Summary of Key Points
Traditional tobacco shops are facing a severe survival crisis: affected by factors such as the flattening of distribution channels (manufacturers selling directly to consumers), the shrinking market for group purchases, increased online price transparency, and rising operating costs, many stores have been forced to close (for example, 7% of community tobacco shops in Wuhou District, Chengdu, have already closed). The remaining shops are trying to survive by cutting costs (by reducing store size, lowering rent, decreasing staff, and disengaging from franchise agreements), adjusting their business models (by maintaining low inventory levels and responding quickly to small orders), and expanding their product range (by adding tea, bird's nest, and local specialties). The industry is undergoing rapid consolidation; those that stick to traditional methods will be eliminated, while only those that proactively adapt will barely make it through this tough period.
Why Are Traditional Tobacco Shops Suddenly Unable to Survive? — Multiple Pressures Crushing Traditional Business Models
In the past, tobacco shops made money from three main sources: corporate group purchases (where large customers bought alcohol as gifts), retail sales to individual consumers, and profit margins on high-end alcoholic beverages and cigarettes. However, these sources of revenue have now been significantly impacted:
- Group Purchases Have Disappeared: Corporate budgets have tightened, with fewer alcohol purchases for holidays and business events, leading to a significant loss of large customers.
- Profit Margins Have Shaken: Online retailers and instant delivery services (such as Meituan) provide transparent prices, making it difficult for tobacco shops to profit from price differences.
- Rising Costs: Rent and labor costs are increasing year by year, leaving little profit after covering expenses.
- Distribution Channels Are Being Competed For: Manufacturers are opening their own direct sales outlets, and supermarkets are selling more alcohol, diverting business from traditional tobacco shops, which are now seen as unnecessary intermediaries.
These combined factors have significantly reduced the viability of traditional tobacco shops.
Which Stores Will Be First to Close? — Small, Unfunded Retailers and High-Cost Chain Stores Are Most Vulnerable
Not all tobacco shops will close, but the following types are particularly at risk:
- Small Community Shops Without Group Purchase Resources: For example, among the 300 stores supplied by Liu Bo in Chengdu, more than 20 have closed because they relied on passing customers for business and couldn't afford high rent and inventory costs.
- Chain Stores: Chain stores face higher expenses (rent, labor, storage, and management fees), so any decline in sales leads to faster losses. For instance, a chain owner in Sichuan had to close two stores in Hongpailou due to lack of business during the Mid-Autumn and National Day holidays. Another chain reduced its number of stores from eight to two.
These shops either lack stable customer bases or have excessively high costs, making them the first to be eliminated by the market.
How Are Surviving Shops Trying to Adapt? — Cutting Costs and Adjusting Business Models
Shops that want to stay open are adopting various strategies:
1. Reducing Rent: Larger stores are converting into smaller ones or moving to less expensive locations, cutting rent by half (from 50,000 yuan to 20,000 yuan per month).
2. Eliminating Franchise Fees: They are removing franchise agreements and buying goods directly, saving over 100,000 yuan annually.
3. Reducing Staff: Owners are working full-time, with fewer employees (often just the owner and family members), significantly lowering labor costs.
4. Maintaining Low Inventory: Instead of stocking large quantities, they order products only when customers place orders, reducing inventory holding costs.
5. Diversifying Products: They add tea, bird's nest, and local specialties to increase profits and improve cash flow.
6. Responding Quickly to Small Orders: Suppliers are more flexible, allowing them to ship small quantities of goods frequently, reducing the need for large upfront investments.
7. Diversifying Income Streams: Owners are engaging in side businesses to supplement their tobacco shop earnings.
What Will Happen to the Industry in the Future? — Accelerated Consolidation and Survival of Those Who Adapt
This crisis is not temporary; it represents a major reshuffle of the industry:
- Which Stores Will Survive? Those that stick to traditional methods (selling only alcohol and cigarettes, stockpiling products, relying on price differences) will be eliminated.
- Which Ones Will Thrive? Those that adapt to new trends (by controlling costs, diversifying their offerings, and maintaining low inventory levels) will have a better chance of surviving in the current market environment.
- How Long Will This Take? The toughest times are ahead; whether the industry can recover (for example, with the resumption of group purchases or price stabilization) is uncertain, but it's unlikely we will return to previous prosperity anytime soon.
In summary, the “golden age” of traditional tobacco shops has passed. To survive, businesses must abandon old ways of doing things and learn to be more efficient and adaptable.
This news article highlights that traditional businesses that do not adapt to market changes will eventually be replaced by more innovative ones. No matter how stable they were in the past, they must now take proactive steps to ensure their survival.