2021, Where Is the Convenience Store Wind Blowing?

Click 'Read Original' for details Source: Retail Business Review (ID: lssync) China's convenience store sector is experiencing sustained growth in chain branding. Both market size and density have significant room for growth, and local brands are rising strongly. In terms of models, the industry has been rapidly iterating in recent years, with new species and dark horse brands constantly emerging. As the capillaries of the social economy, the convenience store track is still full of variables.

Convenience Store Acceleration On December 31, 2019, the Ministry of Commerce and 12 other departments jointly issued the "Guiding Opinions on Promoting the Accelerated Development of Brand Chain Convenience Stores." On July 31, 2020, the General Office of the Ministry of Commerce issued documents such as the "Notice on Carrying out the Three-Year Action for Branding and Chaining Convenience Stores," making specific arrangements for the future development of convenience stores and promoting the industry's transformation and upgrading towards structural chaining, personalized private brands, and digital operations. According to Tianyancha data, there are currently over 960,000 convenience store-related enterprises in operation, survival, relocation, or migration, with individual industrial and commercial households accounting for 95.6%. In fact, there are nearly 6 million mom-and-pop convenience stores in China. By proportion, chain brand convenience stores account for less than 3%. This also indirectly confirms the inevitability of market transformation and upgrading. According to CCFA data, the growth rate of brand chain convenience store outlets has fluctuated in recent years, with the number rising from 91,000 in 2015 to 144,000 in 2020. In terms of overall market size, with the orderly development of the convenience store industry, it is predicted that convenience store sales will reach 647.3 billion yuan by 2026. According to CCFA statistics, in 2020, the overall growth rate of the convenience store industry was 8.9%, while the top 10 grew only 6.7%, and other convenience stores grew at a high rate of 15.4%, showing the rapid expansion of other brands. Of course, we also see that besides Japanese convenience store brands, domestic local brands are also growing rapidly. In terms of total store count, Sinopec's Easy Joy, PetroChina's昆仑好客 (Kunlun Hao Ke), and Meiyijia occupy the top three, all exceeding 20,000 stores. Some regional brands are also rising strongly, such as Beijing Haolinju, Shanghai Kedi and Kuai Ke, Guangdong Tianfu, Shanxi Tangjiu, and Wuhan Today. "Retail Business Review" believes that local brands will accelerate their expansion in the coming years, mainly because they have already established advantages in their home bases. The next issue is how to break through regional restrictions and expand nationwide. From a strategic perspective, the "franchise conversion" model seems difficult to implement well, and the direct operation + franchise model will accelerate.

Local Brands Running Fast Among local brands, we can give examples. For instance, Meiyijia. It was established in 1997 and focused on the Pearl River Delta and Guangdong Province market, then began expanding nationwide from 2014, achieving rapid growth through its franchise model. After 24 years of development, as of July, Meiyijia has spread across 20 provinces and more than 170 cities, with a total of over 24,000 stores. This year, Meiyijia newly entered six provinces: Shandong, Shanxi, Hebei, Shaanxi, Sichuan, and Yunnan, covering half of the country's regions. Its offline stores serve over 150 million customers monthly, making it a leading convenience store brand in China. Another example is the dark horse brand Bianlifeng. In December 2020, Xue Enyuan, executive director of Bianlifeng, revealed at the 2021 Bianlifeng Supplier Conference that the company would launch a "high-speed expansion model" in 2021. According to the plan, Bianlifeng would open an average of 5.5 new stores per day in 2021. Looking back at Bianlifeng's development speed, it can be described as stepping on the fast track and running all the way. Its positioning, compared to traditional convenience stores, is an "internet convenience store." Users can meet one-stop shopping needs for breakfast, bento boxes, afternoon tea, fruits, beverages, daily necessities, etc., through the App and offline stores. Since opening its first store in Beijing in 2017, Bianlifeng has continued to expand rapidly. Subsequently, Bianlifeng made frequent major moves, entering Guangdong, Shandong, Henan, Anhui and other provinces, while also significantly increasing store openings in its original North China and East China markets. It also started construction of China's largest fresh food factory in Tianjin. Bianlifeng's rapid development is due to its supply chain and system algorithms. For example, Bianlifeng once conducted an experiment where 10 most experienced 7-ELEVEN store managers worked with all data for a week to reduce the SKU count of a store's products by 10%. The results showed that sales dropped 5% the next day. When the computer was restored to make the selection, also reducing SKUs by 10%, sales only fell 0.7% the next day. It can be said that the guarantee of the technical model is helping its stores expand rapidly. Currently, Bianlifeng has stores in Beijing, Tianjin, Shandong, Jiangsu, Zhejiang, Anhui, Guangdong, Hebei, Henan and other municipalities and provinces. Beijing has nearly 700 stores. Many cities also have over 100 stores. Nationwide, it has exceeded 2,000 stores, and it has only been running for 4 years. Recently, Bianlifeng reported news of its third IPO attempt. According to market information, it may be supported by major investment banks such as Goldman Sachs, Morgan Stanley, and CITIC Securities. It seems that it is about to go public. Another example is TODAY Convenience Store. According to public information, TODAY started in Nanning in 2008 and has now entered 37 cities in five provinces including Hubei, Hunan, Henan, Guangxi, and Hainan, with more than 500 stores. Fresh food is TODAY's core label and competitiveness. Currently, TODAY has more than 200 types of self-owned fresh food, meeting people's needs for "six meals a day" including breakfast, lunch, dinner, afternoon tea, supper, and snacks. Industry insiders believe that local convenience stores have different models, positioning, and strategies, forming differentiated competition. This is a good thing, as the ecosystem should be diversified.

Where Will Future Changes Occur? Digital convenience stores are inevitable. Brand chain convenience stores are leading, but mom-and-pop stores are facing new transformation challenges. A Meiyijia official previously stated that to serve its 23,000 offline stores, Meiyijia has built a supply chain digital platform, a store intelligent operation platform, and a member precision service platform, forming interaction between the upstream supply chain, midstream stores, and downstream consumers, creating a data-driven closed-loop system to precisely empower each store and franchisee. Recently, Bianlifeng also reached a deeper cooperation with Coca-Cola, upgrading to a "national strategic partnership." It will become the "frontier" for both parties' "digital" cooperation and new product cooperation. Alibaba's MMC is also stepping up efforts to transform traditional small stores into digital small stores. This is a race against time. At the same time, convenience stores should become information islands and front-end traffic grabbers. This traffic touchpoint is actually very high-frequency and sticky. For platform parties, it can bring low-cost customer acquisition. Community convenience stores should focus on density effects. Within a 300-meter living circle, convenience stores should achieve 10-minute delivery. Although many platforms are now promoting 3-kilometer range with 30-minute delivery, for high-frequency FMCG, 30 minutes is still long. For FMCG, the range should be narrowed to a 300-meter radius to achieve 10-minute delivery. However, this requires higher density in last-mile delivery. But the future trend, we believe, is that the proportion of online and offline should be half and half. In fact, Meiyijia, 7-11, FamilyMart and other convenience stores have already connected to online platforms such as Meituan Waimai, Ele.me, or JD Daojia. Bianlifeng is even positioned as an internet convenience store from its model. With technological evolution, C2B will definitely come. How well does your convenience store know its customers? To upgrade and evolve, convenience stores must rely on technological evolution. In addition to the digital development of front-end stores, the back-end big data analysis and processing capability is also core. We believe that C2B will definitely be the ultimate battlefield for convenience stores. For example, for a family consumer, what brand of rice do they eat, how long have they been eating it, how long until it runs out, and whether it needs to be shipped in advance. The convenience store downstairs can deliver it directly to their home. Even the so-called big data is not yet powerful enough for this, but we believe that within 3-5 years, the first batch of such convenience stores will emerge. And they can be commercially replicated. The "community-oriented" and "scenario-based" nature of convenience stores has become a new password. In the future, convenience stores will not simply be opened in communities, but will carry various cultures, social interactions, and services. The community-oriented nature of convenience stores will gradually become a collection of small formats. Let's think about small stores around the community, such as real estate and travel agencies. Cooperation or resource complementarity with high-frequency convenience stores can generate significant benefits. There is also scenario-based. For example, MUJI opened a "MUJIcom" convenience store in JD.com's headquarters campus. This store only retains daily necessities for consumers. But it highlights social, dining, and cultural spaces. Finally, think about a question: What is the future convenience store? It should become a place that connects people with people, and people with the street.

PS: From August 24-26, 2021, the 2021 (4th) China FMCG Conference hosted by New Distribution will be held in Shanghai. Focusing on industry trends + practical cases + growth connection , 3,000 FMCG practitioners will gather for the event. 10 themed forums cover new retail O2O, community group buying, short video live e-commerce, distributor transformation, new consumer brand rise, new alcoholic beverage interpretation, distribution B2B supply chain, omni-channel marketing, B2B2C new technology applications , etc., with operators in each segment bringing the latest case studies. Some of the confirmed heavyweight guests so far include: 1. Tao Shiquan, founder of Jiangxiaobai; 2. Yao Xuhong, general manager of Meiyijia Holdings Co., Ltd.; 3. Lu Xiuqiong, global expert partner at Bain & Company, former vice president of marketing for Coca-Cola China; 4. Chen Xiaodong, senior vice president of Nestlé Greater China; 5. Zhang Fujun, president of Lee Kum Kee Sauce Group China; 6. Bi Chaojiao, general manager of China Resources Snow Breweries (China) Marketing Center; 7. Yang Hongbin, vice president of Junlebao Dairy Group; 8. Yang Shun, COO of Lipton Greater China; 9. Zhang Yipeng, general manager of Kuaishou E-commerce SKA Brand Operations Center; 10. Li De, general manager of e-commerce at Gold Hongye Paper Group ..... A grand event for FMCG people, you must be there! Are you "watching" me?