus water and electricity bills, it is definitely a loss-making business," said Wang Yang.

Wang Yang said that at that time, the prices of goods in that store were not cheap. For example, a certain brand of beverage was sold for 3.2 yuan in Zhao Yiming's store in the county town, but it was sold for 4 yuan in that store.

"The store owner said that the price of getting goods from the franchise headquarters is high, and the purchase price is 3.4 yuan. Even if the store's profit is low, it cannot sell at a price lower than 3.4 yuan. Although it is a discount store, it does not have a price advantage. It loses money every day it opens." Wang Yang said that the store closed within a few months.

"The annual rent for a 300-square-meter store here is about 60,000 to 80,000 yuan, the transfer fee is about 30,000 to 50,000 yuan, plus the store employee salary is about 2,000 to 3,000 yuan." Wang Yang said that although the rent and labor costs here are not high, they cannot offset the deserted stores.

Even between 12 noon and 1 pm, the entire store was extremely deserted, with no customers coming to shop. In such a large store, there were no customers queuing to pay.

2. It is difficult to do business in rural areas

In the rural market, although the staff and rent costs have great advantages, the snack discount store business in rural areas has to face the key problems of insufficient core consumer groups and limited consumption capacity.

In the past two years, discount stores such as Busy Snacks, Ming Snacks, and Zhao Yiming Snacks have sprung up like mushrooms on the commercial streets of many counties and towns.

In these stores, you can buy Nongfu Spring at 1.1 yuan, Wanglaoji at 2.8 yuan, Lay's potato chips at 2.9 yuan, and hand-grabbed snack packs at a few cents each. Compared with supermarkets and convenience stores, the goods in discount stores are 20%-30% cheaper on average.

At the beginning of this year, data released by Meituan showed that since New Year's Day, the search volume for keywords related to "snack discount store" has increased by 393.7% year-on-year, and the number of comments has increased by 250.0% year-on-year.

During the same period, the transaction volume of "snack discount stores" on the platform increased by 517.6% compared with the same period last year, the order volume increased by 232.5% compared with the same period last year, and the number of users increased by 241.2% compared with the same period last year.

These snack shops spread across the county rely on open franchising, direct connections to factories, cutting out the middlemen, and occupying the mass snack market with low prices.

But the reality of running a snack discount store in a rural area is that this business is not easy to do.

On the one hand, the population that township markets can radiate is mainly the rural population within a few kilometers. However, due to the imbalanced development of local economic momentum, the rural population in these areas is generally dominated by the elderly.

On the other hand, many towns still have primary schools and middle schools. Although students are the core consumer group of snack discount stores, parents will instinctively limit the types, amounts, and frequency of snacks that students can buy at one time due to concerns about their children's health. This means that the repurchase rate and number of people entering the snack discount stores in towns are not as high as expected.

This has also led to many snack discount store operators in rural areas quickly closing or transferring their stores within less than a few months of opening.

In the absence of a core consumer group, competition among discount snack shops in rural markets is still fierce. Take Wang Yang’s township as an example. Together with the Haoxianglai store that is currently under renovation, this township market has gathered five discount snack shops.

Previously, snack discount stores in towns and villages were mainly third- and fourth-tier brands. However, as competition among leading brands intensifies, leading brands such as Haoshanglai, Zhao Yiming, and Snacks Are Mang have also begun to enter the sinking township market. Under the convergent business model, price wars will also occur among township snack discount store brands.

Similarly, due to the diversion caused by too many stores and the impact of continuous price wars on profits, it may not be easy for the rural market to establish a stable profit model.

Industry insiders said that compared with the urban and rural markets in the south, the winter in the north is cold and long, with short days and long nights. It is inconvenient for many consumers in the rural markets to go out, which also limits the local residents' willingness to go out in winter.

This problem applies to snack discount stores in rural areas in the north. Not only are their business hours extremely short in winter, but the time after dinner, which is the peak business time for snack discount stores in the south, is rarely seen in snack discount stores in rural areas in the north during winter.

3. Future: Competition of Product Cost-Effectiveness

Snack discount stores used a "simple and crude" low-price offensive to quickly occupy the market share of snack stores such as Bestore and Baicaowei, and also forced many convenience stores and small supermarkets to close down.

Discounted consumption has also become a new consumption trend since 2023.

This has also caused retail giants to feel a strong sense of crisis.

At that time, Hou Yi, the former CEO of Hema, once said in his circle of friends: "Discount stores such as Hi Special Purchase and Hao Special Sale have opened next to and opposite Hema Fresh. Their prices are 1/3 cheaper than ours. The sales of the stores we invested heavily in have dropped sharply, and they have become experience stores and display stores for brand products."

In order to cope with the challenges, retail giants have also started their own discount transformation. Hema has announced a "comprehensive discount" transformation; Yonghui Supermarket has adopted a gradual change, adding "authentic discount stores" to its stores; and the traditional snack shop company Bestore has also launched a large-scale price cut.

The pressure of price cuts and discounts has been transmitted to upstream suppliers, and the original "retailer-supplier relationship" seems to have become tense. The entire retail industry is transforming and reforming around price cuts, discounts, special supplies, and self-operation.

Kaiyuan Securities pointed out in a research report that behind the discount trend among large supermarket chains is the change in consumers' demand for essential consumer goods in the face of a new economic cycle and consumption environment, that is, the pursuit of the ultimate low-price satisfaction without compromising quality.

From affordable goods like a box of milk or a bottle of shampoo to luxury goods like handbags and watches, discount retail has penetrated into every aspect of residents' consumption and has become a familiar consumption habit and lifestyle.

Judging from the price alone, the products in snack discount stores are more affordable than those in traditional offline and online e-commerce stores. In the final analysis, the essence of mass merchandising is still a battle of product cost performance, especially in low-tier cities, where the price directly determines the competitiveness of the product.

One of the reasons why discount snack shops have low prices is their strong supply chain management capabilities. They work directly with well-known brands, eliminating the middlemen, and lower costs through large-scale centralized procurement and direct transportation.

But it is worth mentioning that low prices can never form core competitiveness. Being able to keep prices extremely low and still make money is the core capability that mass-market snack shops really need to build.

From the perspective of discount models, in the past three years, the market and capital have paid more attention to the "hard discount" model. This model optimizes the supply chain, purchases directly from manufacturers, or makes OEM products, thereby reducing intermediaries, reducing operating costs, and ultimately achieving low prices.

Under this model, Sam's Club and Costco have achieved rapid growth in the Chinese market. In addition, various snack discount stores that have emerged in recent years mostly focused on "near-expiry foods" in the early days, such as Haotemai and Hitgou, and have also "evolved" from a soft discount model to a hard discount model.

For consumers, low prices are indeed attractive, but product quality, environmental services, etc. are also important factors for people to consider. On the Black Cat complaint platform, many netizens have complained about the food quality of discounted snacks;

Recently, some media reported that a certain brand's franchise stores were closed, suspected to be due to poor management.

This practice of sacrificing quality for low prices reduces consumer experience and product repurchase rate, which in turn affects the long-term development of the brand. At a time when leading snack discount stores "occupy" rural areas, how to develop with a long-term strategy is what companies should think about in the future.

Author/Qingshan ID/lingshouke
This article is written by the author of Operation Party [Lingshou Media], WeChat public account: [Lingshou]. It is originally created/authorized to be published on Operation Party. Reproduction without permission is prohibited.

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