Dialogue with ZHANG Yibo of Boston Consulting Group: Supermarket renovation should avoid "three major misunderstandings"

The direction of adjustment is already clear, but more drastic changes will occur beneath the invisible iceberg.

After nearly 30 years of blind and headlong competition on the same speed - racing track, Chinese retailers are facing a decisive turning point.

Zhang Yibo, a managing director and global partner at Boston Consulting Group (BCG), made this judgment based on his more than a decade - long tracking and research of the industry. As the head of BCG's retail business in China, he has served 8 out of the top 10 Chinese supermarket chains and participated in numerous business adjustments of various sizes. However, this "adjustment and reform trend" is different.

"In the past, many adjustments were optimization - oriented, such as online transformation and exploration of new business models, which was like changing the car's shell. Now, we need to change the engine, and the power mechanism has changed." In Zhang Yibo's view, Chinese supermarkets will be divided into four major tracks in the future, simply referred to as "Fire, Speed, Price, and Efficiency".

"Fire" refers to supermarkets with a strong sense of daily life, and Fat Donglai is a representative of this type. In the past three years, this company, which has been focusing on the Henan market, has continuously refreshed its revenue scale, increasing from 10.7 billion yuan in 2023 to 23.5 billion yuan in 2025.

Photography: Liang Xiao

"Speed" represents instant retail, with Xiaomai Supermarket as a representative. By the end of 2025, this "rising star" had entered 39 cities across the country. Data from 2024 showed that its annual GMV was approximately 30 billion yuan.

"Price" refers to the absolute price advantage under the hard - discount model. The most typical example is the German brand Aldi, with an annual global revenue of over 150 billion US dollars. It has also become a "dark horse" in the Chinese market in the past two years.

"Efficiency" refers to the ultimate efficiency of single products, especially in the membership - store model. Sam's Club China, which sold 140 billion yuan worth of products in 2025, is an outstanding example.

The direction and path are clear, but for Chinese retailers accustomed to the traditional "engine", the road ahead is not easy. Which "teacher" should they choose? How should they carry out the adjustment and reform? What capabilities are essential? Which pitfalls can be avoided? Zhang Yibo was interviewed by China Entrepreneur on these issues.

More Than Just the Fat Donglai Model

China Entrepreneur: What's your view on the current supermarket adjustment and reform?

Zhang Yibo: Nowadays, when people talk about adjustment and reform, they often think of the "Fat Donglai - style reform". In fact, there are other types of "adjustment and reform". Some are exploring community stores, some are learning the hard - discount model, some are seeking "gradual" reforms, and some are focusing on developing private - label brands.

However, the term "adjustment and reform" did emerge because the industry started learning from Fat Donglai, and I think its symbolic meaning is very important. Previously, no supermarket had ever, in such a resounding way, re - told consumers "who I am and who I serve", and issued a declaration to its employees, suppliers, and consumers: "I will treat you in this way." In my opinion, this adjustment and reform is equivalent to a return and restart of the industry towards the essence of retail.

Photography: Liang Xiao

China Entrepreneur: What does restarting mean? Why does the Chinese retail industry need to restart?

Zhang Yibo: The development of the Chinese retail industry can be divided into several stages. Around 1990, the supermarket format began to emerge, and the industry immediately entered a high - speed development phase. The competition was mainly about the speed of opening new stores, so most enterprises were crowded on the homogenized track to expand their market share. After 2012, the industry began to be squeezed by online retail, but it still maintained overall growth. Since 2020, the industry has been like driving into a tunnel, feeling rather confused.

The fundamental reason is that before entering the "tunnel", the traditional Chinese supermarket industry was already significantly over - supplied. Compared with other countries, our per - capita supermarket area is not proportional to the per - capita disposable income. For example, the per - capita supermarket area in China is already the same as that in the UK (0.22 square meters per urban population), while China's per - capita disposable income is currently one - quarter of that in the UK. This is the result of the previous collective expansion. Coupled with the shift of the Chinese consumer market from a seller's market to a buyer's market, the supermarket industry has now entered the stage of an "elimination round" to reduce inventory.

Therefore, although Chinese supermarkets have been constantly changing, the intensity of the changes varies. In the first stage, most of the changes were optimization - oriented adjustments. In the second stage, the industry began to explore various business models, like trying different car shells. Now, it's time to change the engine - the power mechanism has changed.

Comparing with overseas markets, we can find that Chinese retailers have gone through more than 100 years of development in other countries in just 30 years: the expansion period, the differentiation period, and the online - impact period. The Chinese retail industry has not yet entered the differentiation period but has first faced the most intense online penetration globally. Online retail is not as developed overseas, so offline businesses can make adjustments slowly. We don't have this luxury, and offline businesses are forced to enter a race against time.

China Entrepreneur: So everyone is eager to find a "good teacher" and learn from Fat Donglai.

Zhang Yibo: The "Fat Donglai - style reform" definitely has positive significance. The concept of Fat Donglai is actually the essence of retail: consumer - centricity, improving employee well - being, and returning to product strength. These concepts may seem novel in the Chinese market, but they are quite common overseas. Retailers like Trader Joe’s, H - E - B (the largest local supermarket chain in Texas, USA), Wegmans (rated as the best supermarket in the US for many years), and Mercadona (the largest supermarket chain in Spain) are all highly respected in the industry, and they share the same concepts.

China Entrepreneur: Joe Coulombe, the founder of Trader Joe’s, said that the most important business decision he made was to "pay employees high salaries".

Zhang Yibo: That's right. If you read The King of Space Efficiency, you'll find that the underlying logic of Trader Joe’s and Fat Donglai is very similar.

However, their appearances and "personalities" are also very different. Trader Joe’s is like a captain who travels the world, bringing global cuisines to their shelves. H - E - B presents a strong local Texan culture, and Erewhon (a high - end organic supermarket chain in Los Angeles, USA) focuses on an ultimate healthy lifestyle.

Therefore, there won't be only one type in the future in China. Not all supermarkets can be like "Fat Donglai". There should be a variety of styles, otherwise, it will just change from one form of homogenization to another.

Beware of the "Three Major Misunderstandings" in Adjustment and Reform

China Entrepreneur: What are the transformation directions?

Zhang Yibo: When we were in the "tunnel", we made a prediction that four "cars" would emerge, which I call "Fire", "Speed", "Price", and "Efficiency".

Now, it turns out that these four "cars" have indeed emerged, and these four directions will not change in the future. Enterprises that enter these directions will once again enter the fast lane of development.

China Entrepreneur: The underlying logic of the four models is the same. What should enterprises learn?

Zhang Yibo: Yes, at the conceptual level, they are similar, all focusing on product strength. Among them, "Price" and "Efficiency" have a higher degree of consistency in the underlying logic. However, they target different consumers, have different functional positioning, and different profit models. For example, those focusing on "Fire" need to focus on how to build the on - site processing ability for in - store dining. Those focusing on "Efficiency" emphasize the limited - product strategy and need to have a very strong ability to create single products from end to end. The focuses are different.

China Entrepreneur: The four models require different capabilities, and there may be overlaps. How can enterprises determine which path is more suitable for them?

Zhang Yibo: Indeed, the Chinese retail industry places high demands on enterprises. They need to quickly respond to various changes.

In a nutshell, enterprises need to have no weaknesses and have their own advantages. Instant retail is indispensable, product efficiency must be enhanced, and cost - performance must be ensured. All capabilities are necessary, but different models have different requirements for the density of capabilities. Therefore, enterprises first need to figure out their comparative advantages.

In addition, I always say that Chinese consumers are not like a cheesecake but like a tiramisu, with many different layers. Moreover, Chinese consumers have one of the highest "shopping IQs" in the world. They can access different global products and retail forms. They not only care about functionality but also emotions and can easily compare products online. It is a great challenge for retailers to meet their changing needs.

On the other hand, loyal consumers are even more important. Therefore, enterprises need to figure out who their consumers are, which scenarios they are serving. Your positioning is no longer just a supermarket but a supermarket that serves certain people and a space that leads a certain lifestyle. This means that you need to identify the most important needs of these people in the four aspects of "Fire, Speed, Price, and Efficiency" and make choices accordingly.

Photography: Liang Xiao

The real value is to serve a group of people to a score of 120, rather than serving everyone to a score of 60. There will definitely be such a differentiation in the future. If you can't serve your target consumers well without compromise, it will be very difficult.

So, one is the enterprise's ability advantage, and the other is the ability requirements of core consumers. The direction of enterprise adjustment and reform lies at the intersection of these two answers. Don't try to be the best in every aspect at the beginning. It's not realistic. You can first provide some product categories that exceed the expectations of your target consumers, do these aspects deeply and thoroughly, and then expand your advantages. This will make consumers more and more sticky.

China Entrepreneur: You have participated in the adjustment and reform of many enterprises. What common problems have you found?

Zhang Yibo: There are probably three aspects of misunderstandings:

The first is the "imitation misunderstanding". Don't lose yourself in the process of learning. When copying, learn the underlying logic and business logic, not just copy everything blindly. For example, some regional supermarkets have unique features in local food, condiments, and pork. After the adjustment and reform, they become less distinctive. Summarize your own genes and don't blindly imitate others. Just like the "thousand - faced hero" in the works of the well - known American writer Campbell, learn the hero's logic, not the hero's face.

The second is the "shock misunderstanding", which requires great caution. The current industry consensus is to eliminate slotting fees, but the pace must be carefully considered. Remember that this is the result of good business operations, not the cause. It is because of good product and business capabilities that the profit from the "store" can be transformed into the profit from the "products", not the other way around.

Now, some enterprises are in urgent need of forcing this change during the transformation. This is very necessary, but the risks also need to be evaluated, especially the risk of a "shock" in the financial situation.

The third is the "personal - rule misunderstanding". Emphasizing people and culture is very important, but it is not at all contradictory to systemization. In the end, retail competition must rely on systematic capabilities: end - to - end cost management, product management, pricing management, operational capabilities, and private - label brand development capabilities. These lean capabilities are essential. In fact, Fat Donglai has a very strong foundation in these aspects, which is the result of long - term accumulation. However, many enterprises that are learning from it often ignore this point.

China Entrepreneur: For small - scale regional supermarket chains, can the adjustment and reform in this regard be postponed in terms of priority?

Zhang Yibo: They still need to carry out the adjustment and reform. Don't rely on personal rule or experience, but use systems and data. Moreover, with the acceleration of AI technology, the cost in this regard has become even lower.

Reconstruct the Channel Value Chain

China Entrepreneur: What kind of new situation will the Chinese retail industry present after this round of adjustment and reform?

Zhang Yibo: The integration of the Chinese retail industry is accelerating, and the industry concentration will definitely increase in the future.

Compared with overseas markets, in the Chinese retail market, both CR3 (the sum of the market shares of the top three companies in the industry) and CR5 are very low, especially in regional markets. The winners may not necessarily be those with large scales but those that can better serve local consumers. An example is the "tower - shaped" regional supermarkets. Take H - E - B as an example. It uses seven types of business models to provide all - around and saturated services to the people in a state, capturing the "local taste" and accounting for more than 20% of the local market share.

One trend we can observe now is that many Chinese consumers have gradually shifted their trust from brands to channels. Therefore, retailers need to have their own "personalities" and establish their own brand value propositions to gradually shift from the traditional slotting - fee model to the retail - brand model.

Photography: Liang Xiao

China Entrepreneur: Will this transformation also have a great impact on suppliers and brand owners?

Zhang Yibo: Yes. Currently, the adjustment and reform direction of retailers is already clear, but more drastic changes will occur beneath the invisible iceberg.

One is the future transformation of the retailer - supplier relationship. The role of distributors will change. The simple multi - level reselling model will gradually collapse, and professional intermediaries with stronger service capabilities, product - sourcing capabilities, and cost - management capabilities will gradually emerge