Summary of Key Points
In the first half of this year, the number of stores nationwide “net decreased” by 410,000 (with 410,000 fewer stores opening than closing), indicating significant pressure on physical businesses. The primary catalyst for this trend is the exorbitant cost of rent. There is a well-established benchmark in the industry: when rent accounts for 20% of sales, a business is in a dangerous situation; when it exceeds 30%, it’s essentially like working for the landlord—everything earned goes towards rent, leaving the business owner with no profit.
Detailed Analysis
1. The Disappearance of 410,000 Stores: A Warning for the Survival of Physical Businesses
The “net decrease of 410,000” does not mean that only 410,000 stores closed; rather, the number of new openings fell far short of the number of closures. Many small restaurants, clothing stores, and convenience stores that opened within a few months soon put up “for sale” signs. This is especially true after the pandemic, when consumer spending became more cautious. Coupled with high rent costs, businesses that couldn’t survive had no choice but to close. This reflects the widespread anxiety among physical business owners: “The money we earn isn’t even enough to cover rent; it’s better to stop operating.”
2. The Critical Rent Thresholds: What Do 20% and 30% Mean?
Let’s break it down with a simple example:
Suppose you own a snack bar with a monthly turnover of 100,000 yuan:
- If rent is 20,000 yuan (20% of the turnover), you only have 80,000 yuan left to cover expenses such as ingredients (40,000 yuan), labor (20,000 yuan), and utilities (10,000 yuan), leaving you with a profit of 10,000 yuan. Even a slight drop in turnover (to 90,000 yuan) would result in a loss.
- If rent is 30,000 yuan (30% of the turnover), you only have 70,000 yuan, which is just enough to cover all expenses, leaving you with no profit. In other words, you’re working tirelessly for the landlord.
This ratio is a common benchmark in the industry, though it may vary slightly depending on the sector. Generally, the higher the rent percentage, the lower the chances of survival.
3. Which Types of Stores Are Most Vulnerable to High Rent?
Businesses with low profit margins and weak resilience to risks are the most affected:
- Small eateries: Such as breakfast shops and hot pot restaurants, which typically have a gross profit margin of around 50%. After deducting rent and labor costs, their net profit might be less than 10%. A slight increase in rent can be devastating.
- Small retail businesses: Clothing stores and small supermarkets face high inventory costs, and the impact of online shopping makes it difficult to increase turnover, leading to higher rent percentages.
- Individual businesses: Compared to chain stores that can negotiate lower rent rates or receive subsidies from headquarters, individual owners have no bargaining power and are at the mercy of landlords.
4. Why Can’t Rent Rates Be Reduced? What Can Ordinary People Do?
The reasons for high rent rates are:
- High demand for prime locations: Locations in shopping districts and near schools are in high demand, so landlords are unlikely to lower rent.
- Renters’ financial pressures: Many landlords use loans to purchase properties, and reducing rent would mean losing money.
- High costs of commercial real estate: The operational and maintenance expenses of shopping centers are also passed on to tenants.
Possible Solutions:
- Negotiate long-term leases: For example, signing a three-year lease with an annual rent increase limit of 5% to stabilize costs.
- Diversify revenue streams: Combine offline and online operations (e.g., offering delivery services or live streaming to generate additional income and reduce reliance on foot traffic.
- Move to less expensive locations: Moving to less popular areas can reduce rent costs, although it may result in fewer customers.
- Seek government support: Some local governments offer rent subsidies or tax exemptions for small businesses; apply for these benefits.
5. The Economic Implications: The Need to Alleviate Pressure on Consumers and Businesses
The closure of 410,000 stores reflects a dual challenge of low consumer demand and high operating costs:
- People are more cautious with their spending, especially after the pandemic, leading to fewer customers in physical stores.
- Rising costs (rent, labor, and materials) are squeezing profit margins.
To revive physical businesses, it’s necessary to stimulate consumption and reduce the burden on businesses. This can be achieved through measures such as issuing consumer vouchers, regulating the rent market, lowering taxes, and providing more support policies to help small businesses survive.
In summary, the decline in the number of stores is a symptom of the difficulties faced by physical businesses. High rent rates are just the final straw. To solve this problem, we need to address various factors, including consumption, costs, and policies, to ensure that business owners can make a profit rather than working for landlords.