Budget meat and vegetable stores see business slump, low-profit competition offers no way out

Can budget meat and vegetable stores attract people just by being cheap? Not necessarily. Recently, chain budget stores in Guangzhou have run into this problem. The store manager tried many methods: running promotions, but people came in one wave and then left; slashing the price of one type of rice, but because oil, salt, soy sauce and vinegar did not drop in price, it still failed to attract people; the pork counter sat empty, and even with rent halved, no one came. Some experts say that in recent years this kind of homogenized meat and vegetable store has expanded in large numbers, lacking distinctive features, so poor operation is only to be expected. Budget meat and vegetable stores relying solely on low-profit “hand-to-hand combat” have no way out.

“This points card is 3 years old! Only 17 points! How is that possible!” The old man stood in front of the cashier, holding the card and pointing at the cashier's face.

Ambitious

Originally planned to build 100 stores in 5 years

The old man bought a bundle of green vegetables. After paying, he leaned on his cane and left, muttering to himself. He was the only customer in the store in the past 10 minutes.

Two female shop assistants left the cashier counter and tied up some shriveled green vegetables, marking them with special-price tags. The store's central air conditioning was not turned on, and more than a dozen oscillating fans whirred. Yellow special-price signs for eggs, Jiangxi rice and Ningxia choy sum swayed in the wind, making a pa pa pa sound.

Store manager Xu Wei (pseudonym) stood in front of the vegetable shelves, wearing the store's green uniform, hands on his hips. Not long before, he had been transferred to this store as manager, but he did not think he had taken over a rotten mess, “there are many uncontrollable factors here.”

This budget meat and vegetable store, which opened in 2010, was warmly welcomed by citizens at the beginning for its fresh store image, fresh and safe agricultural sideline products and affordable prices, “at peak, the number of people paying at the register in one day exceeded 1000.”

This budget meat and vegetable store, with green as its main color, had already spread across the city as early as 2010. In April of that year, the Guangzhou Supply and Marketing Cooperative Federation jointly contributed 10 million yuan to establish Guangzhou Supply and Marketing Cooperative Agricultural Products Management Co., Ltd. This budget meat and vegetable store is the service vehicle of this company. News on the company's official website shows that at the time of its founding, the plan was to create 65 stores by the end of 2013, distributed across all districts of Guangzhou, with Haizhu District having the most, reaching 29.

“At that time, the company planned to build 100 stations by this year.” A person familiar with the matter said.

However, for a certain station that received government subsidies, with vegetable prices 15% lower than market prices and grain, oil, meat and egg prices 5% lower than market prices, not every store operated smoothly as scheduled during the course of business. For example, the one where Xu Wei works.

How important is site selection? Faced with this question, Xu Wei cited the store located on Huangsha Heping West Road as an example.

A certain station's Heping West Road store faces the Huangsha Aquatic Products Market and sits behind Xicheng Duhui Mall. Around it is the old city of Liwan, where a large number of households receiving minimum living allowances live. This store happens to satisfy the consumption needs of disadvantaged groups such as low-income and minimum living allowance families and disabled people.

“Since we opened, foot traffic and turnover have been relatively stable, because agricultural sideline product prices are lower than supermarkets, nearby residents come here for daily necessities, and the customer base is relatively stable.” In early July, Manager Li said this was mainly because the site selection was relatively good, “directly opposite there is a ParknShop supermarket, with prices higher than ours. There are not many nearby supermarkets, and they are small in scale, so they cannot make much of an impact. Our store is the most cost-effective choice.”

Compared with the Heping West Road store, Xu Wei found part of the reason his store's business was poor. Xu Wei's store is near a main urban road and is inside a shopping mall, “by rights, foot traffic should not be small.”

A blow to the head

Turnover fell from 6000 yuan/day to 2000 yuan/day

But starting last year, new buildings were erected between the store and the main road, blocking the line of sight from the main road to the store. Indeed, although it is very close to the main road, in the sale of alcoholic and soft drinks, the 7-Eleven convenience store right next to the roadside has more advantages, “besides, right outside 7-Eleven there is a bus stop.”

The sharp decline in turnover specifically began in March this year.

Before March this year, every morning before 9 a.m., the pork at the store's pork counter would be bought out by citizens lined up in long queues, and vegetables and fruit were also selling well. At that time, one cashier and one employee responsible for packaging and weighing goods rarely rested all morning.

And at the beginning of this year, a new competitor arrived. At the end of 2014, an old factory building about 80 m away from a certain station was renovated, and in March this year, a brand-new meat and vegetable market was completed. Faced with a newer market with a more complete variety, in March alone Xu Wei clearly felt turnover decline.

“For daily meat and vegetables, oil, salt, soy sauce and vinegar, citizens want freshness and good value. The meat and vegetable market has diverse choices, pork is slaughtered and sold on the spot, and the price is not much more expensive than ours, so naturally it draws people away.”

Xu Wei revealed that currently, daily foot traffic is around 200 people and turnover is around 2000 yuan, whereas previously it was 6000 yuan.

In fact, Manager Li and Xu Wei had both just been transferred from another store to their current storefront. This store opened on an inner street of a large affordable housing community, right next to a meat and vegetable market, but last month, another store's daily turnover exceeded 40000 yuan for several consecutive days, tugging at the nerves of Xu Wei and Manager Li.

The daily turnover reaching this figure came from prior rectification.

An insider told the reporter that this store began rectification in June. Taking into account the convenience needs of some elderly people, the storefront on the second floor was moved entirely to the first floor, and the second floor became a warehouse. At the same time, the variety of goods was increased and shelf placement adjusted, “just to make things more reasonable and make cheaper things easier to see.”

Small vegetables, big knowledge

Two extra steps at the entrance become a roadblock

“I think it is the details. For example, if you do not need to take the elevator to the second floor, elderly people are more willing to come. After all, our product sources are safe and regularly tested.” Xu Wei said. At first glance, the store has shelves lined up one after another, but in fact, many details affect consumers' shopping experience.

“For example, if there are 2 steps at the supermarket entrance, it will affect business; if it is flat ground, it will be a bit better. For example, if large bottles of oil are discounted and rice is also discounted at the same time, consumers will buy both.” Xu Wei had worked at this store for some years and had his own set of views on supermarket operating strategy, but the difficulties he faced now seemed not to be overcome merely by paying attention to details.

In recent days, Xu Wei thought of some methods. Dishwashing liquid priced at more than 11 yuan is now sold for 9.9 yuan; Jiangxi rice at 109 yuan per bag is now sold for 101 yuan. The struggle with foot traffic is like taking hormones, “cut prices once, and a wave of people comes.” But the people soon leave again.

In Xu Wei's store, according to the configuration, a pork counter was set up. It was originally offered at a monthly rent of 5000 yuan and was rented by several young men. Until the nearby meat and vegetable market opened, the pork counter's business had always been good, and it also drove sales of other goods in the store.

“When going out to buy groceries, everyone likes one-stop shopping. After buying pork, you turn around and there are vegetables, fruit, eggs, oil, salt, soy sauce and vinegar. If you can buy everything in one place, no one wants to walk more.” Xu Wei said. But after March, once foot traffic decreased, the pork counter's business fell at once, and the young people quickly left. The pork counter has been empty ever since.