On August 28, the first Tmall convenience store opened in Hangzhou. What does Alibaba's announcement of "sales up 45% month-over-month, foot traffic up 26%, and expected annual gross profit increase of over 400,000 yuan" really mean?
Let's do a simple calculation: with a gross margin of 20% (domestic convenience stores typically have margins of 18%-20%), an extra 400,000 yuan in gross profit translates to an additional 2 million yuan in annual sales, or about 5,500 yuan per day. Considering that the store added fresh food, ice cream, and other high-margin items, the actual new sales might be between 3,000 and 5,000 yuan per day. That alone exceeds the current sales of many small stores.
Reading the reports made me curious, and I had a million questions:
Can I really add 400,000 yuan in annual gross profit just by franchising a Tmall store?
I wanted to see it for myself.
My business trip request had been pending for a while, but I finally got a chance to visit Hangzhou during a trip to Shanghai.
From Hangzhou Station, buses 400, 49, and 92 all go there.
Although it's called a small store, the location is excellent:
Most reports mention the south gate of Zhejiang University's Yuquan campus. But from my perspective, it's backed by high-rise residential buildings, faces a sizable Hanting Hotel, and is the only supermarket in the row of shops on the ground floor—a unique advantage. Plus, the Alipay building and West Lake Administration are nearby. The location is absolutely prime!
The three most important things in retail: Location! Location! Location!
Weijun Supermarket has all of them.
Advantage 1: Prime location
After checking the surroundings, I couldn't wait to go inside.
From the news photos, the storefront looks really stylish! The checkout counter rivals 7-Eleven and FamilyMart.
Checkout counter
Inside, compared to typical small stores, Weijun Supermarket is much more spacious than most mom-and-pop shops, even larger than many convenience stores.
The store is about 140 square meters, quite roomy! You could easily play hide-and-seek among the shelves.
Many stores I've seen are around 10 square meters, with the smallest being just 2 square meters.
However, compared to the stylish checkout counter, the interior shelves (which most media didn't capture) are quite ordinary, similar to a neighborhood supermarket.
Well, the reason it became the first Tmall store is its size—plenty of room for renovation!
Advantage 2: Large store area, surpassing over 90% of mom-and-pop stores
With these two advantages, the store's SKU count is correspondingly rich, exceeding 6,000. Besides typical snacks, drinks, cigarettes, and alcohol, it also serves local residents' needs, with daily necessities accounting for a significant share of sales compared to many small stores.
It's only natural that Tmall chose Weijun Supermarket as its first store!
These are not easy for ordinary small stores to match.
From my observation, the store's business was normal in the afternoon, with about 10 people in the store at a time.
There were a few people like me, looking around and checking things out—probably also there to inspect the store.
So, the "26% increase in foot traffic" is still questionable. After the short-term media frenzy and the halo effect of being the first store fade, we'll have to wait and see what the actual foot traffic is.
Should you also franchise a Tmall store? Ask yourself:
- What's your store's current location like?
- Is your store large enough to be renovated?
- Can you purchase at least 10,000 yuan per month from Ling Shou Tong? (This also limits store size)
After buying a bottle of water, I mustered the courage to chat with the young, handsome store owner.
The owner seemed used to it—recently, media and experts have been visiting him frequently, and he's become quite polished in interviews.
Me: Boss, do you buy all your stock from Ling Shou Tong?
Owner: Not at all, only about a third. The rest comes from wholesale distributors.
Me: Which items do you buy from Ling Shou Tong, and which from wholesalers?
Owner: Tmall bestsellers look trendy and sell well, so I get those from them, but they're often out of stock. For other traditional items, I shop around.
Me: What do you compare? Prices?
Owner: I'd like to compare prices, but sometimes it's too troublesome. There are minimum order quantities or discount coupons, making it hard to compare clearly. I know some things on Ling Shou Tong are pricier, but I let it go.
...
Hearing this, my eyes lit up!
Key point 1: "Want to compare prices"
Even for a Tmall store, any owner who says they don't care about purchase prices is lying! Price comparison is an eternal pursuit.
Key point 2: "Comparing prices is too troublesome"
It's not troublesome! Not at all!
Use Huoquanquan to compare prices—you can see quotes from multiple e-commerce and offline wholesalers for a single product.
There's also a smart shopping cart feature: toss items in, and Huoquanquan compares prices for you at once!
I continued: If a price comparison tool could really help you compare prices across multiple channels at once, would you use it?
The owner looked at me skeptically: Really? How would it handle discounts and freebies?
Unfortunately, Huoquanquan is currently only available in Shenzhen and Beijing. So I didn't push it on him.
I just mentioned it, and surprisingly, he later downloaded it. He asked when Hangzhou would be available.
I was both delighted and anxious—other cities need to speed up.
Source: Huoquanquan
The 3rd China FMCG + Internet Conference (CFIC) will be held in Chongqing in November 2017. The conference will focus on the theme "New Forces, New Ecosystem," inviting over 1,000 distributors, 500 brand owners, 200+ B2B platform founders, and 100+ investment institutions to explore new chapters of cross-industry integration.
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Click the links below to review the highlights of the first and second FMCG + Internet conferences:
2016 "FMCG + Internet" Summit Forum
2017 (2nd) China FMCG + Internet Conference
Click the links below to review the highlights of the first and second FMCG + Internet conferences:
2016 "FMCG + Internet" Summit Forum
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