Founder: How is this round of restructuring/quality supermarket expansion different from 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 areas 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: The offline supermarket sector is severely differentiated, with quality/restructuring-oriented players continuing to perform strongly Since 2024, Pang Dong Lai has publicly 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 upon opening, forming a sharp 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 chain stores in various niche categories (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 and SUNART RETAIL showing no improvement in profits after Alibaba's investment; Dual squeeze from traffic and costsonline dividends peaked, while offline-to-online traffic diversion mostly failed to materialize, 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 focused 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 attrition 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 "expand the middle and raise the low" policy of the "15th Five-Year Plan," Gen Z is growing stronger, and combined with slowing economic growth, 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, brands 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 of streamlined SKUs, direct sourcing from origin, buyout operations, and private labels, with channels directly responsible for product quality and definition rights, achieving dual improvement in gross margins and repurchase rates. The bank is bullish on the sustainability of this round of supermarket format transformation The profit model has been validated (Hema became profitable starting in 2025, Yonghui and Better Life Commercial ChainShare turned around losses, and expansion has shifted to being driven by operating cash flow with significantly lower reliance on primary market financing); the quality supply gap in tier-2/3 cities and county-level areas is enormous (Chaobesuan NB plans to cover 300+ counties, and Meituan Lightning 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 still account for 11% share and supermarkets/small supermarkets account for 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