Summary of Key Points
Snack discount stores are transitioning from being small shops that sell snacks and drinks to comprehensive discount supermarkets—first by adding household products, and now they are branching out into selling fresh groceries and oils. This shift is driven by declining performance and concerns about customer traffic: revenue per store is decreasing, and competition among peers is fierce, forcing them to expand their product range (such as fresh goods, which are in high demand) to attract customers. For traditional food and beverage companies, this was initially a benefit (to compensate for the loss of sales from traditional supermarkets), but now it has become a problem. Not only do these discount stores compete with lower prices, but they also start charging fees and extending payment terms, similar to how traditional supermarkets operate, essentially causing hidden harm. If snack discount stores continue down this path, they may end up repeating the same mistakes of traditional supermarkets and find themselves in a increasingly narrow trajectory.
Why Have Snack Discount Stores Suddenly Started Selling Groceries? — Performance Decline Forces the Change
Snack discount stores used to thrive on low prices, high frequency of purchases (since consumers visit frequently), and profitable items (such as loose snacks and private brands). However, the situation has changed:
- Declining revenue per store: For example, Wanchen’s annual revenue per store dropped from 3.36 million yuan in 2025 to 3.13 million yuan, a decrease of 6.9%.
- Fierce competition: As one store becomes popular, another of the same brand opens across the street, cutting sales in half; additionally, cheaper brands compete for business, and consumers prefer the lower prices.
- Insufficient customer traffic: Consumers’ initial interest fades, as many only visit discount stores to buy cheap drinks and then leave.
The only options are to either encourage customers to buy more at one time or to make them return more frequently. Fresh groceries and oils are essential items that people need regularly—you might not buy snacks for a week, but you definitely need to eat. Therefore, adding these products aims to bring customers back weekly and potentially increase overall sales.
For Traditional Food Companies: From a Lifesaver to a New Problem
Initially, snack discount stores were beneficial:
- Filling the gap in distribution channels: With traditional supermarkets closing down, these stores provided a new market for companies’ products. Early partners saw rapid sales growth; some regions even shifted from failing to meet targets to becoming the top performers, with substantial commissions.
- No middleman profits: Discount stores directly contracted with companies, avoiding typical fees like entry and display costs (which were usually 25% or more in traditional supermarkets), and the supply prices were lower.
However, things have now turned negative:
- Low-price competition affecting traditional businesses: Discount stores’ low prices have impacted traditional sales channels (such as convenience stores and supermarkets), leading to internal conflicts between these companies’ teams.
- Specialized products for discount stores causing dissatisfaction: To balance this, companies created exclusive products for discount stores—e.g., 100ml less packaging at a 20% lower price, which consumers feel is unfair.
- Channel backlash: Discount stores are now charging extra fees and extending payment terms (which were previously rare). Companies offered lower prices because of the fee-free and faster payment models, but now they are paying a price for these additional costs.
The Profit Secret of Snack Discount Stores: It’s Not Just About Low Prices
Many assume discount stores rely on low prices, but there is a more complex profit strategy:
- Product segmentation: Products are categorized into three types:
- Attraction items (top-tier brands like cola): Less than 10% of the inventory, with lower gross margins (below 10%) to attract customers.
- Specialty items (mid-tier brands): 30% of the inventory, with gross margins of 10-15%.
- Profitable items (private brands and loose snacks): Over 60%, with gross margins of 30-50%—these are the main sources of profit.
- Fast payment cycles: Payments to manufacturers are made quickly (compared to traditional supermarkets’ 40-90-day delays), allowing for faster capital turnover. Consumers buy more (average order value is higher, around 100 yuan, twice that of traditional supermarkets) and visit more frequently (members may make 21 visits a year, 2-3 times per month).
However, this strategy is facing challenges due to increased competition, which disperses customer traffic. Therefore, discount stores must expand their product range (like with fresh goods) and start extracting additional profits from companies.
The Dangers of Becoming More Like Supermarkets
As snack discount stores evolve into comprehensive supermarkets, they may encounter similar issues:
- Limited product variety: With only 1000-2000 items compared to traditional supermarkets’ 5000-10000, adding fresh and household products still limits the range of offerings. This can prevent companies from introducing new products.
- Repeating Traditional Problems: The same issues that plagued traditional supermarkets—high costs and long payment terms—are emerging in discount stores, potentially leading to similar outcomes.
- Low profits: For companies, these stores are merely a supplement to their main channels, not a significant source of profit. For discount stores, increased competition and rising costs reduce their margins.
If this trend continues, snack discount stores may lose their advantage of low prices and flexibility, becoming another inefficient distribution channel.
Conclusion
The transformation of snack discount stores is a result of external pressures, but it’s not an easy path to follow. For consumers, there’s an additional option for cheap fresh groceries; for companies, it’s another channel that brings both benefits and challenges; for the discount stores themselves, maintaining their focus on low prices and flexibility will be crucial to avoid repeating the mistakes of traditional supermarkets. Otherwise, they may simply follow the same path with different consequences.