Source: Brand Issues
Fat Donglai "exploded" the supermarket
Recently, the popularity of Fat Donglai has not decreased, although this is a local supermarket that is only opened in the third and fourth tier cities of Henan, but almost all the people in the country know it. On the one hand, the news of Fat Donglai's adjustment of Yonghui Supermarket is boiling, and everyone is paying attention to the effect; On the other hand, there was a sudden "backyard fire", and Fat Donglai demonstrated how the brand dealt with negative public opinion with practical actions.
The reason for this matter is that someone in Douyin feedback on the poor hygiene of its rolling dough processing place, Fat Donglai immediately closed down the relevant catering stalls and launched an investigation, and released a six-page investigation report the next day, in addition to the dismissal, dismissal, cancellation of year-end benefits and other treatments for relevant staff, more importantly, to give 100,000 yuan to customers who found this hidden danger, and refunded all customers who bought rolling dough and spicy noodles during the hidden danger period, and gave 1000 yuan in compensation (a total of 8833 copies, nearly 9 million yuan in compensation).
Photo/Fat Donglai rolling dough incident
As soon as this incident came out, netizens praised Fat Donglai for his responsibility and pattern, and once again circled a wave of fans. Coincidentally, at the beginning of this year, Fat Donglai had food city employees who did not clean their chopsticks after tasting, and the group released a 13-page report, and proposed to terminate the labor contract and comfort compensation, or reduce the study period and transfer two treatment plans, and the latter was chosen by democratic voting. Previously, Fat Donglai also set up a "grievance award" for employees, and they could be subsidized by 5,000-8,000 yuan if they were wronged according to the normal work process.
It seems to be a public relations issue, but it is actually a problem of business philosophy and corporate values.
Fat Donglai's "explosive reform" of Yonghui actually needs to be understood from its unique corporate philosophy. In the hearts of consumers and even retail industry practitioners, Fat Donglai can be said to be an almost mythical existence. From Jiabaile, BBK to Yonghui, when Fat Donglai copied his model to the "Brother Supermarket", it can also bring very significant positive feedback.
To put it simply, the main ideas of "Fat Donglai" are as follows:
First, optimize the commodity structure, adjust nearly eighty percent of the goods, and put Fat Donglai's popular private label products into the store;
Second, cancel the forced circulation line, and provide convenient facilities such as microwave ovens, power banks, and fair scales.
Third, increase employee salaries, shorten business hours, and increase employee care.
It is worth mentioning that in the process of helping and adjusting, Fat Donglai does not charge any fees, and even the travel expenses are borne by himself. The founder Yu Donglai once said in a media interview that Fat Donglai has no idea of expanding the scale of revenue, and even Fat Donglai's products that have entered other supermarkets have also participated in the common bidding of other suppliers.
When supplying to Brother Supermarket, the supply price is basically the same as its own internal supply price, and even the R&D expenses are not included, and even many products are supplied at a loss.
This is related to the values that Yu Donglai himself believes in - "As long as it can make everyone healthy and happy, and we can achieve it, we will implement it, isn't this wisdom." He once said: "Some people say that Fat Donglai is a myth, but in fact, it is a little more sincere and kind, if this is said to be a myth, then how sad we are!" ”
The utopian fat east comes, and the traditional supermarkets that cannot escape losses
The famous entrepreneur Inawa Morio once said that the purpose of business operation is for the happiness of employees. But in the real business environment, most companies use it as a means rather than an end – "improving employee happiness" as a way to attract and retain talent, but ultimately leads to more money and greater profits.
Fat Donglai is really practicing this concept, distributing ninety percent of profits to employees, and its implementation of employee treatment and corporate culture has always been talked about.
Not to make money as the primary purpose is also one of the reasons why Fat Donglai chose not to expand. Founded in 1995 with an annual sales of 10 billion yuan, Fat Donglai is stationed in Xuchang and Xinxiang in Henan, and even closed stores in 2014, and now only 13 stores remain. For Donglai, instead of making more money, he hopes to make Fat Donglai a model, "so that everyone can learn, refer to, and learn from each other, so as to help more people achieve a healthy and beautiful life."
Fat Donglai does not expand, whether he doesn't want to go out, or he can't go out, in fact, there are different opinions. In addition to Yu Donglai's insistence on value, there are also limitations at the business model level.
First of all, the hierarchical management brought about by the expansion will have an impact on the unique corporate culture of Fat Donglai. As Liu Chunxiong, an associate professor at the School of Management Engineering at Zhengzhou University, said: "Fat Donglai's business methods cannot be replicated, and the corporate culture will be diluted due to the expansion of scale." "The adjustment and reform of BBK stores is questioned that it is not in place, and it is indeed difficult to do this if there is no recognition and implementation of values and concepts.
The second is the problem of water and soil, and different cities have different needs for supermarket services. Fat Donglai is positioned in the middle and high-end consumer groups in third- and fourth-tier cities, and its entire set of products and services match this positioning, but it may not be easy to succeed in first- and second-tier cities where industry competition is more diversified and online retail services are more convenient.
Finally, high-quality products, services, and high benefits mean higher operating costs. If it expands to the whole country, the cost pressure will be more prominent, especially the cross-regional supply chain system will be more complex, and the original local bargaining power may be lost.
For Fat Donglai, adjusting and helping other supermarkets may be an expansion in another sense. After all, in the past few years, the business of traditional hypermarkets has become more and more difficult, and more supermarkets are facing losses and "store closures".
Among the listed supermarket companies, Yonghui Supermarket will have a net profit loss of 1.329 billion yuan in 2023, BBK will lose 1.889 billion yuan, and Lianhua Supermarket will lose 791 million yuan.
Figure/Performance data of listed supermarket companies in 2023
The traditional supermarket business is facing such a dilemma, mainly because the core competitiveness of one-stop shopping in hypermarkets has been greatly weakened in the context of the new era.
On the demand side, consumers' consumption habits for retail goods have changed, and people are becoming more and more accustomed to buying goods in fresh e-commerce, takeaway platforms, online supermarkets and other channels, and they also have more diversified consumption preferences in the choice of products and brands.
On the supply side, on the one hand, various hard discount stores and warehouse stores provide consumers with lower price options by reforming the supply chain, and on the other hand, retail models such as fresh e-commerce and community group buying are also impacting traditional supermarket retail.
Toshifumi Suzuki, founder of 7-Eleven, wrote in The Philosophy of Retail: "If the way of doing business is bound by historical experience, then the company will be stuck in the past and will not be able to grow." Regardless of the type of business or type of business a company belongs to, it can only survive if it adapts to changes in consumer demand, establishes assumptions, and takes countermeasures. So under such changes in the times, how do traditional supermarkets save themselves?
First, high-end upgrading.
Since 2015, many traditional supermarkets have chosen to upgrade in the direction of high-end, such as Carrefour in the first and second tier cities to open a more community-oriented, more boutique convenience store brand Easy Carrefour, Yonghui upgraded the "red label store" to Bravo YH, and China Resources Vanguard's Ole boutique supermarket also ushered in expansion at that time, but this part of the high-end population is now gradually diverted by Costco, Sam's and other membership-based supermarkets.
The second is to develop its own brand.
Supermarkets launched their own brands and transformed from channels to channel brands. According to the "2021 White Paper on the Development of China's Private Label Industry", China's private label market increased by 22.7% year-on-year in 2020. Among overseas companies, the sales of private brands generally account for more than 20%, and the sales of ALDI's own brands have reached more than 90%.
Figure/Proportion of private label sales of European and American retailers
The third is the transformation of the commodity side.
For example, at the beginning of this year, Walmart renovated its hypermarket, mainly to streamline SKUs and create "leapfrogging" cost performance and differentiation.
Fourth, expand new business formats.
For example, Yonghui transformed 600 stores into "authentic discount stores"; Vanguard launched a family-centric community store format Wanjia LiFE; Sun Art Retail's (RT-Mart's parent company)'s M Club store in 2023 is regarded as the "second growth curve".
Photo/M member store
What is the evolution of retail business?
According to the data released by the National Bureau of Statistics, in 2023, the total retail sales of consumer goods in mainland China will 471495 100 million yuan, a year-on-year increase of 7.2%, and the retail sales of department stores, convenience stores, specialty stores, and brand stores will increase by 8.8%, 7.5%, 4.9%, and 4.5% respectively over the previous year, while the retail sales of supermarkets will decrease by 0.4% over the previous year. Traditional supermarkets need to re-examine the essence of retail and actively transform to adapt to the development of the times.
So in the ever-changing consumer environment, what is the retail business fighting for?
(1) Fight for customers
Retail has always been a business that revolves around people, and Muneaki Masuda, founder of Tsutaya Shoten, once said, "Good managers know what their customers' needs are, and the best managers are able to create new needs and solve problems that customers themselves have not thought of." "This also requires operators to first accurately understand the needs of the target customer group.
Known as the "discount king" of Japanese retail, Don Quixote targets the younger demographic, and the store displays seem to be chaotic, but in fact create a Taobao-like experience for young people through interesting displays. Costco, the largest membership-based warehouse supermarket in the United States, and Sam's Club, which is backed by Walmart, are both aimed at the pockets of the urban middle class, and users are actually buying a sense of group identity while buying goods.
(2) Spell cognition
For consumers, if they want to buy all retail goods in one stop, they often only need to rely on the brand awareness of different supermarkets to make decisions, such as placing an order for Hema on the mobile phone, going to Sam's is suitable for big purchases, and ALDI can buy a lot of ultra-low-priced goods.
ALDI's recent waves of marketing, including the giant subway advertisement and Aunt Xue's complaining marketing, are all building a "cheap" product mentality, which also caters to the "delicate" target consumer group in the city.
Photo/ALDI Metro Marketing & Surroundings
(3) Spell service
The essence of service is to "exceed expectations", and this expectation is related to product pricing and brand perception.
In Fat Donglai, this kind of service expectation has been broken, consumers buy defective products in the supermarket, even if they can return the goods, but there is more time cost to toss, it is not a pleasant thing, but this thing is like picking up a grand prize in Fat Donglai. For example, the customers who bought rolling dough mentioned at the beginning, many people may not care at all, but they were compensated 1,000 yuan.
This kind of service beyond expectations is reflected in all aspects, such as Fat Donglai in order to ensure the freshness and taste of sliced fruits, 20% off after 4 hours on the shelves, 6% off after 6 hours, and will be posted on time with a new price tag, 8 hours after the direct off the shelves to report losses, various details make consumers more assured when buying.
(4) Spelling products
Fat Donglai can have such a service, in the final analysis, it is to have confidence in the product, as Yu Donglai said: "The best marketing is sincerity, and the best service is the commodity." "Fat Donglai has a strong ability to directly purchase and operate, with a large number of its own brands, self-operated goods, its central kitchen has a complete production system, and has a very strict control over product details. For retail enterprises, creating products that "no one has me, no one has me" can be said to be the key to establishing their own competitive barriers.
For example, in the membership store represented by Sam's, the logic of product selection has changed from "people looking for goods" to "goods looking for people", accurately understanding the needs of members, and providing the most suitable products for this small group of people.
Tsutaya Bookstore, which is positioned as a "lifestyle proposer", has a similar idea of "finding people with goods" in product display, jumping out of the original book classification framework and arranging books and products for specific life scenarios. For example, when you want to travel to a certain country, you may want to read language reference books, travel attraction recommendations, literature of that country, etc., and Tsutaya Bookstore will provide this complete set of products in a special section. The product selection logic based on the user's thinking will also bring a more extreme consumer experience.
Photo: Tsutaya Shoten
(5) Spelling experience
From the layout of the physical store, the furnishings and visual style, the checkout efficiency, to the new retail experience of online and offline integration, including the membership system, distribution efficiency, digital intelligence level, etc., together constitute a complete experience for consumers.
How to make this process more smooth and comfortable is the direction that retail companies need to continuously improve. For example, extending to online services, taking Sam's as an example, Sam's online sales will account for 47% in 2023.
Many local retailers also choose to partner with online services. According to the data, Meituan flash sales will reach millions of local retailers, brands and hundreds of millions of consumers in 2023, and the order volume will increase by more than 40% year-on-year.
Photo/Sam's Club applet
summary
From the adjustment of other supermarkets to the praise of "ceiling-level" services, Fat Donglai is well-known and sought after by more and more people. But as we mentioned earlier, Fat Donglai's business logic is actually "anti-business intuition", and Yu Donglai himself hopes that he will transform from a "business operator" to a "communicator of happy business".
It is undeniable that Fat Donglai has achieved remarkable results in the adjustment and reform of some stores of brother supermarkets, but for many retail enterprises that pursue large-scale development, transformation and upgrading still need to further find a more suitable method for themselves.