As millions of small shops embrace instant retail, who will make the first pot of gold?

Traditional e-commerce has already met our planned needs, and now we can also use food delivery platforms to fill our immediate needs. In today's world, we can buy almost everything through instant retail. So what is the specific situation of physical retail? Let's take a look at this article.

On Friday night, Wu Di invited his colleagues to his home for dinner. After eating and drinking, someone suggested playing Werewolf, but there were only playing cards at home. At ten o'clock, the supermarket outside was closed, and it was too late to go to the e-commerce platform to buy.

There is a 24-hour convenience store in the next community a little further from home. Not knowing if it has the goods, Wu Di decided to ask a errand rider. When he opened Meituan, he suddenly realized that he could buy cards like ordering takeout.

He did find quite a few stores that sold cards, not just Werewolf, but also boxed script-based cards and even poker chips.

This ordinary little thing reflects a change in the retail industry in the past two years: when traditional e-commerce met consumers' planned needs, food delivery platforms began to fill immediate needs, and people can buy almost everything through instant retail.

Following this trend, more and more physical stores are entering food delivery platforms. Instant retail is becoming a common opportunity for physical stores of all sizes, including supermarkets, convenience stores, and community stores.

How many small shops are there in the country? A report by Soochow Securities shows that Meituan Flash Purchase has launched about 1 million merchants, with the largest number being supermarkets, fruit shops, and flower shops. This number is far from over and is increasing at a year-on-year rate of 30%.

The last time physical stores "went online" on a large scale was during the "Hundred Regiments Campaign" ten years ago. After all, e-commerce mainly changes the fate of online stores, while offline stores are mostly spectators. Is online supermarket a good business? How is the online business after the epidemic is lifted? These questions can only be answered by the first batch of supermarkets that try out takeaways.

01 The edge of the city, brightly lit

After ending his 10-year career as a worker, Deng Feilong decided to start his own business and open an offline supermarket.

The location of Ande Supermarket is not far away, but it is located in the suburbs of Shanghai, in the center of Jinshan District. After many field visits, Deng Feilong rented a storefront near Red Star Macalline. The 200-square-meter supermarket is "small but complete". In Deng Feilong's words, "it can solve the immediate needs of the surrounding people, such as thirst, hunger, and lack of cigarettes."

Deng Feilong has many years of experience in e-commerce operations. In 2018, he launched a delivery service on Meituan. At that time, few people in the industry mentioned "instant retail". With the support of professional riders, the supermarket's reach has expanded to 5 kilometers around it, and it provides round-the-clock service. "It can increase revenue by about 30%." He said that this is a valuable income.

Increasing revenue by expanding business scope is the primary reason why many physical merchants embrace instant retail.

"The order is about to arrive, please remember to prepare the stock!" At the Te Ling Life Supermarket on Xixiang Street, Bao'an District, Shenzhen, the sound of Meituan taking orders keeps coming from the machine. When the orders are dense, it will sound every few seconds.

Supermarket owner Chen Yu is busy picking and packing goods, while riders on electric bikes come one after another, picking up the packed goods and leaving one after another. Half an hour later, the lights in nearby residential buildings will light up one after another, and the snacks in the packages will fill the stomachs of young people who are leaving get off work.

Most transactions at Te Ling Life Supermarket are completed online, and fulfillment is done late at night. "From 6 pm to the next morning, orders account for 70% of the whole day." The store has a wide variety of products, including online celebrity snacks, toilet paper, bubble wrap, cat food, etc.

Chen Yu believes that the advantage of online supermarkets lies in the differentiation of time and goods: most supermarkets only operate during the day, and instant retail just solves the pain point of "not knowing where to buy offline, and not having enough time to place orders on e-commerce platforms."

In addition, most of the platforms that previously delivered goods to people’s homes within 30 minutes were fresh food platforms. Her supermarket now focuses on “small commodities that are urgently needed but hard to buy,” bringing great convenience to the lives of community residents.

These two supermarkets in Shanghai and Shenzhen are just the tip of the iceberg of the current transformation of mom-and-pop stores. In fact, using instant retail platforms to expand business scope is a path that large supermarkets have already taken. Traditional e-commerce is a centralized traffic distribution model, and instant retail is based on location matching local stores and consumers, converting online traffic into store orders.

Xu Lingna is the head of digitalization at Rainbow Department Store. Many people have asked her, "How do you prove that the sales you bring are incremental? Is it possible that you just transferred offline sales to online?"

She shared a concept of "cross-time and space": in terms of time, 20% of Rainbow's online sales occurred after the store closed - that is, between 10 pm and 9 am the next morning; in terms of space, one store used to cover a surrounding area of ​​3 kilometers, but now 45% of online sales are sold in areas where Rainbow has no stores.

Unlike the zero-sum game between traditional e-commerce and offline entities, the instant retail format has not squeezed out the original offline business, but has broken through the limitations of time and space, bringing in orders from farther, closer, earlier, and later. So some people say that the rapid growth of the instant retail format is essentially the growth of the local real economy.

02 One storefront, two businesses

It can be seen that many of the first batch of stores that launched food delivery platforms have already formed a stable flow of customers. In any industry, there is survival of the fittest, and those who start early have more opportunities. As a business between online and offline, instant retail has higher requirements for stores: they must have both the acumen of e-commerce operations and the meticulousness of store services, and ultimately make a long-term business.

Only those who have actually opened a store know how complex people’s needs are. Even for the same community and the same residents, the needs at different times and in different scenarios are very different. Ideally, stores that enter the instant retail platform should form a staggered competition with offline physical stores and online e-commerce companies.

In other words, if a supermarket wants to do food delivery, it has to find a completely different path from the past. This online supermarket must not only use the data and fulfillment capabilities of instant retail to predict consumer demand more quickly and accurately, but also take advantage of its roots in the local community to provide services that e-commerce platforms do not have.

In February this year, a reporter from People's Daily interviewed a small shop in Chaoyang, Beijing. The shop, which has three people, receives more than 5,000 orders per month. The 170-square-meter shop has twice the variety of goods as an ordinary convenience store. Thanks to digital business tools, the shop owner Zheng Mingyue always sees business opportunities faster than his peers.

He gave an example, in the early days of the store, he bought more than 40 kinds of potato chips at once, involving multiple brands, multiple flavors, and multiple packaging styles. After one month of operation, the system prompted that 10 kinds of potato chips had zero sales records. "At this time, we must quickly discount and clear the inventory, and replenish the hot items in time." Zheng Mingyue said that in just four months after the store opened, he had eliminated hundreds of products and added more than 90 new ones.

"There are four to five thousand kinds of goods and 12 rows of shelves. How to arrange them and what to put where all depends on the system to design and plan." Zheng Mingyue introduced that after the goods are put on the shelves, the system remembers the location and quantity of each item clearly. When it comes to the sales sorting stage, the system can also automatically plan the picking route, and the clerk can sort 30 kinds of goods in an average of more than 2 minutes.

The other side of digitalization is often a sense of distance. But for local mom-and-pop stores, instant retail is not a frivolous online business. The process of store clerks picking up goods and riders delivering goods is full of the store's understanding of the neighbors.

In 2019, Nanjing community supermarket "7 Things" launched an instant retail platform, and now one-third of the store's orders come from online.

January 10th is China's Chinese Police Day. Shop owner Ma Jun received a "strange" order: a young lady wanted to buy a can of Wangzai Milk professional can, and asked the shop owner to help her pick out the "police version" as a surprise for her policeman boyfriend.

Although there were not many items in this order, when Ma Jun found the can of milk from the whole box and put it into the bag with his own hands, he felt "like he was participating in someone else's happiness."

One storefront, two businesses. Small stores that are relatively successful in instant retail operations have one thing in common: their overall thinking is online, and they can make concessions on individual products to ensure overall profit growth; they also maintain their original offline operations and do not ignore any notes, so that residents can enjoy the same service as in-store.

03 Physical retail, noisy as yesterday

On the other hand, those merchants who failed in their attempts at food delivery often only saw one side of the story: either they directly used the offline profit model to calculate the success of their online business, or they regarded instant retail as e-commerce and lost the local characteristics of physical stores.

Lao Lu is one of them. Last year, he launched instant retail for a while. The products were still the same as in the original store, and even the prices were the same online and offline, without much change. For about half a year, the store traffic was mediocre and did not make much money.

To this end, he specially consulted a supermarket owner who specializes in online business, and then he realized that their thinking was very different.

For him, the first thing to do when opening a store is to calculate the costs of rent, utilities, and labor, and leave a little profit to set the price of each product. However, the bosses who specialize in online business do the opposite. They set the profit line first, and then set up activities such as discounts. As long as they ensure that most orders are profitable, they will make money overall.

The most obvious difference is that Lao Lu always calculates sales volume and will never sell something at a loss, while his friend’s calculation unit is orders, and he will try to increase the average order value as much as possible, rather than calculating the profit of a single product.

Many restaurants do takeout to increase profits by increasing turnover. Lao Lu found that if supermarkets like his, which mainly operate offline, want to make money from instant retail, the key is to ensure enough orders. It is now common for supermarkets and convenience stores to enter online platforms. In order to maintain competitiveness, "0.1 yuan for a single product" and "9.9 yuan for delivery" have become standard.

It sounds a lot like "losing money to gain publicity". Some people think that it is like online stores making physical stores "roll up", and the pressure of takeout is transmitted to offline, and it will become more and more difficult for small stores to do business - this view is wrong and one-sided.

It is not that the online business will eventually be "swept away" by the offline business, but that when physical stores are "moved online" one after another, competition will become more transparent. Some instant retail merchants feel pressure, which is actually because mature offline business formats have transformed to the online business in advance, and started a new round of competition with them.

Take Lao Lu as an example. When he first started to do food delivery, the biggest difficulty was that there were too few products. There were too few categories, and the average customer spending could not be increased, so it was easy to lose money. If he added more products, inventory and labor would be problems again, so it was very contradictory.

"I originally thought that online stores were just competing for traffic, and that those that only did business online were the ones that were competing for business. But after a careful calculation, I found that many of the top orders came from convenience store chains and large supermarkets that sell everything."

Lao Lu discovered that when he put his products for sale online, his competitors were no longer the small store next door, but small shops in the three nearby blocks, or even supermarkets and hypermarkets ten kilometers away.

According to a report by the China Chain Store & Franchise Association, more than 80% of convenience stores have launched online businesses. From the financial reports of major supermarkets, it can be seen that the proportion of online revenue is increasing. As takeout covers a wider range, business formats with different locations and characteristics appear in the sight of consumers at the same time, and hypermarkets that can "shop everything in one stop" have obvious competitive advantages.

But this is not entirely a bad thing. If Lu had not gone online, he would not have faced competition from other formats. It is like opening a new map in a game. It is precisely because of instant retail that mom-and-pop stores have the opportunity to compete with supermarkets and convenience stores.

Unlike e-commerce online stores, mom-and-pop stores’ weapon is definitely not traffic. The key to instant retail merchants’ profitability is to transform traffic thinking into local thinking, serve residents well within a limited radius, and change their tactics to deal with former rivals. The so-called “channel dividend” is not about grabbing land, but about using the platform to play to its strengths and avoid its weaknesses, and making the most of a small effort.

For example, although a rich variety of merchandise is a big plus, for community stores, accurate product selection and excellent service are more important.

During this year's Mid-Autumn Festival, the most popular items sold in a small shop in Hangzhou were not mooncakes, but mooncake syrup and mooncake trays - the owner noticed that residents had the urge to make mooncakes by hand, and large supermarkets were obviously too late to react. A pet shop in Wuhan saw a short video that made a certain product popular today, and it will have a batch of goods delivered to the store tomorrow. Residents nearby can buy them without waiting, and can also bring their dogs to the store for a bath, which is something that ordinary convenience stores cannot do.

The online ecosystem is a true reflection of the offline ecosystem. As supermarkets, convenience stores, discount stores and other formats go online, mom-and-pop stores will face more competition in the future. In the past, the key to the survival of mom-and-pop stores was to be closer to residents and compete with large supermarkets. Similarly, stores that enter the instant retail platform must also differentiate themselves from offline physical stores and online e-commerce companies.

Physical retail has become popular again, and the trend of online and offline integration is unstoppable. Offline retail, which has previously formed a balance, may now compete with online retail for growth. However, no matter how the situation changes, the key to the long-term existence of physical stores will always be "careful management and solid service".

Author: March

Source public account: Kaiboluo Finance (ID: kaiboluocaijing), focusing on live streaming e-commerce, new consumption, and focusing on in-depth content.