Huachuang Securities: Domestic retail industry transitions to a "goods looking for people" model, offline sector sees transformation opportunities towards a buyer's market.

Huachuang Securities released a research report stating that the domestic retail format is gradually shifting from a model of people finding goods to a model of goods finding people. It provides differentiated value in scene innovation and fast delivery, but traditional formats still face challenges of slow turnover and weak profitability. The offline retail industry in China is facing a transformation opportunity in the buyer's market, where consumer power is gradually increasing, while supply-side power is decreasing. Retailers will become more involved in various aspects of the supply chain to provide more efficient and higher quality and value-for-money supplies for segmented customer groups. Domestic retail companies are exploring adjustments and reforms around the supply chain and organizational mechanisms that are suitable for the Chinese market. The main points of Huachuang Securities are as follows: The core value of retail is better matching efficiency The essence of retail is the supply-demand matching between products and consumers. Retailers need to meet consumer demands, gather traffic, and continuously improve supply-demand matching efficiency to achieve low buying and high selling of flow. The core theme of retail industry development, both domestic and international, has always been the continuous optimization of supply-demand matching efficiency. Lower gross profit margins and faster inventory turnover are typical features of efficient retail formats. Overseas industry leaders like Walmart and Costco have achieved efficiency superiority through this, while domestic retail formats are gradually shifting from a model of people finding goods to a model of goods finding people. They provide differentiated value in scene innovation and fast delivery, but traditional formats still face challenges of slow turnover and weak profitability. The core success factor of advanced retail formats is achieving precise matching of people, goods, and scenes Costco reduces operating costs by integrating store and warehouse in suburban areas based on the vast land and sparse population of the United States. They target middle-class families with a membership system, which brings stable traffic and a selection of SKUs for greater scale effects and benefits for consumers, allowing them to have pricing power and strong user stickiness. Trader Joe's targeted the social changes of the 1960s in the United States and positioned itself for the "sophisticated poor" high-knowledge group, providing differentiated products through buyer-driven selection and high own brand offerings for the target audience. China's Heydong Store roots itself in Xuchang, creating higher revenues through high-quality goods and ultimate experiences, providing higher welfare and better lives for employees, and using sincere and professional services to customers, thus establishing a deep match of people, goods, and scenes and becoming a regional retail benchmark. Chinese offline retail formats face traditional model dilemmas while also encountering transformation opportunities in the buyer's market Traditional retail formats in China have long operated on the "second landlord" model, relying on channel fees from suppliers to earn backend profits in a zero-sum game relationship. With no advantages in product selection and pricing, large shopping malls operating on channel fees find it difficult to sustain their business model under the impact of more efficient formats like e-commerce and instant retail. The current Chinese consumption market is gradually shifting from a seller's market to a buyer's market, with economic growth shifting gears and a clear trend of consumption replacing production. In the buyer's era, consumer power is gradually increasing, while supply-side power is decreasing. Retailers will become more involved in various aspects of the supply chain to provide more efficient and higher quality and value-for-money supplies for segmented customer groups. By reconstructing people, goods, and scenes, driving supply chain and organizational mechanism reforms, and returning to the essence of retail Private brands are an effective way to create differentiation and value for money, and they are also one of the core competitive advantages of mature overseas retailers. Private brand ratios of discount retailers like Trader Joe's and ALDI can exceed 70%. Meanwhile, advanced overseas retailers further strengthen their competitiveness through deep cooperation with the supply chain: 7-11 gathers suppliers to jointly develop differentiated products through a "dealer alliance" model, implementing a 52-week MD strategy to achieve rapid product iteration; Kobe Material Corporation provides unique and low-priced products by owning production capacity, building a competitive barrier based on a vertical supply chain; Sam's Club and ALDI deepen their involvement in the supply chain through efficient organizational mechanisms. Sam's Club focuses on member demand in product development, has strict selection procedures, while ALDI follows a buyer-driven flat organizational structure to shorten decision-making chains and improve supply chain efficiency. Domestic retail companies are exploring adjustments and reforms centered around the supply chain and organizational mechanisms that are suitable for the Chinese market Yonghui Superstores' adjustments are based on supply chain transformation, transitioning from the traditional KA model to a direct procurement model, and strengthening private brands to enhance product competitiveness; Hema has shifted from trying out multiple formats to focusing on core formats, cultivating the supply chain to create private brands for quality upgrades and price optimization; Better Life Commercial ChainShare introduced the experience of Heydong Store and made comprehensive adjustments in product structure, store layout, employee treatment, etc., achieving a significant increase in store revenue; EAST BUY is building an "online Sam's Club" based on user trust, implementing a membership system, focusing on self-operated product development, and establishing a "membership system-selective goods-user trust-scale effect" positive feedback loop to achieve efficient supply-demand matching. Risk Warning: Domestic consumer demand recovery below expectations; Increasing market competition; Store adjustment effects below expectations.