Laying out the lightning warehouse format has become the mainstream trend and necessary direction for brand owners and channel partners to follow the evolution of the instant retail industry.

Traditional brick-and-mortar retail relies on scientific store layout design and aesthetic merchandise display as business strategies to attract consumers to place orders. However, the charm of instant retail lies in the fact that the incremental space for immediate demand is far greater than guided demand. This means that users' immediate needs must have a brand owner, channel partner, or all-encompassing platform that can efficiently meet these needs without additional guidance.

Furthermore, when 'search' becomes the primary entry point for instant retail, the unique supply offered by instant retail and the 'warehouses' that can address supply-demand mismatches become the incremental field for brick-and-mortar retail to achieve differentiation.

Whether it's the dark store model, which is explored based on fresh food e-commerce and gradually moves away from the debate on its authenticity, or the lightning warehouses that are continuously being expanded by platforms like Meituan Flash, essentially, the value of 'warehouses' lies in reshaping the retail logic of 'people, products, and places', evolving from focusing on 'shelves and in-store experience' to 'shelves and picking efficiency'.

It's not difficult to understand why Meituan Flash regards 'lightning warehouses' as an important supply carrier to satisfy users' high-certainty lifestyles and has set a development goal for lightning warehouses to reach 100,000 units and achieve 200 billion GMV by 2027.

Of course, what is more important and worthy of retail professionals' consideration is: How can we truly build a sustainable and profitable instant retail model and innovatively achieve the 'evolution of retail formats'?

01 Lightning warehouses become a new growth pole for instant retail

Before clearly defining lightning warehouses and exploring their industry value, we must first clarify the specific differences between dark stores and lightning warehouses in terms of business implementation.

It is not difficult to see that dark stores test the brand charm and basic fulfillment capabilities of retail enterprises. At present, Sam's Club (cloud warehouse), Dingdong Maicai, and Pupu Supermarket have become beneficiaries of the dark store model. However, for enterprises that want to focus their limited energy on brand building and efficient operations by leveraging their strengths and avoiding weaknesses, partnering with Meituan, which already possesses strong supply, fulfillment, and operational management capabilities, and sharing in the instant retail pie through lightning warehouses is a good choice at present.

Image source: "Innovative Development Report on Instant Retail Dark Stores"

In terms of attributes, the difference between Didi Chuxing and Gaode Maps can be analogized to the difference between dark stores and lightning warehouses, where the former is an independent platform built under an independent brand, while the latter is a supply ecosystem aggregated by multiple merchants.

In the article "Why are Dark Stores Making a Comeback?", Retail Business & Finance noted that 'repurchase' based on enhancing product strength is the 'internal combustion engine' that drives the dark store model, which is also the core reason why dark stores are making a comeback.

When this product strength can achieve full-time, full-category, full-format, and full-regional supply, the advanced nature of lightning warehouses becomes apparent. In fact, the gradual evolution from the uneven standards established by representative players like Sam's Club, Hema, Dingdong Maicai, Pupu Supermarket, etc., towards a more universally applicable lightning warehouse standard developed collaboratively by various retail enterprises is the prevailing trend.

Therefore, as the warehouse format that best represents the current trend of supply evolution, lightning warehouses will become the new standard for the entire warehouse format in the future.

This is also why more and more retailers have chosen to expand their instant retail presence through the lightning warehouse model this year.

For example, Miniso recently announced that it will launch over 800 '24H Super Stores' in the form of lightning warehouses on Meituan within the year. Analyzing the deeper meaning behind Miniso's accelerated warehouse opening, it is essentially a disruptive understanding and judgment of the 'countercyclical' retail landscape rather than simply relying on market experience or data analysis.

Not only Miniso, but Watsons has also opened lightning warehouses on Meituan covering more than 10 first- and second-tier cities, with warehouse productivity increasing by 1.4 times. E-Jia Convenience Store, with over 28,000 stores, has also launched its online takeout store 'E-Jia Express,' essentially in the form of a lightning warehouse. Suning Tesco, Sephora, Muji, Heilan Home, Decathlon, Hotwind, and others have joined Meituan Flash, signaling that first-tier brands are significantly increasing their instant retail presence by 'turning stores into warehouses.'

Image source: Rapid growth in instant retail sales

There is another category of players (Hema, RT-Mart M Member's Store, and JD.com's 7FRESH, which focuses on the 'integrated warehouse and store' model) that have chosen a heavier model - self-built dark stores. However, in the future, they may also consider leveraging lightning warehouses for business, just as Taobao and WeChat Pay are 'tearing down walls' and JD.com Logistics is fully integrated into the Taobao and Tmall platforms. As lightning warehouses become a new growth pole for instant retail, competition will ultimately evolve towards cooperation.

02 How to open 'warehouses' of high quality?

Facing the booming instant retail market, retailers are no longer hesitant about entering the field but are eager to open 'warehouses' of high quality for three main reasons:

Firstly, the demand for instant consumption continues to expand, and traditional supermarkets still have limitations in undertaking instant retail business with their existing offline-focused business models. At the same time, without strong financial and supply capabilities, blindly increasing the fulfillment costs of dark stores may accelerate corporate blood loss.

Secondly, the market increment brought by lightning warehouses cannot be overlooked. For example, currently, over 30,000 Meituan lightning warehouses have expanded to cover all categories (digital appliances, maternity and child toys, daily necessities, beauty and personal care, pet supplies, fruits, ingredients, alcoholic beverages, flowers, medical equipment, adult products, etc.), multiple formats (convenience stores, supermarkets, discount stores, specialty stores, etc.), and all hours.

Full-category instant consumption Image source: iResearch

This means that for retailers and brand owners, lightning warehouses covering more categories and formats provide new sales channels and growth points. Moreover, full-category coverage, full-regional service, instant delivery, and 24-hour operation are also the values that lightning warehouses offer to consumers.

Thirdly, with the evolution of the supply ecosystem and the increasingly mature instant retail ecosystem, this model, based on mature supporting facilities, can help businesses improve operational efficiency, reduce operational costs, and have lower replicability and longer lifespans.

Miniso's expansion into lightning warehouses is a representative case. In the view of Ye Guofu, instant retail has the potential to become Miniso's second growth curve in the domestic market.

On the one hand, Miniso's price range aligns well with the needs of mainstream instant retail users, and its strength lies in its emergency products that cater to consumers' needs in such situations. On the other hand, since joining Meituan in 2018, Miniso's new customer volume has increased by over 70% annually, leading to the decision to expand into lightning warehouses.

'The product mix of the 24H Super Store differs by over 70% from that of regular Miniso stores,' said Chen Zhenjie, head of Miniso's instant retail business. 'While regular stores focus on 'big IPs with small daily necessities,' super stores offer a combination of 'big daily necessities with small IPs.' Lightning warehouses primarily cater to demand for household goods and gift items, such as disposable socks, underwear, bedsheets, and more, which are developed by Miniso based on Meituan data and consumers' spontaneous travel scenarios.'

At this stage, retailers that can leverage instant retail platforms to expand their business boundaries and tap into market increments are not limited to Miniso. One industry perspective is that all towns with takeout services have opportunities to engage in instant retail through lightning warehouses.

'First, there must be business before talking about branding. For small and medium-sized merchants, steady growth is the top priority,' said the manager of a gift store in Wuhan to Retail Business & Finance. 'During rainy or snowy weather, the number of customers visiting our store decreases significantly, but overall sales remain stable. The key is that after launching instant retail, we can rely on the platform's data analysis capabilities to create different product combinations distinct from physical stores, thereby extending sales time and space and optimizing inventory management. This double-duty store-warehouse model generates incremental business, which seems like a store-warehouse combination but actually delivers a multiplier effect.'

Compared to stores and warehouses of the same size, lightning warehouses undoubtedly have advantages in terms of rent costs, number of displayed SKUs, operating hours, sales per square meter, monthly sales, and profit margins. Merchants who choose to directly open lightning warehouses (independent warehouses) have already reaped the benefits of this market.

'Monthly net profits range from a minimum of 30,000 to a maximum of 80,000 yuan,' said a lightning warehouse service provider. 'This year, we opened a total of 50 warehouses, which have been profitable.'

Image: Store associate picking items in the warehouse

Achieving the goal of '100,000 lightning warehouses and a scale of 200 billion' will not be entirely smooth sailing. It is reported that Meituan has launched the 'Starry Sky Plan' for lightning warehouses, providing support such as 'precise location selection, operational guidance, ramp-up resources, morning glory system, and dedicated delivery solutions' during the warehouse opening process.

03 Continuous evolution of instant retail

From the demand side, the number of active users on instant retail platforms continues to increase. According to the latest "Development Report on the Instant Retail Industry (2024)" released by the Ministry of Commerce Research Institute, the number of active instant retail users in 2023 was approximately 580 million, an increase of 34.88% year-on-year, accounting for 53.11% of internet users. Data from Meituan shows that from January to August this year, the industry's scale increased by 26.2% year-on-year; the proportion of night orders on Meituan Flash continued to increase, reaching 26%; and in lower-tier markets like counties, Meituan's instant retail orders increased by 54% year-on-year.

The growth on the demand side of instant retail is a direct result of the cultivation of a high-certainty lifestyle and the prosperity of the supply ecosystem.

From the supply side, in the view of Wang Puchong, CEO of Meituan's core local commerce business, instant retail has evolved into multiple supply species so far, including formats like Rosen 's 'warehouse-as-store,' Yonghui and RT-Mart's 'store-with-warehouse,' and independent warehouse formats like Xiaoxiang Supermarket, Dingdong Maicai, and Meituan Lightning Warehouses.

The emergence and prosperity of lightning warehouses are driven by the increase in order density brought about by the cultivation of a high-certainty lifestyle and are an important indicator of the evolution of retail formats.

Since the warehouse format is also a physical entity, it has basic requirements for inventory and sales. For example, convenience stores may struggle to survive if their daily sales are below 5,000 yuan. Therefore, the higher the density of warehouses and the stronger the product strength, the better the business will be.

Taking SF Express Convenience Store as an example, this year, SF Express Convenience Store has accelerated the renovation of its stores, ensuring store service fulfillment while deeply exploring regional online consumption trends to create an online PB product mindset and achieve refined online and offline operations. Currently, SF Express Convenience Store's online sales have increased by over 90% annually, with around 300 PB products, and online sales of these products have increased by 118% annually.

Image: 24-hour convenience store

Merchants choose to leverage platforms to expand their stores and open warehouses primarily because they recognize the 'three highs' characteristics of Meituan's instant retail business - high penetration, high-efficiency fulfillment, and high-quality ecosystem. Industry insiders believe that for retail enterprises operating in the 'mid-speed range' of economic development, the core strategies for breakthroughs are outstanding total cost, differentiation, and focus.

Furthermore, for retail enterprises to achieve long-term development, they cannot blindly pursue sales but must also focus on improving profit margins. Only business models with lower costs and higher efficiency (transitioning from 'shelves and in-store experience' to 'shelves and picking efficiency') can enhance their anti-risk capabilities. Additionally, only by quickly occupying better warehouse locations and reaching denser population centers can they gain more orders and the 'initiative' in repurchase rates.

Lightning warehouses are undoubtedly an excellent instant retail solution for local retailers to address supply-demand mismatches. As their name suggests, lightning warehouses make 'more, faster, better, and cheaper' faster in the 'faster' dimension and iterate towards more, better, and cheaper. Figuratively speaking, lightning warehouses - the 'Darwin's finches' representing the evolution of instant retail - are also witnessing the innovation and reshaping of the retail industry.