Summary of Key Points
The instant retail industry has experienced rapid growth over the past three years (from 650 billion in 2023 to an expected trillion by 2026), attracting numerous players. However, beneath this surface prosperity lies a frenzy characterized by fragmentation: many have entered the market, but few have successfully turned a profit; the number of stores has increased rapidly, yet sales have not kept up; the franchise model has deceived many franchisees, and traditional retailers are struggling with their transformation. In the future, competition will no longer depend on who opens the most stores, but rather on three key factors: "store density per city," "profitability per warehouse," and "category focus."
Detailed Analysis
1. The seemingly bustling industry is actually a "racecourse" for the big players
Although there seem to be many participants in the instant retail sector, they are actually divided into three tiers, all controlled by a few giants:
- Platform Layer (renting out space): Platforms like Meituan Flash Purchase and Taobao Flash Purchase aggregate over 50,000 delivery warehouses, but they do not purchase goods or maintain inventory; they merely act as intermediaries, earning from transaction fees and delivery charges.
- Self-operated Front-end Warehouses (owned by large companies): Companies such as Dingdong Maicai (acquired by Meituan), Meituan Xiaoxiang, Pupu, and Hema have invested heavily to manage their own inventory and sell goods efficiently.
- Third-party Delivery Warehouses (franchised): Brands like Huiyixuan (with over 4,000 stores) and Xiaochai Guo (750 stores) use the franchise model to expand quickly, but these are also part of larger systems (e.g., Huiyixuan Group, Kuaidada Group).
In essence, the dozens of brands visible on the surface are just competitors among giants like Meituan and Huiyixuan, making it difficult for smaller players to stand out.
2. Store numbers do not equal sales; don't be misled by the figures
Many believe that more stores mean higher profits, but in instant retail, the situation is different:
- Number of Stores: The number of lightweight third-party delivery warehouses has increased the fastest (Huiyixuan with over 4,000 stores), followed by platform-aggregated warehouses (over 100,000), while large companies' self-operated front-end warehouses number around 2,700.
- Sales: The reverse is true! Platform-mediated transactions account for more than 60% of the industry's sales (600 billion annually), while large companies' self-operated stores account for nearly 30%, and third-party delivery warehouses, despite having the most stores, generate less than 10% of the sales (less than 100 billion).
The reason is simple: large companies control their own warehouses, allowing them to sell more goods per unit. Third-party warehouses, being franchised, often have empty shells with low sales output. Therefore, when evaluating the industry, focus on actual sales rather than just the number of stores.
3. Be cautious with franchising delivery warehouses
The franchise model makes opening stores seem easier, but the risks are shifted to the franchisees:
- Initial Franchise Fees: Brands charge franchise fees, security deposits, and system fees, ensuring a steady income regardless of the success of the store.
- Supply Chain Profits: Franchisees must purchase goods from the brand, which effectively means the brand takes a portion of the profit before the franchisee even sells them, leaving no bargaining power to the franchisee.
- Impressive Sample Stores: During recruitment, brands use a few profitable sample stores to show potential returns and average customer spending, but once the store opens, factors like location and competition can undermine the business model.
- Difficulties in Exiting: Contracts are biased in favor of the brand, making it hard to get a refund for the security deposit, and inventory buildup can be detrimental.
A typical example is Jimu Supermarket, which had over 500 stores at its peak in 2024 but went bankrupt due to financial issues in 2025, showing the imbalance of the franchise chain.
4. Transforming traditional retail into instant retail is not just about changing the name
Traditional supermarkets (such as Yonghui and Jiajiayue) find that the two models operate on completely different principles:
- Different Customer Behaviors: Traditional retail involves planned purchases (e.g., buying groceries for a week ahead), while instant retail meets immediate needs (e.g., ordering cola at night with delivery in half an hour). The product mix and processes are not compatible.
- Traffic Distribution: Traditional stores rely on location, while instant retail relies on platform algorithms (e.g., Meituan and Taobao). Traditional stores must give up control of their locations to gain traffic from platforms, losing some of their decision-making power.
- Operational Systems Need Rebuilding: Traditional stores focus on product variety and customer experience, while instant retail emphasizes density and turnover speed. For example, Yonghui tried self-operated front-end warehouses in 2018 but only opened a few dozen stores after eight years due to the difficulty of adapting its traditional structure.
5. The keys to survival in the future: three critical indicators
The era of rapid expansion is over; the next stage focuses on practical capabilities:
- Density: It's not about how many cities are covered, but how densely stores are distributed within a city. Higher store density reduces delivery costs and ensures timely deliveries (e.g., 30-minute service). Companies that spread too thinly will be eliminated.
- Profitability per Warehouse: Capital used to focus on the number of stores; now, it's about whether each warehouse can generate profit independently. Jimu's collapse was due to continuous losses at the warehouse level, leading to greater overall losses as more stores were opened. Without a profitable model, companies will eventually be abandoned by investors.
- Category Focus: Fresh and fast-moving consumer goods (high-frequency, low-value sales) rely on density to spread costs, while general merchandise (high-value sales) depend on traffic generation. It's essential to specialize in specific areas.
Conclusion
The instant retail industry is not yet settled, as most players have not found a replicable profit model. Platforms win by providing the platform, not by selling goods directly; the franchise segment is the most aggressive, but success or failure can come within just one quarter. Those who first establish a profitable per-warehouse model and a healthy supply chain will be the ones to succeed in the long run.