---
title: "7-Eleven's Slow Pace vs. China's Fast Convenience Stores"
description: "Japan's 7-Eleven is the benchmark for convenience stores, but its development in China has been slow and often criticized. However, despite opening fewer stores, Beijing's 7-Eleven is profitable and outperforms many local competitors, highlighting the importance of profitability over expansion speed."
author: "房煜"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-03-06"
language: "en"
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# 7-Eleven's Slow Pace vs. China's Fast Convenience Stores

> Japan's 7-Eleven is the benchmark for convenience stores, but its development in China has been slow and often criticized. However, despite opening fewer stores, Beijing's 7-Eleven is profitable and outperforms many local competitors, highlighting the importance of profitability over expansion speed.

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Japan's 7-Eleven (i.e., 7-ELEVEn, same below) is the benchmark of the convenience store industry, with overwhelming praise and analysis online, but few have systematically analyzed the development of 7-Eleven in China. This disparity has existed for years. If we consider the cost of learning from a benchmark, learning from the 7-Eleven we see every day is more cost-effective than a trip to Japan.
The reason is that the outside world has always believed that 7-Eleven in China has not developed well and has been too slow. As a result, some in the convenience store circle have proudly said, "We admire Japan's 7-Eleven, not China's 7-Eleven." The first reason for this perception is scale. In several major markets, 7-Eleven in China has not gained an advantage in scale, whether in Beijing, Shanghai, the Pearl River Delta, or Chengdu and Chongqing in the southwest.
According to statistics from iyiou, as of August 2018, 7-Eleven had 251 stores in Beijing, 14 years after entering the Beijing market, while in Japan, 7-Eleven surpassed 1,000 stores in just 7 years. In terms of store count, 7-Eleven has indeed developed relatively slowly in China, with Beijing being the headquarters of its China operations. In comparison, the new brand Bianlifeng opened 100 stores in one year; the troubled Quanshi Convenience Store had over 320 stores in Beijing after 8 years; and Linjia Convenience Store, which went bankrupt and was taken over by Wumart, had 168 stores at liquidation.
You might understand my point. Despite slow store openings, Beijing 7-Eleven is still alive, and actually doing quite well, better than many peers.
Since Beijing Wangfujing Department Store acquired a 25% stake in 7-Eleven (China) Investment Co., Ltd. (hereinafter referred to as China 7-Eleven) Beijing company in 2005, the outside world can glimpse the operating conditions of Beijing 7-Eleven from Wangfujing's financial reports. Surprisingly, the most recent media reports on this date back to 2014, when Beijing 7-Eleven was not yet profitable for Wangfujing. However, starting from 2015, 7-Eleven began to be profitable, and in recent years, profits have doubled, but the media has selectively forgotten this.
The author reviewed Wangfujing's financial reports over the past five years and found that in 2015 and 2016, 7-Eleven's net profit was still in the millions (4.25 million yuan and 2.07 million yuan, respectively). In 2017, its net profit reached 37.2 million yuan, and Wangfujing completed a capital increase in China 7-Eleven Beijing company.
What does this mean? It means that in 2018, when convenience stores in Beijing (note: not nationwide) were in dire straits, 7-Eleven in Beijing was thriving.
Why does this happen? We know that Japanese companies, regardless of industry, share common characteristics: seriousness, rigor, humility, and a strong ability to learn. These seemingly abstract values were not only the gap between Chinese and Japanese convenience stores in the past but also the line between life and death today.
For example, we think China's 7-Eleven is too slow in opening stores. However, Japanese convenience stores, including 7-Eleven, generally believe that local convenience stores are too crazy. Let's start with this.
******A Humble Tiger Is Still a Tiger******
On Guijie Street in Beijing's Dongzhimen, there is a 7-Eleven with a two-story building: the first floor is the store, and the second is the office. This is the flagship store of Beijing 7-Eleven. Many people in the convenience store circle visit Beijing specifically to see it, satisfying their curiosity. This curiosity is not only because it is the flagship store but also because this small store once set an industry record that left peers astounded: daily sales of 60,000 yuan per store.
Last year, when the author visited China 7-Eleven headquarters for an interview, I asked about this while touring the store. The accompanying staff said, "That was the result of a promotion; the store's normal sales are over 30,000 yuan." Later, they added, "This record has been broken, but we didn't announce it." The author learned that the record was later broken in Tianjin, reaching 70,000 yuan.
According to the convenience store report by the China Chain Store & Franchise Association, the average daily sales per store for local Chinese convenience stores is 4,936 yuan.
We were surprised by this, but they didn't think it was a big deal. Moreover, during store inspections, they would frankly tell us, "This sells well, that one doesn't sell well, it's a headache." My first impression was that Japanese companies are very humble.
Later, I met Uchida Shinji, Executive Director of Seven-Eleven Japan Co., Ltd. and Chairman and General Manager of Seven-Eleven (China) Investment Co., Ltd. Regarding the speed of store openings, his rebuttal is widely circulated: "The average daily sales of 7-Eleven in Beijing is 24,000 yuan, which is about three times that of other convenience store brands. So, our 250-plus stores in Beijing are equivalent to 750 stores of other brands in terms of sales." In other words, one of my stores is worth three of yours, so what's the point of discussing opening speed?
As the head of the industry leader in China, Mr. Uchida's polite attitude still reveals his inherent confidence.
You can say Japanese companies are conservative, but within the entire 7-Eleven system, even if they are not the same operating entity, their philosophy is highly consistent. Ten years ago, in 2009, Taiwan's Uni-President Group obtained the brand license to bring 7-Eleven to Shanghai, which was already a red ocean for convenience stores and the most densely populated city for convenience stores in mainland China. Uni-President's first foray into Shanghai opened only 4 stores. To many, this was like throwing a pinch of salt into the sea—what was the point?
The point is that store profitability is more important than expansion speed!
It's worth noting that this philosophy is a consensus among Japanese convenience stores. FamilyMart has over a thousand stores in Shanghai, but in the more complex Beijing market, it had only 30-plus stores before May 2018. However, all mature FamilyMart stores in Beijing are profitable.
During the period of crazy expansion in Beijing, Beijing FamilyMart once negotiated for a location for a long time, but a local competitor raised the rent by 20% to snatch it. The headquarters directly told the staff, "No need to negotiate; let them have it." FamilyMart people later privately said, "This kind of crazy business, whoever wants to do it can do it; FamilyMart won't."
Unfortunately, this kind of reckless business did cost some brands their lives. Because the Beijing market is indeed a dangerous place for convenience stores: high costs, many regulations, complex urban structure, and difficult operations. But this does not mean that the convenience store format lacks profitability and self-sustaining ability.
Many peers use the caution of Japanese convenience stores in the Beijing market to prove that Japanese convenience stores are nothing special, which is underestimating the enemy. Look at what happened in Nanjing.
In August 2017, Lawson entered Nanjing with 5 stores, and citizens queued to buy products, with many shelves cleared out. When counting, they found that a 130-square-meter store had daily sales of 118,000 yuan. Impressive, right? Note that Nanjing is not an empty market; Suguo Convenience Store under Suguo Group has been there for years, backed by China Resources Retail, the largest retail giant in China.
On August 30, 2017, the first Lawson store in Nanjing's Hexi area saw long queues for three days after opening, with many shelves empty by evening.
A year later, on May 30, the first Golden Eagle 7-Eleven store in Jiangsu opened at Golden Eagle Shopping Center on Zhujiang Road, Nanjing. According to Golden Eagle's data, by 21:00 that evening, the single-store sales of Golden Eagle 7-Eleven exceeded 350,000 yuan, setting a new record for 7-Eleven convenience stores in mainland China.
You can say all this is the result of promotions, but it's just Japanese convenience stores occasionally flexing their muscles. Moreover, Japanese convenience stores have said they don't look at best results but at average results. Like students taking exams, scoring high once is just luck. FamilyMart calls this the "sustainable operation" philosophy. It sounds vague, but when it comes to attracting customers, you'll find they are much better at it than you, many times over.
Even so, Chinese convenience store peers often hear 7-Eleven executives say after visiting local brands, "You're doing well, very much like China 7-Eleven."
This is their politeness and courtesy; if you take it seriously, you're done. A tangential example: In Hohhot, Inner Mongolia, the home of dairy giants Mengniu and Yili, there is Anda Convenience Store, which was once praised by Uchida Shinji: "Anda dares to sell high-priced, short-shelf-life products; it's the most convenience-store-like convenience store I've seen in China." But the owner of Anda knows the gap himself. He told the media, "Short-shelf-life products are too difficult; currently, Anda can only try to do 3-5 day short-shelf-life products, while regular products have a 7-day shelf life."
In contrast, some short-shelf-life products operated by Japanese convenience stores like 7-Eleven have a shelf life of only 24 hours. The devil is in the details. So, a humble tiger is still a tiger.
******The Sorrow of Apprentices******
Fairly speaking, it is unfair to blame the failure of some convenience store brands in Beijing on the store-level managers. Because many of them were originally apprentices of 7-Eleven, trained by China 7-Eleven Beijing company. Hearing their bleak news, I doubt Mr. Uchida is happy either.
There should be a long list here, but the high-profile executives currently include: Wang Zi of Beijing Bianlifeng, Yang Bo of Quanshi Convenience Store, and Wang Lei of Linjia Convenience Store, all at the general manager level.
During a past interview with Wang Lei, one detail left the deepest impression. After graduating from university, Wang Lei joined Beijing 7-Eleven, worked his way up from the front line, later left to start a business with his team, and founded Linjia Convenience Store. At night, two people are on duty, and the worst thing is when your partner asks for leave. Once, Wang Lei encountered this at 7-Eleven. That night, Wang Lei single-handedly moved over 40 boxes of water and beverages, and the next day his back was completely ruined. As listeners, we sighed, thinking what a miserable industry this is.
But this miserable industry later attracted capital, which is both good and bad. That's why Wang Lei told the media, "I could open 2,000 stores a year if asked." But he added, "But they'd have to close too." So, when many media outlets later said Linjia's capital chain broke due to blind expansion and insufficient self-sustaining ability, I believe Wang Lei must have felt wronged. After years of 7-Eleven's teachings, he surely understands the rules of the convenience store industry.
To some extent, this is the tragedy of the industry: everyone says to learn from 7-Eleven, but how many truly learn its essence with the same diligence as Japanese companies? Perhaps in the game, one has no choice. Even 7-Eleven apprentices who start their own businesses inevitably deviate, let alone those who seek quick success.
For example, Uchida Shinji once said a seemingly insignificant sentence, but today it rings loudly. 7-Eleven does not reject scale; rather, it develops franchising by finding suitable partners after establishing a solid foundation of direct-operated stores, to quickly capture the market. So, what is the ideal ratio of direct-operated to franchised stores? Mr. Uchida believes that the number of direct-operated stores should not exceed 80; beyond 80, headquarters control becomes difficult.
We don't know how Japan's 7-Eleven calculated this red line of 80 stores. However, when Linjia fell, the official count was 168 stores, with only two franchised stores. The number of direct-operated stores was just over twice the red line. Why didn't Linjia open franchising earlier? This was also puzzling.
Now, some rapidly expanding convenience store brands have direct-operated store counts far exceeding this red line. Whether this 80-store red line is a rule or outdated experience, we can only wait and see.
******Misconceptions and Essence of Convenience Stores******
Conversely, why do local Chinese convenience store brands pursue speed so much? There are several reasons, some understandable.
First, the convenience store format in China is still in its growth period, with vast market potential and exciting industry growth.
2017 was the first year of China's new retail. Alibaba's Hema Fresh became the first internet celebrity of new retail, and Intime Department Store became Alibaba's ally. The new retail transformations of these two companies frequently appeared in the media. Why Hema and Intime? One represents the supermarket format, the other the department store format. Supermarkets, department stores/shopping malls, and convenience stores are generally considered the most common retail forms.
Why didn't Alibaba target convenience stores (here referring only to branded chain convenience stores)? It wasn't until recently that Alibaba invested in Shanghai's C-Store, while Tencent is reportedly a shareholder of Bianlifeng.
Because in 2017, the department store industry as a whole was already seeing negative growth, and supermarkets were not doing well either, with some growing and some shrinking. Only convenience stores saw industry growth as high as 20%.
In such a market, it is indeed difficult to stay calm, steady, and control your desires. Moreover, the convenience store market currently has no national brand (note: excluding the convenience store brands of PetroChina and Sinopec), while 7-Eleven has spread across the world, which stimulates people's desire for conquest.
Second, some public misconceptions are taken as industry common sense.
Although convenience stores are small, they are the most complex of all retail formats. To do it well, the backend supply chain, frontend operations, and product development all require refined management. At the same time, operators must also be sociologists, with deep insights into the city's consumption habits, population structure, and policies and regulations.
In such a complex format, if widely circulated misconceptions become the basis for investor decisions, it would be a disaster.
One common misconception is the so-called "per capita GDP of $8,000 means a city should have a certain number of convenience stores." If so, why does Beijing have so few? Articles have analyzed this from various angles, including climate, urban structure, etc., and they are all correct. The author adds one more.
Open the city maps of Beijing and Shanghai and look at the dense subway lines. One can count how many convenience stores are in Shanghai's underground commercial areas. Beijing is still a forbidden zone. This alone reduces many potential locations for convenience stores in Beijing. Fortunately, the Beijing municipal government is now determined to develop convenience stores, and underground commercial convenience stores will gradually break the ice.
Conversely, many cities with lower GDP have developed convenience stores very quickly, such as Xi'an, Changsha, and other central cities. This cannot be explained by the aforementioned GDP theory.
Third, the core of convenience stores is that the single-store model must be viable before pursuing density, not scale.
Looking at the development of other retail formats in China, the basic pattern is to first race to occupy territory, develop scale, dominate, and then refine management—a process from chaos to order. Unfortunately, this doesn't work for convenience stores.
As mentioned earlier, the failure of some convenience store brands in Beijing is related to the special characteristics of the Beijing market. There are also brands that have developed well in China, such as Meiyijia, the king of Chinese convenience stores, which quietly surpassed 10,000 stores in 2017 but only entered 5 provinces.
What does this show? It shows that scale, a factor highly valued by Chinese companies, has another play in the convenience store industry: density. The two are similar but not synonymous. Opening 5,000 stores across 20 provinces and 100 cities is scale. Opening 5,000 stores across 5 provinces and 5 cities is density.
Because convenience stores are essentially a business model with a short supply chain radius, density is necessary for logistics supply chain and operating costs to be worthwhile.
Following the logic of density, why do 7-Eleven and others value single-store profitability so much? Some articles say this is because 7-Eleven can't afford scale and thus focuses on fine single-store operations, which is a misunderstanding. In convenience stores, something called the single-store model is particularly important.
The convenience store model is to cultivate a mature single-store model and then replicate it. So, single stores must be profitable, and the single-store model must be viable. This is completely opposite to the traffic-driven approach of internet thinking. But the key is that one city cannot be covered by a single store model, especially in megacities like Beijing and Shanghai.
Typically, a city needs at least four models: business district stores, community stores, campus stores, and transportation hub stores. But different cities have variations; for example, Shenzhen also needs factory stores. FamilyMart reportedly has 10 models. Wu Haibin, General Manager of FamilyMart Beijing, once said, "Even among schools, are university and primary school customer groups the same? No, so we need another model." This is what refined management means.
In simple terms, opening a convenience store is like planting a tree; a tree needs to go deep into the earth. A single tree does not make a forest, so density is important. But you can't just arrange a bunch of bonsai and pretend it's a forest.
In this regard, local Chinese convenience stores have a bright future, but the road is winding.
Finally, someone will surely ask: since convenience stores have high labor and rent costs and are not easy to profit from now, what about unmanned convenience stores?
The author will answer this with a life scenario and end the article: Every morning, when we go to a convenience store to buy steamed buns for breakfast, a clerk hands us the buns, we walk to the cashier, and the cashier often doesn't need to ask a colleague; they look at the bun and know the filling and price, then check out quickly and conveniently.
If, in the future, machines can automatically recognize the filling of steamed buns, then we can discuss this issue again.
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