Chongqing - As China’s traditional supermarkets fade, the retail sector is shifting to a low-price discount model, with JD.com and Alibaba optimizing supply chains and cutting intermediaries to offer consumers more competitive prices.

Interior view of a JD Discount Supermarket. (Photo/JD)

Consumers worldwide are familiar with discount supermarkets that cut prices by selling surplus or near-expiry goods. But China’s new hard discount model goes further: instead of relying on short-term markdowns, it streamlines the supply chain to slash middlemen costs, enabling everyday low prices on a long-term basis.

Li Ran, Head of the Department of Applied Economics at Chongqing Technology and Business University, said that traditional retailers depend on layers of distributors and wholesalers, which drive up costs and complicate the supply chain. By contrast, the hard discount model streamlines distribution, cuts out middlemen, and sharply reduces operating expenses.

According to JD.com representatives, the company reduces intermediary costs to a minimum through direct sourcing, direct delivery from the source, and the development of its own private label products, passing the savings directly to consumers.

In agriculture, the company partnered with Tailiang Rice in July to build a terraced rice base in Guangxi, adopting a “farm-gate pricing” model that cuts out traditional distributors. In industrial goods, JD set up an integrated forward-and-reverse logistics warehouse for Panasonic, reducing storage and transfer costs by 18%. For private labels, its “JD-made” brand now works with over 100 high-quality factories in sectors ranging from home appliances to kitchenware and furnishings, enabling large-scale procurement.

With advantages in supply chain, brand influence, and data, e-commerce platforms hold unique competitive strengths in the hard discount space. Li further explained that e-commerce platforms have extensive supplier resources, enabling them to select the best products and, using data accumulated online, precisely analyze regional consumer demand, which in turn supports offline store selection and product updates.

Li predicts that the hard discount segment will rapidly rise, primarily due to its vast market potential. According to the 2025 China Retail Industry Outlook, China’s hard discount market will exceed 200 billion yuan (USD 27.97 billion) by 2024.

As consumer awareness of rational spending increases, the hard discount model is perfectly positioned to meet the growing demand for affordable, high-quality products. According to iMedia Consulting, in 2024, "cost-effectiveness" will top the list of the most important shopping factors for Chinese consumers, with a 78.4% vote share, underscoring consumers' high expectations for price and quality.

A Chongqing resident, Ms. Chen, shared, “Now, there are many types of supermarkets and rich online channels, but what attracts consumers most is the ability to buy the best products at the lowest prices.”

However, the hard discount supermarket model is not just a price war. Li pointed out that the core of the competition lies in a comprehensive test of the retailer’s product selection, supply chain management, and service capabilities. Ultimately, consumers will make their choices based on product quality, quality control, and after-sales service.