Driven by the new retail concept, small retail formats like convenience stores are seeing new opportunities, with major players entering the field. Suning Xiaodian, launched by Suning Commerce Group, targets campus and community services, offering two categories: FMCG and fresh products. The FMCG products share the procurement system with Suning.com and Suning Supermarket, while fresh products mainly come from fresh e-commerce platform Yiguo. As of end-2016, 13 Suning Xiaodian stores were open, mainly in Nanjing.
Recently, media learned from Suning that in 2018, 1,500 Suning Xiaodian stores will enter the domestic convenience store market, with 150 stores planned for Nanjing, Zhenjiang, Yangzhou, and Taizhou, and 300 stores expected in Jiangsu Province.
In terms of categories, Suning Xiaodian has around 2,000 SKUs, divided into online and offline parts. The online and offline product structures are not identical, and sales data also differ. Notably, Xiaodian will fully launch OEM products and gradually build its own "internet-famous" products.
Online, there is an independent APP. It includes one-hour delivery of daily convenience goods, fresh product pre-ordering, selected products from Suning.com, and future plans for Suning Finance. Online focuses on bulk-packaged goods, with fresh products accounting for 60% of sales.
Offline, stores are 100-200 sqm community convenience stores. Products focus on fresh food plus daily small-pack convenience goods, with the convenience product structure referencing FamilyMart, Lawson, Suguo Convenience, and other mainstream domestic and local Nanjing convenience store structures. Additionally, they offer some logistics, bill payment, and other convenience services. Offline fresh products account for about 30% of sales.
In terms of operation mode, unlike JD Convenience Store and Tmall Xiaodian, Suning Xiaodian has chosen a fully self-operated model. Franchising and self-operation are both debated in the industry. Franchising allows rapid store count growth to quickly capture market share, but can lead to management difficulties and quality control issues. Self-operation ensures control over store products and personnel, but high opening and operating costs make it difficult to quickly capture market share in the short term, testing the company's chain management capabilities.
In terms of coverage area, Suning Xiaodian also has unique advantages. The main scenario for convenience stores is communities. Suning has deep cooperation with brand real estate developers like Evergrande and Wanda. It is conceivable that nationwide, Evergrande and Wanda properties will become store property resources, and these homeowners will become precisely covered customers. According to insiders, Xiaodian may cooperate with telecom operators China Mobile, China Unicom, and China Telecom to open "cross-border stores."
In logistics, Suning Xiaodian mainly relies on its self-built logistics system, capable of one-hour rapid delivery within a 2-kilometer radius. Delivery personnel prioritize Suning's own employees, but during busy times, third-party crowdsourcing platforms will be used for order grabbing and delivery. Free delivery is available for orders over 38 yuan.
Additionally, Suning Xiaodian stores will offer free WiFi, printing, copying, scanning, shared power banks, umbrellas, and rely on Suning's after-sales service to provide appliance repair, laundry, utility bill payment, and other convenient services.
"We must build offline stores as a brand-new product," said Suning Chairman Zhang Jindong. Offline retail empowered by the internet can better match user needs.
Appendix: Development of Major Chain Convenience Store Enterprises in 2016
According to the "2017 China Convenience Store Development Report" jointly released by the China Chain Store & Franchise Association and Boston Consulting Group, the number of convenience stores in China has exceeded 260 (brands?), with 91,000 stores in 2015, growing 9% year-on-year to 98,000 in 2016. Meanwhile, the industry's sales increased 13% from 118.1 billion yuan in 2015 to 133.4 billion yuan in 2016. The following is the development of major chain convenience store enterprises in 2016.
| Brand | Store Count | Store Growth Rate |
|---|---|---|
| Easy Joy | 25,000 | 3.3% |
| Kunlun Haoke | 17,000 | 3.0% |
| Meiyijia | 9,300 | 25.7% |
| Tianfu | 3,311 | 17.0% |
| Hongqi Chain | 2,704 | 18.9% |
| Shizu, Zhishang | 1,936 | 18.6% |
| FamilyMart | 1,810 | 20.6% |
| Kuai Ke | 1,551 | -3.3% |
| Kedi, Haode | *1,400 | -6.7% |
| Tangjiu Convenience | 1,420 | 2.2% |
| 7-Eleven | 1,371 | 242.8% |
| Wu Dongfeng | 1,065 | 16.4% |
| Suguo, Guodi | 1,030 | -8.3% |
| LAWSON | 1,003 | 79.5% |
| Jinhu Convenience, Zaozhao Convenience, Yuguo Fresh Convenience | 943 | 3.9% |
| Xinjiayi | 830 | 18.6% |
| Zhongbai (Zhongbai Supermarket Co., Ltd.) | 812 | 2.0% |
| FOOK Jianfu Convenience | 803 | 46.0% |
| 36524 | 800 | 33.3% |
| Wenfeng Supermarket | 758 | -6.0% |
| Zhongye Aimin | 700 | 16.7% |
| everyday | 625 | 65.3% |
| Zhongbai (Shandong Weifang Department Store Group) | 600 | 11.9% |
| Jishi | 580 | 16.0% |
| Xinxing | 530 | -4.8% |
| Shike | 410 | 7.9% |
| Liangyou Jinban LIANGYOU | 381 | -16.8% |
| Danis, Quanrixian | 340 | 21.4% |
| Like | 340 | 13.3% |
| Zhongyanghong Xiaoyueliang | 310 | -0.6% |
| Qianhui | 300 | 14.1% |
| Quanshi | 290 | 45.0% |
| Hi-24 Haolvju | 280 | 7.7% |
| WOWO | 280 | 0.0% |
| Changkelong | 264 | 0.0% |
| Youke | 222 | 9.9% |
| Zhijia Convenience | 220 | -7.9% |
| Jiabei | 211 | 2.4% |
| Badianban | 206 | 28.0% |
| Yitai Convenience | 200 | 18.3% |
| TONGYIN SILVER PLAZA | 198 | -1.0% |
| Huimiba | 198 | -21.7% |
| Fuyang Hualian | 186 | 0.0% |
| Haoban | 172 | 70.3% |
| Leke | 172 | 0.0% |
| Jingkelong | 171 | 13.2% |
| TODAY | 169 | 70.7% |
| Meirimeiye | 167 | 25.6% |
| Kuaidi | 164 | -5.7% |
| Weiwo | 161 | -3.0% |
| Quanfuyuan | 159 | -5.4% |
| Liqun | 157 | 22.7% |
| Wumart Convenience | 156 | 11.4% |
| Jiajiayue | 146 | 5.8% |
| Yueke Convenience | 140 | 33.3% |
| Weili | 136 | 25.9% |
| Xinhezuo, Kupu | 133 | 10.8% |
| Ledoujia | 126 | 200.0% |
| Taiyangxi | 120 | 7.1% |
| Beishan Convenience | 110 | 0.0% |
| Baihui Wanning | 110 | 42.9% |
| Anda | 100 | 566.7% |
Notes:
- Numbers with * are estimates;
- This table includes some other small retail stores similar to convenience stores, such as small community supermarkets;
- Data in this table comes from enterprise self-reporting;
- 7-Eleven China's 2016 sales were 5.76 billion yuan (estimated).
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