Ed Sander | China Digital Retail Report

China Digital Retail Analyst @ Public Speaker @ , Study Tour Leader @

[Ed Sander | China Digital Retail Report @EdSander]

For years, there have been discussions about whether pure-player front-end warehouse companies (often called ‘dark stores’ in the West) can be truly profitable.

In China, there are three cases that seem to prove profitability:
▶️ Dingdong Maicai
▶️ Pupu Supermarket
▶️ Yonghui’s front-end warehouses in Chongqing

Still, a recent analysis by Liansheng claims that none of these cases has sufficiently demonstrated the model's profitability. What’s more, recent iterations of the model and developments among traditional supermarkets seem to prove Liansheng is right.

In this article, I’m summarising Liansheng’s article while combining it with my own on-the-ground research.

Besides shedding light on the situation in China, there are many valuable lessons for quick commerce platforms and traditional supermarkets seeking to offer 1-hour delivery.

https://t.co/RHvROFNSri

[Ed Sander | China Digital Retail Report @EdSander]

While Xinjiang might not be the most representative province to measure VPN usage, this article is interesting nevertheless. As other estimations before it, it comes to the conclusion that VPN usage in China is at most 3%.

https://t.co/vDusLP4VZS

[Ed Sander | China Digital Retail Report @EdSander]

For years, there have been discussions about whether pure-player front-end warehouse companies (often called ‘dark stores’ in the West) can be truly profitable.

In China, there are three cases that seem to prove profitability:
▶️ Dingdong Maicai
▶️ Pupu Supermarket
▶️ Yonghui’s front-end warehouses in Chongqing

Still, a recent analysis by Liansheng claims that none of these cases has sufficiently demonstrated the model's profitability. What’s more, recent iterations of the model and developments among traditional supermarkets seem to prove Liansheng is right.

In this article, I’m summarising Liansheng’s article while combining it with my own on-the-ground research.

Besides shedding light on the situation in China, there are many valuable lessons for quick commerce platforms and traditional supermarkets seeking to offer 1-hour delivery.

https://t.co/RHvROFNSri

[Ed Sander | China Digital Retail Report @EdSander]

A 15-SQUARE-METER WALMART?

One of the fun things about following grocery delivery in China on a daily basis is seeing a constant stream of new delivery model iterations that try to optimise margins.

Over the years, I have seen next-day, same-day, and instant retail delivery. Front-end warehouses, lightning warehouses, stores with integrated warehouses and stores with ‘cloud warehouses’. I’ve seen community group buying, marketplaces, pick-up store concepts and more.

The latest thing that made me smile is this 15-square-meter Walmart that instant retail expert Lao Zhang shared in a post. Quite a change from the enormous hypermarkets found all over China 15 years ago, but which have been in decline while Walmart shifts towards the Sam’s Club model.

But the location in the picture isn’t really a shop. You can’t browse the shelves for products there. It is basically a last-mile fulfilment station. Customers within a 10-minute walking radius can pick up orders they place online. It also works with delivery services for home delivery. The sign says “Walmart is expanding its delivery network! Fresh food can now be delivered to your door.”

The advantage of these ‘stations’ is the low rent and labour costs. Replenishment is done by the larger Walmart supermarkets, which creates a certain dependency.

Is it completely new? Probably not. It reminds me a lot of Alibaba’s Hema Linli (Neighbourhood) stations before they closed down (see: https://t.co/TsTlXmC5bg).

It remains to be seen if these new Walmart stores will become a common sight in China’s upper-tier city streets.

[Ed Sander | China Digital Retail Report @EdSander]

@chinalawtransl8 Good one. 👍

[Ed Sander | China Digital Retail Report @EdSander]

CHINA'S COTTI COFFEE NOW HAS 30 STORES IN EUROPE

In October 2023, I noticed how Cotti Coffee had started recruiting franchisees in Germany on WeChat (see image). It took a while, but it opened its first stores in Berlin in February 2026.

I just noticed that Cotti has been expanding to other German cities. It now has 9 stores in Germany.

According to information on Google Maps and Gemini, Cotti also has stores in France (5 in Paris and 1 in Lyon), Spain (3 in Madrid, 4 in Barcelona), Belgium (2 in Brussels and 3 stores scheduled to open in Antwerp, Ghent and Namur) and the UK (5 in London).

Read more on China Digital Retail Report:
https://t.co/UnpkmnlQX2

[Ed Sander | China Digital Retail Report @EdSander]

NEXT WEEK ON CDRR: ARE SELF-OPERATED DARK STORES SUSTAINABLE

I've got an exciting new publication coming up next week. In this article, I will once again try to answer the question of whether front-end warehouses (dark stores) that are self-operated by companies like Dingdong, Meituan and Pupu will ever be sustainably profitable.

Several cases seem to point to a positive answer. But a recent article by Liangshang begs to differ. And looking at recent developments in instant retail/quick commerce in China, the actual behaviour of market players suggests they might be right.

In the article, I will describe:

▶️ Three cases in which self-operated dark stores turned a profit.
▶️ The limitations of the model.
▶️ The way in which various models for instant retail are converging to a new format.
▶️ What Western companies in quick commerce can learn from this.

And last but not least, paid subscribers get a 25-minute video briefing on developments in instant retail over the past 12 months as bonus content.

To ensure you receive this article in your inbox or Substack app, please take a free or paid subscription: https://t.co/ubNVAtaNXe

[Ed Sander | China Digital Retail Report @EdSander]

Another hint for the people participating in Monday's China Pub Quiz with the VNC.

[Ed Sander | China Digital Retail Report @EdSander]

TEMU'S 200 MILLION EURO EU FINE
Yesterday evening on Ireland's RTE News, I commented on the EU imposing a 200 million fine on Temu for violations of the DSA.

[Ed Sander | China Digital Retail Report @EdSander]

@rabbitsignal_cn Check out my recent report if you want to learn more about Xinpinmu.
https://t.co/dtaMItg4Pr

[Kaiser Kuo @KaiserKuo]

If this goes forward — $250 bill with Trump's face on it. — Chinese will get a huge kick out of it. "250" (二百五， èrbǎiwǔ) is a common Chinese insult meaning a half-wit, a blockhead, a fool. Comedy writes itself. 笑死.

[Ed Sander | China Digital Retail Report @EdSander]

Despite an 11% increase in revenue, Pinduoduo saw a 15% drop in net profit in Q1, partly due to investments in a program called 'Xinpinmu'.
Here's all you need to know about Xinpinmu: https://t.co/dtaMItg4Pr

[Ed Sander | China Digital Retail Report @EdSander]

WHAT YOU SHOULD KNOW ABOUT TIKTOK SHOP

Today, news broke that TikTok Shop is launching in the Netherlands, Belgium, Poland and Austria on June 15th.
Social commerce agencies are once again flooding LinkedIn with stories about how successful live commerce is in China and the opportunities for businesses in those countries.
But there are a few things you should know about TikTok Shop that will temper unrealistic expectations.
Watch this segment from a keynote I delivered at K5 in Berlin last year for a reality check on TikTok Shop.

[Ed Sander | China Digital Retail Report @EdSander]

@FinanceFilosoof Ik zou de potentie in Europe niet direct baseren op het succes in Azië.
Ik schreef er vorig jaar dit over: https://t.co/La3KR0HdxJ
Kijk ook eens naar deze video vanaf 17 minuten: https://t.co/Tzd9VvbxWB

[Ed Sander | China Digital Retail Report @EdSander]

Bezorging per drone is een opmerkelijke vermelding. In China is dat helemaal niet zo sterk ingeburgerd als Joybuy doet voorkomen, en bovendien is het gebonden aan strenge regels. JD bezorgt met name per drone in afgelegen gebieden, niet zozeer in steden, zoals Meituan in Shenzhen doet.
https://t.co/tNpFehtNMp

[Ed Sander | China Digital Retail Report @EdSander]

TIKTOK SHOP EXPANDS IN EUROPE

The cat is out of the bag ...

TikTok Shop will launch in Poland, the Netherlands, Belgium and Austria on June 15th.

In cases like these, I always advise people to 'follow the breadcrumbs' back to China and see what Bytedance has already done in its home market with Douyin (TikTok's Chinese version). China -> South East Asia -> USA -> Europe. I have found that it uses (or tries to use) the same roadmap worldwide.

I have been writing about Douyin Shop's strategy and the TikTok Shop rollout since 2022. So instead of repeating myself, you might want to read up on the topic here:

▶️ How Douyin, the Chinese TikTok, broke into e-commerce
https://t.co/nRj30jhpRz

▶️ The long and winding road of TikTok Shop
https://t.co/uHEXBlFHMt

▶️ TikTok Shop Watch #1: Southeast Asia
https://t.co/TCsZhveMsb
▶️ TikTok Shop Watch #2: Out of Asia, into US & Europe
https://t.co/I7nfCw9DeQ
▶️ TikTok Shop Watch #3 – A reality check on live commerce (recommended!)
https://t.co/QJ6SRezYSP
▶️ TikTok Shop Watch #4: US, Europe and Latin America
https://t.co/VWL0j3TnsF
▶️ TikTok Shop Watch #5: Southeast Asia
https://t.co/rtyQTFjc0P

There are two more updates on the TikTok Shop Watch series coming up on the China Digital Retail Report. Subscribe here to receive them when they drop: https://t.co/ubNVAtaNXe

I also urge you to watch the section of my keynote at K5 last year (fast forward to 17 minutes): https://t.co/kxWrJ14gAR

[Ed Sander | China Digital Retail Report @EdSander]

@SimonChua14 @Larryjamieson_ @EquityBrian Xinpinmu is not a new platform. It is a private brand division that will sell products on Temu and Pinduoduo. You can read more about it in my recent report.
https://t.co/dtaMItg4Pr

[Ed Sander | China Digital Retail Report @EdSander]

Last year, in September, I delivered a keynote at Hovedorganisasjonen @virke_no's Arena conference in Lillestrøm, Oslo. In 25 minutes, I explained the core business model behind Temu and why a cancellation of the tax exemption in Europe is unlikely to stop the platform.

Next month, I will be sharing the latest insights about Temu at various conferences in Germany and the Netherlands. In those keynotes, I will explain why I see the latest developments at Temu as its ‘third phase’.

Meanwhile, in this week's China Digital Retail Report, I have included a recording of last year’s presentation for Virke, so you can learn more about Temu’s first two phases, which many local players are still not fully aware of.

https://t.co/KmYOhfoT5Q

[Ed Sander | China Digital Retail Report @EdSander]

JD CONSIDERS A BID FOR ANOTHER UK RETAILER

While the Ceconomy acquisition is still facing regulatory hurdles and EU investigations, JD is now allegedly eying another UK retailer.

After previous failed attempts to buy Currys (in 2024) and Argos (in 2025), JD is now considering a GBP 2 billion bid on The Very Group, the Liverpool-based online shopping platform.

Read more on China Digital Retail Report: https://t.co/jJsHiwDjxZ

[Ed Sander | China Digital Retail Report @EdSander]

Coming up this week: Temu - Understanding a Chinese Chameleon

Last year, in September, I delivered a keynote at Hovedorganisasjonen Virke Arena in Lillestrøm, Oslo. In 25 minutes, I explained the core business model behind Temu and why a cancellation of the tax exemption in Europe is unlikely to stop the platform.

Next month, I will be sharing the latest insights about what I consider Temu's 'third phase' at various conferences in Germany and the Netherlands.

Meanwhile, in this week's China Digital Retail Report, I'm sharing a recording of last year’s presentation for Virke so you can learn more about Temu’s first two phases. I have noticed that, as the third phase has arrived, many people still don't fully understand the first two.

If you don't want to miss this video, please subscribe to China Digital Retail Report: https://t.co/ubNVAtaNXe