Founder: In this round of adjustments/quality supermarket expansion, what is new compared to the previous round of "new retail"?

Founder released a research report stating that this round is not a simple format renovation, but rather the offline supermarket industry as a whole entering a new round of major transformation, with hypermarkets continuing to contract and accelerating their shift toward quality supermarkets/instant retail. The bank is bullish on the sustainability of this round of supermarket format transformation: the profit model has been validated, the quality supply gap in tier-2/3 cities and county-level markets is enormous, and the dividends from declining rents and maturing fulfillment capabilities are unlikely to reverse in the medium term. Founder's main points are as follows: Offline supermarkets are severely diverging, with quality/restructuring-oriented players continuing to perform strongly Since 2024, Pang Dong Lai has officially announced assistance to Better Life Commercial ChainShare and Yonghui Superstores, Hema has accelerated national expansion after focusing its format, and JD Seven Fresh has restarted expansionwhether it is the offline supermarkets of internet e-commerce players or Pang Dong Lai-style restructured stores, all have triggered queues of nearby residents eager to experience them after opening, forming a stark contrast with relatively weak offline social retail sales data, and the trend continues to this day. The bank believes this is not a simple format renovation, but rather the offline supermarket industry as a whole entering a new round of major transformation: hypermarkets, under successive diversion from search e-commerce, community group buying, hard discount stores, and various segmented category chain stores (Pagoda, Qian Dama, Snack Busy, etc.), are continuing to contract and accelerating their shift toward quality supermarkets/instant retail. Reviewing the previous round of new retail in 2016, the bank summarizes three reasons for its failure Profit model unvalidatedeconomies of scale failed to profitability, with Hema losing money for 9 consecutive years, and Yonghui Yunchuang as well as SUNART RETAIL's profits showing no improvement after Alibaba's investment; Dual blow from traffic and costsonline dividends peaked, while offline-to-online traffic diversion largely failed, compounded by high commercial real estate rents and labor costs at the time (site selection also generally favored city centers); Supply chain transformation was superficialchanges concentrated on renovating the "space" (live seafood dining, suspended conveyor systems, electronic shelf labels), while transformation of goods remained at the surface level, and the lack of product strength led to customer loss as novelty faded. The essential differences of this round of expansion, viewed from the dimensions of "people, goods, and space" Peoplethe middle-income group has exceeded 400 million and continues to expand under the "15th Five-Year Plan" policies of "expanding the middle and raising the low," Gen Z is growing stronger, and with economic growth slowing, consumers are willing to go out for good products and pay only for products worth it, with value-for-money becoming the main theme; Goodsfood safety incidents have systematically raised willingness to pay for quality, brand owners under growth pressure are converging with channels in a two-way embrace, and customization, co-branding, and private labels are entering an acceleration phase (private label penetration in categories such as fresh milk, nuts, and juice has reached 10%+); Spaceonline penetration has stabilized, rents have entered a downward cycle, instant retail fulfillment is highly mature, the marginal cost of integrated store-warehouse operations has dropped significantly, and the expansion cost curve has systematically shifted downward. The role of channels is thereby redefined, from rent collectors relying on slotting fees and entry fees to selectors who streamline SKUs, source directly from origins, engage in buyout operations, and develop private labels, with channels directly responsible for product quality and definition rights, achieving dual improvement in gross margin and repurchase rate. The bank is bullish on the sustainability of this round of supermarket format transformation The profit model has been validated (Hema profitable from 2025, Yonghui and Better Life Commercial ChainShare turned profitable, expansion shifting to operating cash flow-driven with significantly lower reliance on primary market financing); the quality supply gap in tier-2/3 cities and county-level markets is enormous (Chaobesuan NB plans to cover 300+ counties, Meituan Flash Warehouse has already covered 2,800 counties and cities); the dividends from declining rents and maturing fulfillment capabilities are unlikely to reverse in the medium term. According to Bain estimates, in 2025 offline hypermarkets will still account for 11% share, and supermarkets/small supermarkets 30%, leaving ample room for stock transformation. Risk warnings: Demand recovery falling short of expectations; intensifying competition in the retail industry; potential bias in the representativeness of grassroots research