Summary of the Key Points
This article, based on the author's three years of observation and interviews with the instant retail industry (including flash warehouses, forward-positioned warehouses, and physical stores), draws a core conclusion: The key to success for instant retail players lies not in location, supply chain, or store management, but rather in expanding product offerings (increasing the number of SKUs and categories). The author uses industry development trends and examples of leading players such as Xiaochai Guo and Pupu Supermarket to demonstrate that expanding product offerings is the driving force for growth. In the future, the industry will need to continue to expand its SKU range to over 15,000 to address supply-demand imbalances. However, expanding product offerings is not merely about adding more items; it requires precise planning.
Detailed Analysis
#### 1. Why aren’t location and supply chain the key factors?
Many people believe that, like traditional retail, instant retail success depends on a good location, but the author argues otherwise:
- Location is unimportant: Users buy from instant retail services for their speed; they only care about delivery times and costs, not where the store is located (whether it’s down the street or several kilometers away). Moreover, many businesses can compete for prime locations, unlike physical stores that may monopolize a specific area.
- The supply chain is a result, not a cause: Success leads to having a stronger supply chain; many leading players initially did not have a supply chain advantage but developed one after expanding their product offerings.
#### 2. Expanding product offerings is the key to success
The author provides data and examples to show that expanding product offerings (increasing SKUs and categories) is crucial:
- Industry trends: The number of SKUs in flash warehouses has increased from 2,000 in 2020 to the current standard of 8,000; forward-positioned warehouses have also seen a significant rise. Each expansion has been validated by the market.
- Leading player examples:
- Xiaochai Guo: SKUs increased from 2,000 in 2021 to 8,000 in 2023, and they are currently testing 18,000 new items. This strategic expansion helped the company thrive.
- Pupu Supermarket: SKUs grew from 3,000 to over 7,000 and are now testing 15,000 new items, outperforming Daily Youxian, which reduced its SKU count (from 3,000 to 2,000) and subsequently withdrew from the market.
- A turning point in 2023: Companies that continue to expand their product offerings are growing, while those that stop are stagnating or declining.
In short, the company that expands its product offerings first and does so effectively will win.
#### 3. Why do we need to expand to over 15,000 SKUs?
The author explains that expanding product offerings was effective in the past and remains essential for future success for two reasons:
- More complex consumer needs: Traditional supermarkets typically have over 10,000 SKUs, but instant retail faces more diverse customer needs. For example, users may need moving boxes, which supermarkets do not sell due to low turnover rates, while instant retailers can meet this demand.
- Severe supply-demand imbalances: The current supply in the instant retail sector is insufficient. For instance, Meituan Flash購 offers 1,500 categories (such as women’s T-shirts), but a flash warehouse may only have 900 SKUs per category, which is far from sufficient. Clothing categories require dozens or even hundreds of SKUs to cater to various preferences (gender, style, color, size), and many warehouses currently lack these.
#### 4. Challenges in expanding product offerings
Expanding product offerings is more challenging than before:
- Difficult direction selection: Retailers must choose from a wide range of categories (department stores, fast-moving consumer goods, fresh products) and further refine their selections to specific subcategories (e.g., women’s clothing).
- Lower marginal benefits: In the past, adding new items easily led to profits; however, today, misjudgments can result in unsold inventory. For example, while expanding into department stores was successful in the past, expanding into fast-moving consumer goods and fresh products has been slower due to poor strategic choices.
Conclusion
The main issue in the instant retail industry is the shortage of SKUs and categories. Expanding product offerings is the solution. Past success stories show that this approach is crucial for continued growth. To succeed in the future, retailers need to expand their SKU range to over 15,000, with precise planning rather than simply increasing the total number of items. For smaller businesses, focusing on expanding product diversity to meet customer needs is a more effective strategy than worrying about location or supply chain.