The rise of new retail forces｜A new starting point for retail (3)
Zebra Consumer Xu Ji
Where is the future of China's chain retail? We can't pin all our hopes on Pang Donglai. We need more and better options like Ming Ming is Busy, Goodbaby, Pagoda, and Guoquan.
The presence of traditional supermarkets is fading. New retail demands are being met on one side by instant retail, convenience stores, and membership stores, and on the other by various vertical chain brands.
Leading players in sectors like bulk snacks, maternal and child snacks, fresh produce chains, and food ingredient chains have already made it onto China's Top 100 Chain Stores list. Next, niche markets like hard discount stores and beauty chains may also usher in their own new stories.
The Rise of Vertical Chain Retail
After over two decades, the 2023 Top 100 Chain Stores list finally saw its biggest shake-up.
The top spot shifted from the mega-giant Suning to Walmart, marking the first time a foreign company has topped China's chain retail rankings. Freshippo (Hema) debuted on the list in 2022 and last year became the fastest-growing player in the top 10. The unassuming Meiyijia climbed several spots against the trend, breaking into the top 10. Foreign chains, after two waves of retreat, were thought to be winding down—yet Walmart, Aeon, Lawson, and 7-Eleven have become the most stable growth segment in the rankings.
Of course, the most noteworthy aspect of the list is the rise of new forces in various niche markets.
Ming Ming is Busy, formed from the merger of Snack is Busy and Zhao Yiming, debuted directly at No. 30. Last year, it had 7,000 stores (up 159.3% YoY) and sales of 23.865 billion yuan (up 196.1% YoY), making it the fastest-growing in both metrics. Just days ago, its store count surpassed 10,000, marking the dawn of the 10,000-store era for bulk snacks.
Snack is Busy and Zhao Yiming are both young brands, founded in 2017 and 2019 in Changsha, Hunan, and Yichun, Jiangxi, respectively. The K-shaped consumption divide, with its trend toward downgrading, has propelled bulk snacks to rapid growth. Backed by capital, they’ve raised the banner of affordability and expanded nationwide through franchising. Their merger at the end of 2023 instantly made them the industry leader, securing a spot on China's Top 100 Chain Stores list at record speed.
Maternal and child chain retailer Kidswant (301078.SZ) ranked No. 37 on the 2023 list, with 1,160 stores and sales of 16.332 billion yuan.
In 1998, Wang Jianguo founded Five Star Appliance, which became one of the biggest rivals to Suning (002024.SZ) and Gome. From 2006 to 2009, Five Star was sold to Best Buy and later acquired by JD.com.
After exiting Five Star, Wang Jianguo used his billion-yuan windfall to launch Kidswant in 2009 and the lower-tier market B2B platform Huitongda in 2010.
Kidswant went public in 2021, while Huitongda’s Hong Kong IPO attempt has yet to succeed. Last year, JD Five Star ranked No. 25 on the Top 100 list, with 1,298 stores and sales of 28.968 billion yuan.
It seems Wang Jianguo is the true retail king who has weathered China’s market cycles.
Fruit chain leader Pagoda (02411.HK) ranked No. 41 last year with 6,093 stores and sales of 14.2 billion yuan. Smaller rival Xianfeng Fruit came in at No. 70 with 2,290 stores and nearly 6 billion yuan in sales.
Qian Dama, often found next to these stores, has faced rumors in recent years but remains strong on the list, with 2,936 stores and sales of 13.728 billion yuan in 2023.
Though Guoquan ranks lower, its strength is undeniable. Starting in 2017, it surged during the pandemic, reaching 10,307 stores and sales of 7.447 billion yuan in 2023.
New Stories Await Validation
These emerging chains are all vertical players in bulk snacks, maternal and child products, fresh produce, and food ingredients.
Early on, supermarkets dominated the Top 100 list, with a few department stores and rare vertical players.
Later, vertical retailers like Suning, Gome (00493.HK), Red Star Macalline, and Easyhome (000785.SZ) rose to the top by expanding nationally and consolidating through M&A.
Ming Ming is Busy and Hao Xiang Lai followed a similar path. Before the Snack is Busy-Zhao Yiming merger, Hao Xiang Lai led the bulk snack sector—also through consolidation.
A-listed Wancheng Group (300972.SZ) acquired brands like Lu Xiaohan, Hao Xiang Lai, Lai You Pin, and Ya Di Ya Di, rebranding them as Hao Xiang Lai in September 2023.
The market expects more M&A in bulk snacks. Beyond Ming Ming is Busy and Hao Xiang Lai, second-tier players like Snack You Ming, Snack Preferred, Qia Huo Pu Zi, Ai Snack, and Dai Yong Hong face uncertain futures.
Generation after generation of vertical chains have partially replaced traditional supermarkets and department stores. What once required a trip to the mall can now be solved more professionally, often with better products, lower prices, and stronger consumer engagement.
Yet each vertical chain faces its own challenges.
Bulk snacks are the hottest chain sector, but behind the breakneck expansion lies thin profits and fierce competition. As stores proliferate, sales per store will inevitably drop, forcing brands to balance the interests of franchisors and suppliers.
Fresh retail looks appealing but struggles with high waste and low margins. Pagoda and Qian Dama rely on franchising but bear food safety risks.
Kidswant’s acquisition of Leyou boosted stores by 128.3% last year but sales only grew 7.8%. The core reason is clear: declining operational efficiency.
For Kidswant, the short-term pain mirrors traditional chains, while the long-term risk is a shrinking customer base. Now, deepening operations matters more than scale.
Guoquan (02517.HK) faces similar issues. Per the Top 100 list, its stores grew 8.4% to 10,307, but sales fell 34.4% to 7.447 billion yuan.
During the pandemic, hotpot lovers found solace in Guoquan. But with dining out back to normal, how much room remains for this supplementary demand? Can expanding into barbecue and other non-hotpot scenes solve its efficiency woes?
Only by solving these challenges can vertical chains secure stable growth and remain on the retail market’s barometer.
China’s retail market is vast, with total consumer goods sales exceeding 47 trillion yuan in 2023. It has birthed generations of great companies, but competition is endless—always with new players displacing the old.
Beyond traditional supermarkets, department stores, and convenience stores, new forces like bulk snacks, maternal and child products, fresh produce, and food ingredient chains keep opening new opportunities.
China lacks a hard discount leader. Among contenders like Le Er Le, Hot Maxx, Hi Discount, Biedey, Tiaoma, Jin Baibai, Discount Niu, Aotole, Xun Wu She, and Duo Le Tun, who will break out first? The bulk snack story may repeat.
Beauty chains are another blue ocean. Who will challenge the aging Watsons?
What other niche markets await in chain retail?
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