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Companies focused on in this issue: Meituan, Hema, and Miniso.

Text丨Shen Fangwei, Guan Yiwen, Chen Jing
Editor: Guan Yiwen

The simplest way to define “instant retail” is time efficiency: you can buy the product within an hour and it is delivered to your door.

To be more specific, instant retail is different from long-distance e-commerce that delivers goods to homes by express delivery. Its products (non-meals) are shipped from 3-5km away from consumers, and the delivery time is recorded in hours. It can also be delivered throughout the city, and the delivery time may exceed 1 hour. Currently, it is mainly delivered to homes by food deliverymen.

At the beginning, MissFresh and Dingdong Maicai made fruits and vegetables delivered to your door within an hour. These two fresh food e-commerce companies went public at the end of June 2021. They continued to burn money and suffer long-term losses. MissFresh encountered a crisis in the second half of 2022 and then went bankrupt. Dingdong Maicai did not make its first profit until 2023.

The three-year pandemic has created a lot of demand for online ordering and instant delivery of goods, and has also helped platforms and retailers cultivate consumers' perception of "buying everything in one hour." A typical example is that before, no one could have imagined that camping carts could be bought on instant retail platforms.

In order to break through the ceiling of food delivery and make full use of the free time of millions of deliverymen besides delivering meals and takeouts, Meituan has made the most attempts in the field of instant retail: in terms of model, Meituan has been exploring self-operated businesses including Xiaoxiang Supermarket, Waima Wine Delivery, and Lightning Warehouse since 2019; in terms of categories, in addition to fresh food, Meituan has also explored daily necessities, flowers, 3C digital, medicine, clothing and other categories.

Currently, in the instant retail industry, the leading players in the market are Sam's Club and Meituan. Sam's Club has about 400 forward warehouses in China, contributing a transaction volume of more than 40 billion yuan in 2023; Meituan's total transaction volume in instant retail in 2023 is in the order of 200 billion yuan, and its flash purchase business currently has about 9,000 flash warehouses; in the field of fresh food e-commerce, Hema, Dingdong Maicai, PuPu Supermarket and Meituan's Xiaoxiang Supermarket are the main players.

In addition, Taobao Hourly Delivery, JD.com Second Delivery, and Douyin Hourly Delivery have all increased their investment this year. It is not easy for a platform to deliver goods within one hour, and it has repeatedly failed and requires long-term investment. Now all the big platforms whose main business is e-commerce have come, because in the fast, good and cheap, the "fast" of instant retail has a big enough difference, and the platform has the opportunity to avoid falling into blindly low-price competition.

Another important change this year is that players from various backgrounds are entering the instant retail market. For example, MINISO has opened more than 200 forward warehouses, and Sinopec's Easy Mart is also considering entering the market.

Instant retail has become a new way out for more and more platforms, brands and retailers to try to escape from pure price wars. Some clothing brands sold hundreds of millions of yuan of clothes through instant retail in 2023. A person in charge of instant retail on a platform told us, "In the past, there was a lack of supply, but now, many shopping malls, stores, and traditional channels in cities need new ways out. It is a comprehensive force."

Here are four real-time retail industry trends we’ve learned about.

Xiaoxiang Supermarket has opened more than 680 forward warehouses

We learned that by the second quarter of this year, Meituan's self-operated instant retail business, Elephant Supermarket, had opened more than 680 forward warehouses, of which about 550 were located in the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen. After entering Suzhou last year, Elephant Supermarket continued to expand to cities such as Hangzhou, Wuxi and Dongguan. The business achieved a sales growth rate of over 30% in the first half of this year.

In terms of expansion pace, Xiaoxiang Supermarket chose to utilize the existing central warehouse production capacity in first-tier cities to expand into surrounding second- and third-tier cities. That is, it used existing large warehouses to support more forward warehouses in lower-tier cities, and gradually expanded under the premise of controllable costs.

Although Xiaoxiang Supermarket started later than its competitors and expanded more cautiously, it is also better at learning from the strengths of its competitors.

Since 2023, after learning the large warehouse model represented by PuPu Supermarket, Xiaoxiang Supermarket's forward warehouse has expanded from 400-500 square meters to 800-1000 square meters, and the SKU has expanded from 3000-4000 to 6000-8000. At present, the average daily order volume of Xiaoxiang Supermarket's forward warehouses in first-tier cities is about 3,000 orders.

Specifically breaking down the product structure, Xiaoxiang retains about 1,000 SKUs of fresh products, and the rest are mostly food and daily necessities. Fresh food, as a traffic-generating product, still contributes about 50% of sales.

Since the beginning of this year, Xiaoxiang Supermarket has continued to learn from its competitors and increase its efforts to develop its own brand products. People close to Xiaoxiang Supermarket said that the company's investment in its own products was relatively weak in the early days. This year's strategy is to directly follow up on the successful products of competitors such as Sam's Club, Dingdong Maicai, and Hema, and replicate them on the shelves of Xiaoxiang Supermarket, while gradually cultivating its own research and development capabilities.

In addition, Xiaoxiang Supermarket is also pursuing more advantageous commodity prices. In each regional market, Xiaoxiang Supermarket collects prices from competitors including Hema, Dingdong, Sam's Club, and Baiguoyuan, striving to make the prices of high-frequency and just-in-demand commodities lower than those of competitors.

Waima Wine Delivery has opened over 800 warehouses, and the progress this year is 80%

We learned that Waima Wine Delivery, a liquor instant retail brand under Meituan, has been online since June 2021, and has opened more than 800 forward warehouses by August this year. At present, Waima's average daily order volume is about 70,000 orders, and it is expected to achieve a turnover of 3 billion yuan this year. Meituan plans to increase Waima Wine Delivery's forward warehouses to 1,000 by the end of this year.

Waima's forward warehouses include self-operated warehouses and franchised warehouses. The former, about 150 in total, are self-operated warehouses opened by Meituan across the country for exploratory purposes, and the latter are franchised warehouses expanded after opening for franchising in August 2022, about 650 in total. Waima has entered about 80 cities in 12 provinces across the country, and has even entered third- and fourth-tier cities.

In terms of operations, Waima adopts the "self-operated supply chain + forward warehouse + self-owned distribution" model. Meituan purchases goods from brand manufacturers or first-level wholesalers to reduce prices. After purchasing goods from Meituan, franchisees are responsible for the daily operation of the forward warehouse, which is open from 11 am to 2 am the next day. Meituan provides fulfillment and delivery services for orders.

In terms of product structure, Waima offers approximately 700 to 1,200 SKUs in four major categories: beer, white wine, red wine, and foreign liquor, and plans to gradually add soft drinks and food to expand to 1,500 to 2,000 SKUs.

Due to the high unit price of alcoholic beverages, Waima's average customer unit price can reach 130 yuan. In first- and second-tier cities, Waima's mature warehouses can handle an average of more than 150 orders per day. In second- and third-tier cities, most franchised warehouses can handle an average of 80 to 100 orders per day after operating for half a year.

In the retail market, the alcoholic beverages sold by most small and medium-sized supermarkets and mom-and-pop stores usually pass through multiple channels, from brand-level to first-level, second-level or even third-level wholesalers, with a markup of 10% - 15% at each stage.

Waima can effectively control the cost of alcoholic beverages by shortening the transaction chain through unified procurement through Meituan. After the goods are purchased through Meituan and resold to franchisees, the merchants can still make them cheaper than offline supermarkets while maintaining a gross profit of 20-30 points. Some categories can even be on par with online e-commerce prices.

People close to Waima told us that the cost of joining Waima is about 300,000 yuan, including brand usage fees and a deposit of 30,000 yuan, distribution costs of about 150,000 yuan, and rent, water, electricity, decoration and personnel costs of 80-100 square meters of forward warehouses of about 120,000 yuan. Waima's average payback period in second- and third-tier cities is about 2 years, and some franchisees with better performance can achieve a payback period of 10-15 months.

Meituan's exploration and actual progress in instant retail are better than those of its e-commerce competitors. Currently, Alibaba, JD.com, and Douyin are all exploring instant retail, but none of them have a business similar to Waima. However, this does not mean that Waima has been successful.

There are other players in this field, such as "Jiu Xiaoer", founded by Budweiser's first-level distributor, which currently owns about 2,000 forward warehouses; the wine giant Pernod Ricard previously invested in the retailer "Jiu Ting 1990" to develop instant retail business. They may get goods at lower prices than Meituan, and are also motivated to clear out inventory through instant retail.

MINISO can also deliver within 1 hour, with over 200 warehouses already opened

We learned that MINISO launched a new business model this year, the "24-hour super store", which is called the super store internally. It only serves the immediate needs of consumers within 3-10 kilometers who place orders online and have their products delivered within one hour. Currently, more than 200 stores have been opened.

MINISO's 24-hour superstores are positioned as forward warehouses rather than stores. In contrast, as of March 31, 2024, MINISO has 4,034 domestic stores and 2,596 overseas stores.

The 24-hour super store is MINISO's innovative business in China this year. It is open 24 hours a day. Currently, its product categories are mainly daily necessities, with an average customer spending of 30-40 yuan. It has been connected to the Meituan and Ele.me platforms.

As the stores are still in the early stages of expansion, the order volume of superstores in different business districts varies greatly. Take the two superstores in Suzhou as an example. Both have just opened for less than a month. One has accumulated sales of more than 2,000 orders, while the other has accumulated sales of less than 100 orders.

MINISO upgraded its strategy in 2023, positioning itself as a lifestyle store featuring IP design. In the first quarter of this year, sales of IP products accounted for 26%, which is an important driving force for attracting new users, increasing repeat purchases and performance.

To promote its 24-hour superstores, MINISO also launched its newly co-branded Japanese IP Chiikawa online-exclusive products at the end of July, releasing new products at 0:00, ten hours earlier than offline stores.

However, IP products may not be the mainstream demand of MINISO superstores. An investor in the retail industry said that if MINISO wants to do instant retail, "it must break the SKU, not just be an online store of the original store." In his opinion, MINISO needs to better understand what consumers are searching for and what they need, and what will sell well in the end may not necessarily be what it does well now.

The two super stores in Suzhou currently sell a limited variety of goods, about 1,000, which is one-tenth of the SKUs in MINISO stores. The top three products with the highest sales are disposable four-piece bedding sets, disposable bath towels, and disposable toilet seats, which are more in line with people's typical immediate needs when traveling.

In the current daily necessities category of the instant retail industry, there are many three-no products with varying quality, and more formal and larger-scale players are needed to enter the market.

Many industry insiders said that MINISO's advantage in instant retail is its supply chain capabilities accumulated over the years. MINISO cooperates with more than 1,000 suppliers and has a "711 concept" in the supply chain: from a large product creative library containing 10,000 product solutions, about 100 new SKUs are launched every 7 days, which ensures that MINISO can continuously update and optimize the nearly 10,000 SKU product portfolio of its stores.

The above-mentioned investor said that to do instant retail well, Miniso’s operational capabilities are not a problem, “as long as they are willing to invest and do not rely on the path.”

After four years of abandonment, Hema restarts forward warehouse

We learned that Hema is re-piloting the forward warehouse model that was abandoned four years ago in Shanghai, providing a 30-minute delivery service within 3 kilometers. The pilot has just begun, and the core purpose is to serve areas that are not covered by Hema Fresh stores.

The person in charge of Hema's forward warehouse is Sun Shuo (nickname: Danquan), who was previously the person in charge of Hema X membership store. We have reported that Hema will focus on fresh food stores and NB discount stores in the future and move towards the sinking market. At the beginning of this year, Hema closed two membership stores and will not open new membership stores for the time being.

Hema last tried the forward warehouse model four years ago. In 2019, more than 70 Hema stations were opened. At that time, founder Hou Yi concluded that the forward warehouse was a false proposition for VC (investors) and could not be profitable. There are three main reasons: limited product categories, the average customer price cannot be increased; consumers only place orders before mealtime, often out of stock at 5 pm, and unsold goods after 7 pm become losses; with fresh food categories accounting for the majority, the gross profit will not be high.

At the end of 2019, Hema transformed its forward warehouse into a community supermarket Hema MINI. At that time, Hou Yi called it the "most perfect business model" because the warehouse and store were integrated, and the inventory that could not be sold online in the forward warehouse could be sold at a discount in offline stores, and the stores could also bring traffic to the online store at a lower cost. Soon this model was also abandoned because it still cost millions to open a store. Later, Hema found a lower-cost community group purchase self-pickup point model.

Four years later, the competitive environment and Hema have undergone tremendous changes.

Previously, companies that focused on the forward warehouse model have been in a loss-making stage, hoping to quickly expand their scale by burning money, and then rely on scale to reduce procurement costs and operating expenses. From 2019 to 2022, Dingdong Maicai, the industry leader, lost a total of 12.3 billion yuan, and Miss Fresh also lost more than 10 billion yuan before it collapsed in July 2022.

Now all participants are beginning to pursue business health and efficiency from the supply chain rather than blindly pursuing scale.

Dingdong Maicai chose to go deep into fresh food, developing more than 20 self-owned brands with higher profits, mainly pre-prepared dishes, accounting for more than 20% of total sales; it closed several city sites in Southwest China, Guangzhou and Shenzhen. Although it has not yet achieved profitability at the operational level, with government subsidies and additional income from business operations, Dingdong Maicai will have a Non-GAAP profit of 45.4 million yuan in 2023 (adjusted profit, excluding employee equity incentives, amortization of intangible assets and deferred costs due to acquisitions), turning losses into profits for the first time.

PuPu Supermarket chooses to expand. There are about 6,000 SKUs in the warehouse, of which fresh products account for about 30% and 50% are standard products. The sales of fresh products in Xiaoxiang Supermarket and Dingdong Maicai account for 50%.

Sam's Club has chosen to be more sophisticated. The number of SKUs in its warehouse is about 1,000. Its forward warehouse business has the highest sales in the industry, exceeding 40 billion yuan last year. Dingdong Maicai's sales last year were about 22 billion yuan.

A Hema insider said that it was precisely because of Sam's achievements that the company believed that there was still opportunity for forward warehouses. Compared with four years ago, Hema's online order forecasting capabilities and inventory management capabilities have been greatly improved.

However, there is still a big gap between Hema's average customer spending and Sam's Club. Hema's online average customer spending is about 90 yuan, Sam's online average customer spending is over 200 yuan, and Dingdong Maicai's is 72 yuan.