Are top-tier supermarket giants starting to target county-level markets again? Aren't they afraid of failure this time?

In past few years, there was a trend in the supermarket industry rushing to tap into the lower-tier market. However, as time passed, many well-known brands suffered heavy losses due to poor adaptation to local conditions. Recently, a new batch of top-tier supermarket chains have set their sights on county-level markets. Could it be that they are no longer afraid of failure this time?

Are top-tier supermarket chains targeting county-level markets again?

According to reports from Jiupai News, the country's top supermarket chains are once again setting their sights on county-level markets. Hema is expanding its footprint widely. On July 24, Super Hema Discount NB, the affordable community supermarket brand under Hema, opened its first store in Chongzhou, Sichuan Province. According to the plan of Super Hema Discount, new stores added this year will cover more than 300 counties and cities across the country.

Sam's Club has set its sights on strong counties in eastern China. Starting from June this year, Sam's Club has begun recruitment for its Jiangyin store in Wuxi, Jiangsu Province, which is Sam's fourth county-level city store across the country. The fifth store in Yiwu is expected to open as early as the end of 2026. Leading local supermarket chains are also accelerating their layout in county-level markets. For example, Wushang Group from Hubei Province opened a 92,000-square-meter shopping mall in Wuxue City in January this year.

Similarly, according to a recent report by Tech Planet, the offline supermarket war among major internet giants has spread all the way from first- and second-tier cities to fourth- and fifth-tier county seats. On the one hand, Xiaohu Supermarket under Meituan and Dingdong Fresh are expanding to more prefecture-level cities through the front warehouse model.

A service provider of Xiaohu Supermarket introduced to Tech Planet that Xiaohu Supermarket plans to open 800 warehouses this year. In the South China market, Xiaohu Supermarket has successively opened warehouses in small third- and fourth-tier cities such as Qingyuan, Shanwei, Jiangmen and Zhaoqing in Guangdong Province. Dingdong Fresh plans to open 100 warehouses in the second half of the year, relying mainly on the supply chain advantages in the East China market to focus on deeper sinking markets in Jiangsu, Zhejiang and Shanghai regions.

On the other hand, the booming hard-discount supermarket tracks are also accelerating their expansion. Super Hema Discount NB under Hema and Happy Monkey under Meituan have opened stores one after another in communities with high population density in cities such as Jiande in Hangzhou.

How should we view top-tier supermarket chains' expansion into county-level markets?

Recently, a number of leading supermarket brands have refocused their attention on the vast county-level market. Warehouse membership stores and new-type community supermarkets have successively settled in county-level cities. Many people can't help but wonder: the lesson of large supermarkets suffering huge losses and closing stores when they aggressively expanded into county markets in earlier years is still vivid, so why are top-tier supermarket chains rushing to county markets without hesitation now?

First of all, the blue ocean of the lower-tier market has always attracted major supermarket giants. Why are they targeting county-level markets? The fundamental reason is that in first- and second-tier cities, competition in the supermarket industry has fallen into a white-hot stock game. In places like Beijing, Shanghai, Guangzhou and Shenzhen, even those strong second-tier cities, commercial complexes have long been saturated, or even over-supplied. For these top-tier supermarket chains, the marginal revenue of opening new stores in first- and second-tier cities is declining rapidly, and there has even been an inversion where marginal cost exceeds marginal revenue. Just like the lower-tier market logic we have analyzed repeatedly before, China's nearly 3,000 county-level cities are actually the largest value depression in the current retail landscape, and can even be regarded as a blue ocean waiting to be developed.

More importantly, the consumption logic in county-level markets is undergoing fundamental qualitative changes. In the past, when we talked about county markets, we always regarded them as a byword for "low price and low quality", but in today's county-level markets, the awakening of consumption upgrading far exceeds many people's imagination. A large number of young people who worked in big cities have returned to their hometowns, and they have not only brought back capital, but more importantly, a whole set of exquisite life concepts from big cities. Nowadays, county residents no longer go to supermarkets just to buy daily necessities such as rice, flour and oil. They no longer only value "low price", but start to pursue quality, brand and experience openly and confidently. This intergenerational shift in consumer psychology is the fundamental confidence for top-tier supermarket chains to dare to "go to the countryside" again. This is not just a market transfer, but also a structural docking of consumer demand.

Secondly, most of the previous failures were caused by poor local adaptation. When talking about supermarket sinking, we can't avoid those cases of giants that failed in the past. The root cause of their failure is not complicated: they mechanically applied the operation logic of first-tier cities to the county-level market, which led to serious acclimatization.

In earlier years, many giants directly moved the hypermarket model of 10,000 square meters in first-tier cities to county markets without any adjustment. In big cities, such hypermarkets can attract customers with rich categories and spacious space, but this model fails immediately in county markets. Although the rent cost in counties is lower than that in first-tier cities, the large area of hypermarkets means higher fixed costs. Labor costs are calculated according to the standards of big cities, and loss control also follows the extensive model of big cities. More fatally, the supply chain still relies on the national unified distribution system, without considering the particularity of the county-level market.

The sinking of this high-tier city model essentially ignores the market characteristics of county markets. The scale of consumer groups in county markets is limited, and the demand for rich categories of hypermarkets is far lower than that in big cities. More critically, the consumption radius of county residents is shorter, and they pay more attention to convenience and cost performance. The high cost of hypermarkets will eventually be passed on to commodity prices, which not only loses the price advantage, but also fails to meet the demand for convenience. At the same time, the national unified supply chain cannot adapt to the local characteristic needs of counties, such as the supply timeliness of local fresh food and niche brands preferred by county residents, which cannot be accurately covered, resulting in poor store customer flow and inevitable losses. The previous failure is not because the county market is not viable, but because the giants were too arrogant to truly understand the consumption logic of county markets, and used a rigid model to apply mechanically, which naturally ended in a disastrous outcome.

Thirdly, the new strategies adopted this time are actually more valuable. The reason why these supermarket giants seem to be "not afraid" or dare to show their strength again is that they have completed a profound self-revolution, shifting from "large and comprehensive" to "small and refined". What we see this time is no longer the bulky hypermarket, but a more flexible and targeted business model. Either like Hema, which focuses on small stores of hundreds of square meters, driving the market with an asset-light and fast-turnaround approach, greatly reducing trial and error costs and operational pressure; or like Sam's Club, although its stores are not small in size, it selects locations extremely precisely, only targeting those economically developed "top-performing" counties with high consumption power, and screens out real high-net-worth crowds through careful calculation.

In addition to the evolution of store models, the localized transformation of the supply chain is also a major highlight of this "going to the countryside" campaign. The giants have finally understood a truth: in the county-level market, whoever masters the localized supply chain controls the lifeline of profits. They have begun to avoid the limitations of the previous national unified supply chain, and actively cater to county-level characteristics, even directly establishing procurement centers in local areas. This supply chain strategy of "adapting measures to local conditions" directly reduces logistics costs and makes the product structure more down-to-earth. This is a typical industrial upgrading path, which reduces transaction costs through organizational innovation, thus realizing the reconstruction of profit space.

Fourthly, becoming more sophisticated is the core reason for this supermarket expansion. In the final analysis, top-tier supermarket chains' re-entry into county markets this time does not mean they are completely fearless. It is because they have finally caught up with the rhythm of industry development, understood the essence of the retail industry, and learned to sink into the market through meticulous cultivation, which is their core confidence to dare to bet again.

The growth logic of China's retail industry has undergone fundamental changes. In the past, the growth of the retail industry relied on demographic dividends. As long as the scale expanded, growth could be achieved, and the competition focused on the number of stores and coverage. But now, as the demographic dividend is gradually fading, the core of growth has shifted to structural dividends, and the competition focuses on precise penetration into segmented markets, in-depth insight into consumer demand, and refined operation capabilities.

This layout of supermarket giants in county markets is precisely in line with this logical transformation. They no longer pursue extensive scale expansion, but turn to precise penetration, use small and refined stores to adapt to the county market, use layered operation to lock in core customer groups, and use localized supply chains to fit county characteristics, making every link more refined. This kind of meticulously cultivated sinking is no longer the blind duplication of the past, but a customized layout based on the characteristics of the county market, and a search for new growth points on the basis of fully respecting market laws.

Therefore, supermarkets are not not afraid of failure, but they have become smarter this time. They have seen the underlying logic of the retail industry clearly, and understand that the lower-tier market is not a simple copy-paste process, but requires adapting measures to local conditions and meticulous cultivation. Only by truly understanding the consumption logic of county markets and using adapted strategies for in-depth operation can they gain a firm foothold in this blue ocean and avoid the failure traps encountered in the past.