From foot bath ear picking to pottery experience, from health therapy to Hanfu photography, service retail covers many “non-standard” and “people” businesses. Although its market size is as high as 7 trillion yuan, the online rate is only 9%, which means there is huge room for growth. The article will analyze China’s unique advantages as the “chosen place” of service retail, and how to break the dilemma of “big water and small fish” through online, standardization and AI technology, and achieve the common development of fast business and slow business.
In the early morning in Shanghai, a white-collar worker made an appointment for a shoulder and neck massage at noon after a few operations on his mobile phone; In the small courtyard of Jingdezhen, tourists are experiencing kneading mud, drawing blanks, and painting blue and white; Under the starry sky of Lhasa, young people soak in Tibetan medicinal baths while looking at the Potala Palace……
Behind these seemingly unrelated scenes is a huge and invisible “service retail” network – a supermarket with an annual scale of up to 7 trillion yuan. The National Bureau of Statistics has set up growth indicators specifically for it since 2023, which shows its weight.
This 7 trillion yuan is only the scale of service retail in a narrow sense, which does not include the familiar catering, hotels, and medical care, but refers to those businesses that are more “non-standard” and more dependent on “people”, such as foot bath ear picking, Hanfu photography, and pottery experience. It sells not a physical object, but the “satisfaction” you have personally experienced.
However, in this 7 trillion yuan market, the online rate is only 9%. This means that for every 100 yuan of service consumption, only 9 yuan is completed online. In contrast, even the pharmaceutical industry, which is full of standardization problems, has been leveraged online by innovative models such as “30-minute drug delivery”. This huge gap is precisely where the opportunity lies.
Its development trend also proves its prospects: when commodity consumption is gradually saturated, service retail sales will grow at a compound annual rate of 8%, outperforming GDP and becoming one of the engines driving domestic demand.
It can be said that the blue ocean of 7 trillion service retail sales is most likely to be China’s most certain and potential domestic demand incremental field in the next ten years. It is not only about consumption upgrading, but also contains the biggest opportunity for countless ordinary merchants and craftsmen to “turn the tables” or even become bigger and stronger – it depends on who can be the first to find an online and large-scale password and get their own cake.
01 Why is China the “chosen place” for service retail?
Looking at the world, it may be difficult to find a second place where service retail has developed so quickly and so “down-to-earth” into people’s lives like China.
To achieve these three challenges, product managers will only continue to appreciate
Good product managers are very scarce, and product managers who understand users, business, and data are still in demand when they go out of the Internet. On the contrary, if you only do simple communication, inefficient execution, and shallow thinking, I am afraid that you will not be able to go through the torrent of the next 3-5 years.
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In the consumption circle of Lujiazui, Shanghai, a 30-minute drive away, there are 150,000 service retail stores, 10,000 self-service equipment, 1 million service categories that can be enjoyed, and 200,000 craftsmen. Some returning friends even sighed: There is no karaoke in the United States for a year, but domestic massage, pedicure, ear picking, and manicure are all available, and the convenience is beyond imagination.
The outbreak of this service ecology that “only China has” is by no means accidental, but the result of the joint action of “time, place and people”.
Looking back at the United States in the 70s and Japan and South Korea in the 90s, when the per capita GDP exceeded the $10,000 mark, service consumption ushered in an explosive period. In 2019, China crossed this key threshold, lifestyles are quietly changing, and service consumption has begun to accelerate penetration.
When “eating and clothing” is no longer the primary issue, people naturally begin to pursue a better quality of life. As a result, services that can bring instant satisfaction and happiness, such as pottery, health therapy, and Hanfu experience, are no longer just “enjoyment”, but “rigid need”.
More importantly, China’s soil also provides a unique infrastructure for the explosion of service retail.
On the one hand, the rigid demand brought about by the “silver wave” has directly spawned a huge demand for health services such as health therapy. On the other hand, the high popularity of mobile Internet has made “instant services” within reach, especially in the once neglected sinking market.
Meituan’s data confirms this: in the past three years, service consumption in the low- and middle-tier markets (284 cities, nearly 3,000 counties) has maintained a continuous growth rate of 90%.
Online has smoothed out the regional gap, and young people in small towns can also enjoy trendy experiences such as script killing and self-service billiards at any time. The depth and breadth of this “sinking” market is a “blue ocean” increment that other countries cannot match.
The vitality of service retail also lies in the fact that it breaks the “ceiling” of commodity consumption. Hoarding too many clothes and cosmetics will always be saturated, but people’s pursuit of happiness, experience and happiness is endless. This also explains why the narrow retail services market (excluding F&F, hospitality, travel and healthcare) has outperformed GDP (8% CAGR), and the online segment has grown faster (38% CAGR).
In essence, this is a “people” market, which relies on “manpower” to do business that satisfies the happiness of “people”, and therefore has the unique advantage of embracing all rivers and absorbing employment.
Meituan’s statistics for 2024 show that there are 7 million craftsmen, 4 million hairstylists, and 2.4 million nail technicians in the massage and pedicure industry; In the past decade, the entire narrow service retail sector has added an average of 7.41 million new jobs per year.
When intelligent manufacturing improves efficiency while reducing some traditional jobs, service retail is becoming an important “reservoir” to absorb labor and stabilize people’s livelihood, allowing countless craftsmen to obtain a decent livelihood with their skills.
The National Bureau of Statistics will begin to disclose the growth rate of service retail in 2023, although the caliber is more broad (including catering, etc.), but the signal is clear: both policies and markets have seen the potential of this blue ocean, and also announced the arrival of a new era of service consumption. People are starting to pay for “experience” rather than buying more “things”.
02 What should I do if “big water and small fish”? “Move the business online”
However, this blue ocean also faces challenges.
This “water depth” market of 7 trillion yuan should have been a thousand sails racing, but the reality is that there are only 3 enterprises with a “scale of 10 billion”, which is a typical “big water and small fish”.
On the other hand, in the catering rivers and lakes next door, Mixue Bingcheng, Gu Ming, and Bawang Chaji have made a surge in just a few years, and the brand of 10,000 stores is not fresh; In the fields of wine tourism and medical health, large-scale giants abound.
Why is it difficult for service retail to raise big fish? What is the problem?
It can be compared with commodity retail, for example, as long as the formula process is mature, the machine will continue to produce standard products. But the core of service retail is people – let every pedicure technician accurately find acupuncture points and master the strength; Enabling every hairstylist to cut hairstyles that delight customers – much more difficult than standardized product production.
Therefore, services are highly dependent on human skills and experience, and the “non-standard” characteristics restrict the speed of large-scale expansion.
Just imagine, opening a store depends on craftsmanship, opening ten stores depends on the store manager, and opening a hundred stores? Meituan’s survey shows that once the traditional service industry breaks through 100 stores, the “human flesh” management model is very easy to fail, it is difficult for managers to grasp the full picture of operation in time, and expansion often means loss of control.
The root cause of the dilemma of “big water and small fish” in service retail lies in the low online rate under non-standard characteristics and backward management model. In the 7 trillion market, the online transaction volume is only 640 billion, and the online rate is only 9%.
This means that most merchants serving retail still rely on street signs and regular customer introductions, which are difficult to be discovered and trusted by new customers. Especially for mobile Internet natives (especially Generation Z) who are accustomed to “checking strategies before consumption, comparing prices, and looking at evaluations”, it is almost equivalent to taking the initiative to give up young passenger flow.
However, structural problems also mean huge opportunities. Whoever breaks the game first will be able to enjoy the biggest dividends of the next wave of growth.
The core of the breakthrough is to truly “move the business online” – not only as simple as opening a link and directing a stream, but also to reconstruct the user’s trust mechanism and consumer experience.
The biggest difficulty of service is “invisible and intangible”. How to solve it? First, make the service transparent and the process visual. For example, Meituan’s “Anxin Learning” sub-card group purchase will disassemble the service links one by one, so that consumers can understand what they have bought at a glance and avoid discrepancies with expectations.
Nowadays, users are accustomed to “doing their homework” before making decisions, and checking strategies and reading reviews has become the default action. Then “trust” will be online, and the massive real evaluations accumulated on the Meituan platform are essentially a kind of reputation endorsement, making consumers more confident and easier to choose.
If these “two axes” continue, the “mismatch” between service supply and demand will naturally be much less, especially reducing the sense of distrust caused by information asymmetry.
The pioneers have already reaped the dividends. For example, after Fujino Modeling shows the environment and process through video, the conversion rate of in-store visits has been significantly improved; After the introduction of script killing and online booking, the Tsingtao Beer Museum does not need to queue up during holidays, and the annual income is 200 million yuan.
The effect has been seen, and Meituan predicts based on industry trends that in the next five years, the online rate of service retail will usher in a big explosion, jumping to 25%. What does a 16 percentage point increase mean? Based on the current 7 trillion yuan market, an incremental market of about 1.12 trillion yuan will be released.
At the same time, online is the cornerstone of chaining. Meituan expects that in the next five years, 300 thousand-store brands will be born from this blue ocean.
03 Fast business and slow business can all live well
The trillion-dollar market door has been opened, and the wave of online and AI is sweeping through service retail.
But don’t get me wrong, the goal of this wave of technological dividends is not to subvert the industry itself, let alone engage in the same “assembly line”, but to hand over different tools for the two types of business – so that the “fast business” that pursues rapid turnover and scale replication can run faster, and also let the “slow business” that relies on unique craftsmanship and intensive cultivation precipitate deeper – no matter how fast or slow, you can find your own way of doing business.
For asset-heavy formats such as KTV, gyms, and billiard halls, the core of “fast” is to increase time and make full use of the value of every minute.
Think about it, is there a lot of traditional service retail business that is tied up by the “whole block” time, for example, KTV sells by package at night, massage goes by package, and the vacancy rate is high.
Mei KTV’s solution is very clever: hourly or even self-service sales, so that idle hours such as weekday afternoons can also generate real money.
Similar logic has also given birth to the explosion of the self-service economy: self-service chess and card rooms manned only by cleaning aunts, self-service billiard halls open 24 hours a day, and unattended gyms…… They are essentially doing the same thing – accurately matching the originally idle service supply with fragmented demand to maximize asset utilization.
How to use precious “manpower” on the blade is another core proposition of fast business.
That’s where AI comes in handy. The AI digital employees launched by Meituan, such as “customer service specialists”, “shift specialists”, “business store managers”, and “operation specialists”, are “accelerators” tailored for this type of business.
Fujino Modeling’s huge volume of nearly 1,000 stores, after accessing Meituan’s AI “help appointment”, this year’s “February 2nd” haircut peak day, the number of appointments soared by 270% year-on-year. This not only saves front desk time, but also avoids the risk of potential customer churn.
AI customer service specialists are even more “night owls”, with 50,000 educational institutions responding to late-night consultations in seconds after accessing, and the night consultation rate soared by 40%; More than 2,000 online stores of Gujia Home Furnishing rely on AI to receive them around the clock, and the retention rate has increased by 20%.
The logic behind this is clear: let AI handle “repetitive labor” and free up manpower to create truly differentiated service value. “Time fragmentation” superimposed on “manpower efficiency” is the core competitiveness of “fast business”.
A large part of the charm of service retail comes from the “craftsmanship” and “temperature” that cannot be completely replaced by machines, that is, “slow business”.
In the past, the value of craftsmanship was locked offline, and craftsmen had to start over if they changed places. Now, the platform is turning these “crafts” into “digital assets” that can be accumulated, circulated, and even premiumd. There are many vivid examples of the “online archives” built by Meituan for manicurists, hairstylists, potters and other craftsmen.
Tony, a hairstylist from Fujino Styling in Shenzhen, after entering the Meituan craftsman section in 2019, continued to “post” his works and accumulate evaluations, and his “digital business card” attracted many admiring consumers, and his monthly income also exceeded 50,000 yuan.
Even if it is a “slow business”, moderate standardization can amplify value. Zheng Yuanyuan, the “giant” in the field of pedicure, has nearly 9,000 stores, and one of the core weapons is to standardize the seemingly “non-standard” foot care: from the service process to the technician’s words, all are standardized, and even its own training school has been established to ensure the consistency of national services.
In this process, the online display, evaluation system and precise traffic provided by Meituan have become an efficient channel for Zheng Yuanyuan to reach a wider range of users with standardized services, especially the low- and middle-tier market (the compound annual growth rate of monthly trading users in the past three years has exceeded 80%).
This confirms the core of slow business: through “craft visualization” and “word-of-mouth assetization”, craftsmanship is turned into a visible and spreadable brand value. When craftsmanship is separated from geographical constraints and becomes circulating assets, the growth threshold for small and micro entrepreneurship and characteristic formats is further lowered.
04 Platform role: not just connect, but achieve “people”
Whether it is helping fast businesses “squeeze” time or helping slow businesses “save” craftsmanship, Meituan’s role in the big game of service retail is becoming clearer and clearer – it relies on 6.3 million merchants, precipitates 5 billion orders, and deeply cultivates more than 200 subdivided industries, and wants to do the “water, electricity and coal” of the industry. On the one hand, it improves service transparency and standardizes processes to help merchants better catch traffic; on the other hand, through the user evaluation system and algorithm matching mechanism, users can step on less pitfalls.
When the boom in commodity consumption gradually subsides, the value of service retail is amplifying: for consumers, it is an instant satisfaction within the reach of a 30-minute life circle; For thousands of craftsmen and entrepreneurs, it is a new channel for low-threshold employment and expansion; For China’s economy, it is a deterministic force related to real people’s livelihood, employment and consumption upgrading.
Technology is not the goal, but to make “people” better seen. Whether it is AI digital employees or craftsman files, the essence is to make services more accessible – whether it is merchants and craftsmen who provide services, or consumers who enjoy services, in this 7 trillion ecology, connect more efficiently, interact more happily, make money more decently, and live more conveniently.
This is the most moving part of service retail, it is not a cold efficiency revolution, but a warm business about “people”, and it is also the underlying logic of its continuous growth in the next ten years.
