The Internet wave ruthlessly crushes the "community grocery store"

Jack Ma said that the era of pure e-commerce is over and the future is new retail. In fact, most people still don't understand the concept of new retail. From the perspective of a grocery store owner, the article shows how traditional retail stores have developed and changed under the wave of the Internet. If you have also been paying attention to this phenomenon for a long time, then read on.

In 2016, Jack Ma said at the Yunqi Conference held in Hangzhou that the era of pure e-commerce will soon end, and there will be no e-commerce in the future, only new retail. That year, more than a thousand kilometers away in Guangzhou, a grocery store owner named Acheng had just put aside his concerns about e-commerce and put up Alipay and WeChat payment codes in his store.

Until today in 2023, Ah Cheng still didn’t understand “new retail”, not to mention the endless new concepts in the Internet industry. But this did not affect his community group buying or taking groceries as “takeout”, changing himself little by little to adapt to customers’ new consumption habits. The changes that took place in Ah Cheng’s small grocery store may never be the focus of people’s attention, but they are far from being ignored.

1. Ah Cheng's Grocery Store

"16 yuan has been received through Alipay." Just after nine o'clock in the evening, Ah Cheng received another old customer, and then turned around to continue to tidy up the shelves at the door. As usual, Ah Cheng was ready to close the store and end the offline business of the grocery store today.

Acheng is a grocery store owner. His store is located in an old residential area near a business district in Guangzhou. There are several residential areas of similar size around it, as well as some large supermarkets such as Hema Fresh. Acheng's grocery store is opposite the small park in the residential area and close to the north gate of the residential area. Whether it is day or night, Acheng can always see children playing, students going to and from school, young people going to and from get off work, and the elderly taking a walk or picking up their children after buying groceries.

For Ah Cheng, this is both a part of life and the key to supporting the grocery business. He took over the store from his father and has been running it for more than ten years. His store sells a variety of daily necessities, from food, drinks, snacks, to detergents, paper towels, stationery, etc. Most of the customers are residents and office workers in the community. They are all familiar with Ah Cheng and chat with him from time to time. At first glance, there may not be much difference from ten years ago.

Grocery stores are the last link in the traditional retail chain and the link closest to consumers, forming a common memory of the Chinese people. Some people are used to calling them small shops or convenience stores. In Guangdong, many people call them store chains, and Shanghainese call them cigarette and paper stores. Their positioning and functions are very similar. Most of them are opened in prominent locations in residential areas, renting ordinary houses to open stores. The products are mainly food and beverages, tobacco, alcohol, and daily necessities. The boss is familiar with the surrounding conditions of the store, has a stable network of regular customers and an almost unchanged business model.

However, the occasional "payment received" sound still reminds us that some changes have taken place in the past ten years. Ah Cheng smiled and said that the biggest change that the Internet has brought to small grocery stores like theirs may be mobile payment. As far as he knows, except for the serious epidemic in Guangzhou last year, some grocery stores usually only have payment QR codes related to the Internet. In places where there are no Cainiao stations, there may be more express delivery collection.

But Ah Cheng is still more willing to try new business models, such as the "takeout" model that he seriously considered in the second half of last year. At the beginning of this year, Ah Cheng opened an online grocery store, using the transportation capacity of the takeout platform to expand the service radius of the grocery store. However, in order not to affect the offline grocery store, he and his wife rented a small warehouse in the same community separately, which will temporarily serve as the main force of the online store.

Ah Cheng admitted that in addition to the impact of the epidemic, the main reason he had not opened a store before was that he was worried that if he sold groceries on a food delivery platform, customers would remember the platform more than his grocery store. "But there is no other way. Everyone is used to buying things online, so as a seller, of course I have to follow suit and try it out."

Such changes have been no stranger to Ah Cheng over the past decade.

2. Grocery stores are also changing under the wave of the Internet

In 2014, it was the third year that Ah Cheng took over the grocery store. He could already clearly feel the changes brought about by online shopping. In the past, residents of the community would regularly buy toilet paper and some rice and flour products. People began to choose to buy more and more products online and have them delivered directly to their doorsteps by express delivery. It was also in those two years that takeout food began to rise, especially young people gradually got used to buying online.

In the beginning, Ah Cheng was actually a little worried. He listened to the neighbors discussing how cheap and convenient the Internet was, and he would buy some things online himself. Then, when he saw the news describing that "everyone will buy things online in the future", he always felt anxious.

However, looking back, he found that online shopping did not have much impact on the revenue of grocery stores. First of all, grocery stores mainly sell low-priced food, beverages and daily necessities, and customers' needs are mostly those that can be solved immediately, such as a bottle of Coke or soy sauce.

The second is the "groceries" provided by grocery stores. After years of operation, they have gained a thorough understanding of the living habits and preferences of nearby customers. The goods basically cover most of the small daily needs of community residents, from raw tape for preventing water leaks to transparent tape for sticking things together. The goods selected are all those with the highest demand rate in residents' lives.

Finally, and most importantly, the grocery store relies on a familiar business model, and the customers are mainly old acquaintances in the community. Although it is difficult to break through the customer scale, it is also stable. In addition, everyone's income has been increasing in those years, and Ah Cheng's income has also increased significantly.

But Ah Cheng didn’t know at that time that the arrival of mobile Internet was rapid and fierce, and it would bring some new changes to grocery stores almost every two or three years. In the early spring of 2016, the red envelope war of WeChat Pay allowed people across the country to experience the new experience of “mobile phones turning into wallets”. At that time, Ah Cheng had just applied for a set of payment codes from Alipay, but it was more of an experiment. Apart from thinking that it would be convenient for some people, he didn’t realize that scanning code payment would bring about earth-shaking changes.

According to data released by the central bank (People's Bank of China), there were 25.71 billion mobile payment transactions in 2016, a year-on-year increase of 85.82%, and the amount of mobile payments reached 157.55 trillion yuan, a rapid increase. With the popularization of smartphones and the shift in Chinese people's payment habits, QR code payment has been popularized in almost every corner of China where there are transactions in the following years, and physical wallets have "disappeared" in many people's pockets.

However, scanning code payment is not all good. For vendors like Ah Cheng, every transaction must pay a certain fee to the payment platform. Taking the retail industry as an example, due to the large number of transactions and low profits, the fees charged by Alipay and WeChat Pay are generally around 0.38%. In other words, the merchant has to pay 3.8 yuan in fees to the platform for every 1,000 yuan received. As for other industries, such as catering, leisure, entertainment, and commerce, the fees are generally around 0.6%.

But overall, Ah Cheng is still happy with the convenience brought by mobile payment. "We don't have to pay or count money when we buy things. It's also much easier for us to settle the bill later. Most importantly, it's not easy to make mistakes."

In contrast, the "offline business" of Internet giants also allowed Ah Cheng to see their B-side for the first time. Since 2017, e-commerce platforms have often mentioned "new retail" and have also set off a craze for offline physical stores - 1 million JD convenience stores, 1 million Tmall stores, 1,500 Suning stores, and all major e-commerce platforms are gearing up.

Ah Cheng had also been in touch with JD convenience store promotion, but after repeated consideration, he did not follow up. However, he knew that in another larger community across the road, a familiar counterpart had transformed into a JD convenience store. It did attract a lot of customers at the beginning, some of whom were attracted by the JD brand, some by the uniform and neat decoration design, and some by some novel special products.

However, as the novelty faded, the high purchase price and limited product variety made it impossible to meet the needs of old customers, and the cost was difficult to sustain. "Basically, they went back to where they bought from, and the only thing that remained was the brand." Ah Cheng said, while showing us B2B platforms such as Shopkeeper's Treasure, Retail Link, and Huoquanquan on his mobile phone. They generally consider factors such as price, minimum order quantity, delivery fee, subsidy discounts, etc. before choosing to place an order.

But after three years of the pandemic, Ah Cheng believes that some older regular customers may still prefer to buy things in his store because of habit and familiarity, but in general, the habit of online shopping has been cultivated. Ah Cheng took the example of the fresh food store next door (the only one in the community), and many people now choose PuPu, Meituan or community group purchases when buying groceries, including some older residents in the community. "They (the fresh food stores) are under a lot of pressure."

Ah Cheng was also under a lot of pressure. Especially last year when the epidemic in Guangzhou was at its worst, all stores in the community had to be closed except for pharmacies and fresh food stores (as supply points), including Ah Cheng's grocery store. It was also during that time that Ah Cheng finally made up his mind and embarked on the path of "instant retail".

3. After moving grocery stores online

After the neighborhood grocery store closes in the evening, Ah Cheng will close the shutter door and walk two minutes to the "online grocery store" warehouse in the corner of the neighborhood. This place usually opens in the afternoon. Ah Cheng's wife is responsible for the first half, and Ah Cheng is responsible for the second half - the core night business, which usually lasts until one or two in the morning.

In addition to Ah Cheng, takeaway drivers would come from time to time at night, pick up the goods, and then drive out of the community. For today's consumers, "takeaway shopping" of "order on mobile phone, delivered in 30 minutes" has become a new lifestyle, especially for young people who are used to "buy now, get now". A report released by Accenture shows that more than half of post-95 consumers want to receive the goods on the same day of shopping, and they will cancel orders because of unclear delivery time.

"Instant retail" is a new concept, but we are all familiar with its form, which is "takeout" - you can get the goods you need quickly without going to the store. The difference is that the main suppliers of "instant retail" are local stores that provide a variety of general merchandise, from brooms to soup pots, from cat litter to diapers.

Similar to the situation faced by offline restaurants, the service scope of Acheng Grocery Store was basically fixed in the community, and the operating hours were also fixed. It also needed to pay various costs such as rent, water, electricity, and miscellaneous fees, and inevitably faced the risk of declining profits. The takeaway model has greatly expanded the service radius of the grocery store. Through the takeaway guys coming and going, Acheng's service scope can cover communities and hotels within 5 kilometers. At the same time, online traffic and users can also bring more orders and revenue.

Ah Cheng has also experienced this. The number of orders at night has exceeded his initial expectations. "Most of them are from outside the community. I probably couldn't sell them before," Ah Cheng said. The nighttime needs of these customers are also very different from those of the community business. In addition to common snacks, drinks, cigarettes and alcohol, he has also gradually added cards, ice cubes and socks according to customer needs.

In fact, this is Ah Cheng's first time to run an online store. He did a lot of research before this, but he finally chose a grocery store that he knows better and has more advantages. "I don't understand the Internet, but I still know a little bit about how to run a business," Ah Cheng said.

Ah Cheng believes that, unlike large supermarkets, grocery stores have the advantage of flexibility and service, and the core is to meet all the needs of customers, even online. In terms of product selection, they tend to meet the detailed needs of customers, such as lighters, playing cards, cups, etc. They put themselves in the shoes of customers and consider how to optimize shopping details, such as preparing ice cubes for alcoholic beverages; they do not pay attention to Internet celebrity products, but explore more products with local characteristics or potential.

Although the online grocery business is still booming, Ah Cheng still does not plan to give up the offline grocery store in the neighborhood. In addition to the relationship of more than 20 years, he does not know how long a small grocery store like theirs with no brand recognition can last on the online road. However, at this stage, he is still very confident in the online grocery store. If the current business situation continues, he even plans to rent the fresh food store next door, upgrade his own grocery store, and operate both offline and online at the same time.

"It's just an idea now, and it's hard to say for sure," Ah Cheng added. Then the order reminder and the sound of the electric car approaching made him busy again.

Author: Lei Technology

Source: WeChat public account: "Lei Technology (ID:leitech)"