With the accelerating pace of globalization, our attention tends to focus on the large, internationally influential, and regionally diverse retail giants. However, if we look at retailing data from developed countries, we can see that in China, a huge force - regional retailers - has quietly emerged.
Focused on Tier 2, 3, and 4 cities, these retailers have leveraged their localization to shape their competitiveness through dense regional presence and by catering to unique local needs. They have focused on creating merchandise lines with local characteristics and are committed to improving service quality in order to build superior regional operational efficiency and flexibility, thus forming a solid regional barrier to competition.
According to retail fair, with the rapid growth of middle-income populations and rapidly rising consumption power in second-, third- and fourth-tier cities, these regional retailers see store upgrades as a new business strategy. By optimizing store design, iteratively updating merchandise, improving service quality, and adopting advanced technology and equipment, they enable local consumers to enjoy cost-effective shopping services at their doorsteps that are only available to consumers in first-tier cities. Store upgrades provide regional retailers with a recipe for winning in the face of fierce competition.
According to retail fair, compared with developed markets such as Europe and the United States, China's superstore industry is still less concentrated, which provides a rare opportunity for regional retailers to grow. In the U.S., the concentration of the top three in the superstore market is generally maintained at the level of 30%-70% in each state, while in China, the concentration of retailers in each region is relatively low, with the market share of the top three retailers in economically developed provinces accounting for only about 10%. This means that there is huge room for regional retailers to grow and expand their market share.
For example, after the economic slowdown in the United States, the retail industry has entered a stage of industry differentiation, evolving from a single industry dominated by outlets to multiple segmented industries. Regional retailers play an important role in this fragmentation. With their deep understanding of the local market and a high degree of flexibility, they are better able to meet the needs of the segmented market. Among the top 10 retail chains in the U.S., we can see that regional retailers occupy six of the top ten seats, focusing on serving 6-8 states (equivalent to 2-3 provinces in China), with sales scales comparable to those of national retailers. Regional retailers have grown at a faster rate than national retailers over the past decade.
(1) National retailers: Focusing on the development of new formats such as membership stores and discount stores, they are able to gather homogeneous demand from consumers across the country and build up a scale advantage. By focusing on individual products and penetrating deeper into the upstream of the supply chain, they are able to further expand their cost advantage and form a "moat" of low prices.
(2) Regional retailers: Focusing on improving regional layout density, meeting regional specialties, improving regional operational efficiency and flexibility, and forming a "moat" of regional specialties.
According to retail fair, trust is the foundation of modern economic relationships, and a lack of trust leads to stagnant economic growth. Once trust is established, transaction costs become lower, market transactions are smoother, and collaboration is easier. Price can be competitive, but the trust of local consumers through service is the most powerful competitive weapon for retailers. Fat Donglai has mastered this precisely, and they have gained a high degree of trust from customers by treating them with respect and attentive service, by interacting with them, by meeting their personalized needs, and by providing high-quality products.
The shopping environment has a powerful psychological cue on consumers' self-positioning. In other words, the shopping environment can have a strong influence on consumers, guiding them to specific purchasing behaviors:
(1) Consumer identification: The shopping environment can make consumers feel that they are part of a particular group. For example, a high-end shopping environment may make consumers feel that they have a higher status, while a more casual shopping environment may make consumers feel that they are young and fashionable. The use of nearly 20,000 Dyson washing and drying faucets in the bathroom of the Fat Donglai Angel City store is designed to make consumers feel that their status is high end and respected in the most private of places.
(2) Emotional impact: The shopping environment has a significant impact on consumers' emotions. Factors such as the layout of the store, music, lighting, and aroma can influence consumers' emotions, which in turn affects their purchasing decisions. For example, happy music and bright lighting may make consumers feel happier and thus more willing to buy.
(3) Shopping experience: The shopping environment can also affect consumers' shopping experience. For example, a clean, tidy and organized store may make consumers feel more comfortable and more willing to spend more time in it, and then more likely to make a purchase.
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