Supermarket or community canteen? Is an in-store dining area a smart business move?
Traditional supermarkets in China are struggling to compete with the rise of various e-commerce platforms. The change in shopping behaviour has seen over 130 brick and mortar supermarkets closed nationwide in the first half of 2024. In an effort to stay relevant, these supermarkets are seeking new strategies to tempt shoppers to the tactile shopping cart experience, and many are turning their attention to in-store canteen.
The Wumart Big Canteen in Zhongguancun, a branch of one of China's leading supermarket chains, became an instant hit upon opening. Located inside the Wumart supermarket, it operates on a buffet model. For ￥13.0 ($1.80), customers can enjoy unlimited servings of carb-based dishes like fried noodles and fried rice. For ￥19.9 ($2.70), they can access a wider buffet that includes hot dishes, cold dishes, staples, snacks, and desserts. Children under 1.1 meters tall are charged ￥10 ($1.40).
Wumart big canteen in Zhongguancun, Beijing. Image: Xiaohongshu @福福爱吃 @元气小皮 @陈果果与蓝喵喵
Dishes sold on Wumart big canteen sited in Zhongguancun, Beijing. Image: Xiaohongshu @元气小皮
During weekday lunch hours, the 150-seat dining area is generally close to capacity, mostly with young professionals from nearby offices. In contrast, the fast-food restaurants outside are not as crowded and have no queues. According to Xu Lina (许丽娜), a spokesperson for Wumart Group, the Wumart Big Canteen in Zhongguancun initially saw daily foot traffic of 300-400 people, but within a month, it surged to over 1,000 per day as word spread. The average daily revenue from dining exceeded ￥20,000 ($2,749).
A top-rated comment on a related video said, "It is better than pre-made meals anyway." Consumers seem to prefer the freshly cooked, cheap and cheerful meals at Wumart Big Canteen over the pre-made dishes offered by restaurants.
Top-rated comment below Wamart big canteen video from E-commerce online news (电商在线) Wechat Channel
With the rise of e-commerce/O2O platforms and variety of shopping options, traditional supermarkets have seen a significant decline in foot traffic. They face high rent and labour costs while also dealing with declining sales year after year. To maximize the use of their valuable space, supermarkets are adapting by opening large in-store dining areas where boxed meals, braised dishes and freshly cooked meals are for sold.
The main strategy for these traditional supermarkets entering the food business is to follow the community canteen model. This model focuses on freshly cooked, low-cost fast food with a wide variety of dishes, steering clear of pre-made meals. It aims to meet the high demand for affordable, frequent meals and to attract both community diners and working professionals.
Yonghui supermarket's in-store canteen where self-serve fast food is priced at ￥1.98($0.30) per 50 grams. Image: Xiaohongshu @小七
Hema's dining area in Guangzhou. Image: Xiaohongshu @旸宝
While opening canteens in supermarkets has provided traditional retailers with an opportunity to transform and attract new customers, there are potential risks and challenges:
Cost Control: Compared to fast-food chains, the main advantage for supermarket canteens is their affordability. However, maintaining low prices long-term can strain profits, necessitating effective cost management.
Dining Experience: Supermarket canteens may struggle with noisy and chaotic environments. Without proper management, this can negatively impact the customer experience.
Menu Development: To keep customers interested, supermarket canteens need to continuously develop new dishes, requiring more resources and time.
Delivery Service: If the canteen business becomes more permanent, offering delivery services might be considered. This could add extra costs and challenges in standardizing meal preparation.
Whether turning part of a supermarket’s space into a dining area is a good business move remains to be seen.
