After JD.com and Taobao, Yonghui and Hema have also sensed the danger. Does the future belong to "Pinduoduo"?

Yonghui Supermarket and Hema have successively launched a "discount" transformation, accelerating the layout of price competitiveness in the retail industry.

On October 11th, Yonghui Supermarket announced on its official website that it will set up "authentic discount stores" in stores nationwide, and at the same time, it will add a discount section to its online app/mini-program, providing surprising discounts on food and supplies.

Coincidentally, on October 13th, Hema also announced the full launch of a supply chain optimization project, reducing the prices of more than 5,000 products in Hema offline stores. It will set "offline exclusive prices" for dairy products, biscuits, convenience foods, and other categories, with prices generally reduced by 20%.

Hema also stated that this is not a short-term promotion, but a long-term effective strategy. In addition, the entire business unit will fully launch a discount transformation, with the prices of the majority of products in stores reduced by 20%.

The trial of Yonghui and Hema is not only aimed at brands and products but can be said to have innovated the operating model from the supply chain side. Prior to this, other offline supermarkets such as Jiayue and Wumart have also started to layout. Does this mean that the era of "discount retail" has arrived?

"Discount" sweeping traditional supermarkets

"Discount retail formats are becoming the major direction of transformation for traditional supermarkets."

Currently, there are two main types of discount retail in offline supermarkets. One is represented by "outlet stores," mainly selling branded clearance and near-expiry products. The second type relies on an efficient and vertically integrated business model based on its own supply chain to lower prices.

The choice to open discount stores is partly due to the change in consumer consumption concepts in the post-pandemic era, with consumer demand tightening. On the other hand, in the context of economic recovery, this is also an important attempt for supermarkets to improve operational efficiency.

Opensource Securities believes that the trend of discounting in the retail industry is driven by consumers facing new economic cycles and consumption environments. Under the premise that the quality cannot be compromised, consumers are pursuing the ultimate sense of satisfaction at the lowest price.

Hema CEO Hou Yi regards price competitiveness as the main focus going forward. He believes that in the long run, the core competitiveness of retail companies boils down to three points: service capability, differentiation capability, and price competitiveness. And next, price competitiveness is Hema's core goal.

Pinduoduo's sword "slashes" towards offline

The trend of "discounting" in offline supermarkets seems to have emerged when e-commerce platforms began to "return to low prices."

As mentioned by Wall Street News earlier, since last year, e-commerce platforms represented by JD.com and Tmall have successively announced price reduction strategies. Liu Qiangdong, the founder of JD.com, has also stated that low prices are JD.com's "killer weapon."

There is no doubt that the success of Pinduoduo's model has greatly contributed to the low-price trend in the retail industry. Since the beginning of this year, Pinduoduo has proposed the concept of "Every day is 618" and increased subsidies for high-quality supply. It has launched a series of activities such as the Digital Appliances Consumption Season, the Fifth Season of Duoduo Reading Month, and the 618 Opening Red, etc.Promoting the activation and conversion of consumer potential.

Thanks to the rapid growth of e-commerce, Pinduoduo's earnings reports for the first and second quarters of this year have far exceeded market expectations, with revenue growth rates of over 50% YoY.

The "slash prices" strategy has allowed consumers to taste the benefits, driving a shift in consumer trends and lowering supply prices, making it increasingly difficult for other e-commerce platforms to make money.

Whether it is offline supermarkets or online e-commerce, "price" has clearly become the core keyword for future development. In response to the current trend of discounting in supermarkets, Open Source Securities is optimistic overall:

Currently, high-quality supermarket companies have established mature and complete supply chain systems, giving them an advantage from the perspective of "goods". However, how to maximize the efficiency of the "venue" and grasp the consumer demand of "people" will be the core issue for future growth.