A New Spring for Convenience Stores? Domestic convenience stores are in a period of continuous evolution towards chain branding. There is still significant room for growth in both market size and store count. In terms of models, they are also rapidly iterating, with instant retail, community group buying, and livestreaming bringing new business models. As the capillaries of the social economy, convenience stores have evolved very rapidly in the past three years. Next, we need to consider: where is the tide of convenience store development heading? What are the market competition and evolution directions?
Convenience stores are still in a 'growth period' The sales and scale of convenience stores in China are continuously growing. According to the "2023 China Convenience Store Development Report" jointly released by the China Chain Store & Franchise Association and KPMG, in 2022, national convenience store sales increased from 255.6 billion yuan in 2019 to 383.4 billion yuan. In terms of store count, in 2022, the number of (brand chain) convenience stores nationwide increased from 132,000 in 2019 to 300,000, showing overall positive development. Among the leading brand chain convenience stores, based on 2022 store counts, Meiyijia, Sinopec Easy Joy, and Sinopec KUNLUNHAOKE ranked in the top three, with 30,008, 28,006, and 20,600 stores respectively; Japanese convenience store brands Lawson and 7-ELEVEN had 5,641 and 3,319 stores respectively. (Source: China Chain Store & Franchise Association) According to our insights, in the long term, the convenience store market remains a hot commodity. It is worth noting that convenience stores have been one of the fastest-growing retail formats in domestic sales over the past three years, with average annual sales growth of about 20% and average annual store growth of nearly 10%. "Branding and chain operation are the main development trends for convenience stores, especially evident in first- and second-tier cities. The momentum of brand chains is accelerating store expansion. When chain convenience stores reach a certain scale, the advantages of density effects (especially single-store profitability) will also emerge," a consulting expert in the chain retail industry told us. From the consumer side, "youthfulness" has become a label for high-frequency convenience store consumers, and there is a need to meet their multi-time, multi-scenario demands to a certain extent. According to data from iiMedia Research, in 2023, Chinese consumers spent an average of 44.8 yuan per visit to convenience stores. "Brand convenience stores have high standardization and a more complete product range. I usually choose convenience stores for daily necessities and fresh food. Some hot products are also easier to buy at convenience stores," said a high-frequency consumer. "Convenience stores, as the name implies, are valued for their convenience. Now you can also buy products from nearby convenience stores at home, with delivery to your door." From the consumer market, it can also be seen that youthful consumption on the demand side is pushing the supply side to iterate and upgrade. The brand chain operation of convenience stores is the mainstream trend. But even so, in fact, there are nearly 6 million mom-and-pop convenience stores in China. If calculated by proportion, chain brand convenience stores account for less than 3%. But this also indirectly confirms the inevitability of transformation and upgrading in this market. The author believes that although the growth of chain convenience stores has maintained a certain pace in recent years, in the long run, there is still a long way to go for the domestic market to reach a relatively high saturation level. Compared with the international market, only a few cities in China have a convenience store saturation of less than 2,500 people per store, while most cities have a saturation of 3,000 to 9,000 people per store. The incremental space in the market is also obvious.
New market trends: 'downward market, community-oriented' In terms of market development, competition is also intensifying, with leading brands increasing their scale. The first trend is that chain brand convenience stores are making efforts in the downward market. Currently, the downward market is dominated by traditional mom-and-pop stores, which lack supply chain advantages and have relatively low efficiency. At present, both foreign and domestic chain convenience store brands are accelerating their expansion into the downward market. According to the China Urban Convenience Store Development Index, Xiamen, Taiyuan, Dongguan, Changsha, and Guangzhou rank in the top five. In 2023, cities with positive growth in convenience store numbers accounted for 64.1% of the surveyed cities, with most cities maintaining stable development. The trend of convenience stores expanding into the downward market continues, already reaching fourth- and fifth-tier cities and county-level markets. At the same time, convenience stores in various cities still focus on deepening regional markets. For example, 7-ELEVEn has long extended its strategy to the downward market in mainland China, expanding into regions such as Jiangsu, Shaanxi, Hubei, Henan, Hunan, and Fujian. Lawson is not to be outdone. Over seven years, Zhongbai Lawson convenience stores have covered 21 prefecture-level and county-level cities in Hubei and Hunan, with a total of over 800 stores, opening up the downward market. Some local brands are moving faster. For example, Meiyijia has already started its national expansion model, going to both first-tier cities and lower-tier cities. One of Meiyijia's development strategies is to develop across all markets from first-tier to fifth-tier. Additionally, local brands such as Tangjiu and Jinhui in Taiyuan, and Today in Wuhan, have begun targeting county-level markets. The author believes that the downward market still has huge incremental space, and both foreign and domestic brands are competing for it. But it is not about blindly competing with regional brands for market share, but rather exploring market increments. The key is how the 6 million mom-and-pop stores can catch the express train of chain convenience stores.
The second trend is that community-based convenience stores remain the main force. I have noticed that convenience stores, as capillaries, have strong penetration. According to CCFA data, in 2022, community-based stores accounted for the largest proportion, reaching 48.0%. Community-based convenience stores remain the main force. But in recent years, with the rise of community group buying, community-based convenience stores have been given new capabilities, and convenience stores are accelerating their transformation. Previously, Taotian Group's near-field e-commerce business Taobao Caicai revealed that it would upgrade offline retail stores Tmall Xiaodian to Lingli Xiaodian. The upgraded stores will see significant changes in business hours, store owner income, and consumer experience. Currently, Guangdong, Hubei, Hebei, Zhejiang, Shandong, and Sichuan are the first pilot provinces. According to reports, the upgraded Lingli Xiaodian adds unattended equipment, and store hours will cover 24 hours a day, no longer limited by business hours; at the same time, Lingli Xiaodian owners will also become the group leaders for Taobao Caicai's next-day self-pickup groups, increasing income without adding costs. The author believes that from a market perspective, there is still significant incremental space in the downward market, and the density of community-based convenience stores will continue to increase. Brand chain stores will continue to intensify store expansion in the next two years. At the same time, for mom-and-pop convenience stores, seizing the opportunity for transformation and integrating into platforms is one of the better choices, as this can empower them in terms of supply chain and business models.
Evolving towards 'instant retail, segmented consumption scenarios' As for how convenience stores will evolve, we can observe from several aspects. First, instant retail platforms like Meituan Flash Shopping are opening new windows for convenience stores with '30-minute fast delivery.' This year, many small and medium-sized supermarkets, chain convenience stores, and mom-and-pop stores have accelerated their integration into the instant retail army. According to Meituan platform data, from January to July this year, the transaction volume of convenience stores and supermarkets on the platform increased by 54% year-on-year, with mom-and-pop stores seeing a growth rate of 110%. It can be seen that instant retail, this 'new window,' brings more incremental space to convenience stores. "It not only brings traffic from online, but also often results in higher average transaction values." The author observed that instant retail is a deep integration of online and offline, increasing revenue for offline entities. For community small stores, the 'business playbook' has changed. Under the instant retail model, expanding business radius + extending business hours + increasing online traffic + boosting average transaction value with hot products, thereby increasing community convenience store revenue. The sales radius extends from 1 kilometer to 5 kilometers, and business hours become around the clock. For example, some convenience stores, relying on retail platform riders, can meet community consumption needs within 30 minutes. The service radius also expands from 1-2 kilometers to 5-6 kilometers. In terms of traffic, they no longer only focus on natural store traffic, but also need to stabilize online traffic. Previously, for offline stores, the most important thing was foot traffic. Through instant retail, they now focus more on stable online customer flow. There are also more and more convenience stores, warehouses, and other retail entities that focus on online delivery. As an important instant retail platform of Meituan, Meituan Flash Shopping has also launched '24-hour convenience stores.' In nighttime scenarios, chain convenience stores have natural advantages. By creating differentiated nighttime supply, they can quickly meet customers' emergency needs. Offline, partner convenience stores will hang a small yellow light box. The lighting of the '24-hour light box' also indicates the gradual launch of Meituan Flash Shopping's '24-hour convenience store' project nationwide. We observed that in fact, Meiyijia, 7-11, FamilyMart, and other convenience stores have already integrated into online layouts such as instant retail. Instant retail will become one of the normalized models for convenience stores, and in the future, the delivery efficiency of instant retail should move towards 15 minutes.
The second point is the segmentation of convenience store consumption scenarios, with 'five meals a day' increasing stickiness. Convenience stores are expanding more diverse, curated, and broader categories around consumers' daily consumption scenarios, cultivating the stickiness and loyalty of all customer groups, enhancing single-store profitability, and becoming the core of growth. One direction is that convenience stores are beginning to emphasize 'five meals a day,' addressing breakfast, lunch, afternoon tea, dinner, and late-night snacks. Segmented consumption scenarios will become more competitive. For example, the latest generation of FamilyMart stores has already appeared. Its 'fifth-generation store' design also revolves around the 'five meals a day' strategy. For example, in addition to 'hot small stove' meeting the needs for dim sum and noodles, fresh hot food self-selection emphasizes cooking on the spot, while 'EMO late-night cafeteria' is a sub-brand based on the late-night snack scenario, integrating drinking snacks and convenience store cocktail mixing to create a consumption scenario that combines FamilyMart's snacks and alcoholic products. The author believes that 'five meals a day' actually segments more consumption scenarios. On the one hand, it increases customer purchase stickiness and frequency; on the other hand, it meets the needs of more segmented customer groups and expands the customer base.
Furthermore, online+offline integration, digitalization must 'better understand' consumers. According to our insights, in 2023, the integration of online and offline business for convenience stores, and the creation and upgrading of supply chain-store digitalization, have also become the focus of most brand convenience stores. 2023 is a critical battle for offline physical retail, and local life services also face new challenges. We observed a phenomenon: physical retail merchants are accelerating their entry into platforms, seeking to seize the traffic dividend from consumption rebound. For example, the development trend of online+offline integration. For instance, consumers' habit of 'grabbing online, buying offline' is beginning to emerge. Offline chain retail brands represented by FamilyMart have previously partnered with Douyin Life Services, creating 'snap-up' scenes during FamilyMart's official Douyin account livestreams. In fact, FamilyMart leveraged its advantage of over 3,000 SKUs to attract a large number of fans to grab coupons online. Hot products such as 'five meals a day' bento boxes, sandwiches, rice balls, coffee, and full-category vouchers were sold out as soon as they were listed. At the same time, top influencers gathered in the livestream to promote products and cheer for FamilyMart. Similarly, digital convenience stores are inevitable, and brand chain convenience stores are leading the way. For example, Meiyijia, based on physical stores, is creating an integrated online and offline super shopping platform—Meiyijia Youxuan—through comprehensive digitalization and supply chain reshaping. A Meiyijia official previously stated that Meiyijia is building a digital supply chain platform, a smart store operation platform, and a precise member 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 each franchisee. Another example is Bianlifeng's rapid response to consumer demand, which benefits from its deployment and continuous development of a digital supply chain. After sensing market trends at the store level, it can immediately feed high-value information back to all links of the supply chain, and promptly differentiate to meet local consumer needs through actions such as new product launches and improvements. We believe that convenience stores should actually become information islands and also front-end traffic handles. In addition to the digitalization of front-end stores, the back-end big data analysis and processing capabilities are also core. By connecting the front and back ends of digitalization, we can improve product circulation and efficiency. We believe that C2B is definitely the ultimate battlefield for convenience stores.
The author believes that the convenience store industry is ushering in a new spring. The downward market and community-based convenience stores will become the main development trends. At the same time, instant retail, O2O, digitalization, and scenario segmentation are key to enhancing the competitiveness of convenience stores. In the future, convenience stores will also need to carry more culture, social interaction, and services.
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