The convenience store industry giant is somewhat unexpected. According to the '2021 China Convenience Store Development Report' released by the China Chain Store & Franchise Association, Yijie ranked first with 27,600 stores, 2,000 more than the second-place Meiyida. As a 'direct descendant' of Sinopec, Yijie has unique advantages in resources and channels. In short, wherever there is a gas station, there is Yijie. Born with a silver spoon, it also has its 'embarrassing past.' The nature of gas station convenience stores leads to a single product line and low customer loyalty—even drivers rarely go shopping at gas stations specifically. 'You guard China's largest refined oil retail chain terminal, how can you be so poor that you beg for food?' Fu Chengyu, then chairman of Sinopec Group, was not satisfied with Yijie's profitability. Determined to change, Yijie no longer 'cocooned' itself in gas stations. By 2021, Yijie's turnover exceeded 70 billion yuan, equivalent to 200 million yuan per day.

01

The Oil Seller Tries Something New

There are as many Yijie convenience stores as there are Sinopec gas stations. By the end of June 2022, Sinopec had 30,740 gas stations, and Yijie had opened 27,950 convenience stores, with an in-station opening rate of over 90%.

How did they come up with the idea of opening convenience stores in gas stations? In Europe and the United States, non-oil business in gas stations has reached a mature stage, with 85% of gas stations having convenience stores, and non-oil business contributing stably around 60% to gas station gross profit margins. Convenience stores can become another 'money tree', and the same holds true when the protagonist is Sinopec.

Sinopec's layout in convenience stores began in 2006, when non-oil business had already become one of the group's key businesses. Sinopec invested 1.5 billion yuan to launch a renovation plan to transform its gas stations into comprehensive service venues integrating refueling, rest stops, dining, shopping, and car maintenance. In 2008, Sinopec established a non-oil business department and officially launched the Yijie convenience store brand.

Despite covering almost all consumer needs of drivers, Yijie's initial performance disappointed Sinopec. As an accessory to gas stations, its target audience was mainly car owners. Most refueling services could be completed outside the store, and drivers didn't even need to get out of their cars, resulting in low foot traffic in gas station convenience stores.

Source: China Petrochemical

Compared with traditional supermarkets, it also had no advantage. Gas station convenience stores had a single product category, no promotions, few repeat customers, and limited distribution capacity. Some employees even bought 'fuel cards' with their own money, resold them to car owners for cash, and gave away small items from the convenience store—gas stations, employees, convenience stores, and car owners all benefited from this 'gray chain,' but this one-off transaction didn't provide a good customer experience.

Fu Chengyu initiated a vigorous internal reform. To shake off the 'accessory' label, Yijie entered communities in 2012, positioned as mid-to-low-end, adopting a chain operation model, creating community stores in Zhejiang, Shanghai, and other places, while in Guangzhou it bet on e-commerce, launching a comprehensive B2C online shopping platform to meet car owners' non-oil needs.

Two years later, 25 private capital entities including Tencent subscribed to 29.99% of Sinopec Sales Company's equity for 107.094 billion yuan in cash. Yijie rode this wave and became a pioneer in Sinopec's mixed-ownership reform. Sinopec successively introduced more than ten business partners such as RT-Mart, SF Express, Yihaodian, and Tencent, covering retail, pharmaceuticals, insurance, logistics, e-commerce, and other fields, further enriching product SKUs. By 2021, Yijie's sales reached 70 billion yuan, an increase of more than five times compared to 2012.

02

Multi-format Expansion

'It's quite convenient to buy things at gas stations. I usually buy large items like water and put them in the trunk to take away, without worrying about parking,' a car owner told the 21CBR reporter.

Leveraging its location and channel advantages, Yijie frequently crosses boundaries, making gas stations more versatile. In September 2019, the first batch of 'Yijie Coffee' stores landed in Suzhou. The 92#, 95#, and 98# inside are not gasoline grades but correspond to three product lines: black and white coffee, fashion special drinks, and premium series. Local specialties and poverty-alleviation products are also incorporated into beverage creations. For example, when coffee meets Gansu Tianshui Huaniu apples and Yijie's own brand 'Tibet Zhuoma Spring,' it becomes 'Apple Cold Brew Coffee.'

Aiming at new retail, shortly after launching 'Yijie Coffee,' Yijie publicly recruited for the first time a president, vice president, and financial director, all requiring more than 10 years of retail industry experience. Four months later, two former Walmart executives parachuted in: President Chen Cheng and Vice President Ye Zihui.

With strong leadership, Yijie initiated digital transformation of its stores, upgrading to a new model of 'Internet + gas station + convenience store + third party.' For example, optimizing online platforms 'One-click Refueling' and 'One-click Ordering'; launching 'delivery + in-store consumption' and providing fresh food and vegetable services; linking membership cooperation to bring Walmart Sam's Club into Yijie stores.

In July this year, Yijie Coffee reached a strategic cooperation with 'Tims China' to open small Tims coffee shops in some Yijie Coffee stores, develop co-branded ready-to-drink coffee, and sell bakery products in co-branded stores.

'Early C (coffee) and late A (alcohol)' is becoming popular, so the alcohol business in gas stations is also being developed. In May this year, the first 'Yijie Zhenjiu Pavilion' opened at the Qiutao Road gas station in Hangzhou. The pavilion not only displays famous liquors such as Moutai, Yanghe, and Wuliangye, but also sells Yijie's own brands 'Laimao' and 'Sanrenxuan' developed in cooperation with Moutai and Luzhou Laojiao.

'Yijie's store network covers the whole country, making it a very high-quality channel. Selling products to their terminals is of great significance for our national layout,' said Aolan China, a wine brand that entered the Yijie Zhenjiu Pavilion, to 21CBR. 'Sales are 60-70 million yuan, and the goal is deep cooperation, aiming for 100 million.' Those who have channels win the world; Aolan China is confident in Yijie.

Alcohol can't be drunk on the spot, but drivers' immediate demand for functional drinks is real. Also in May, Yijie cooperated with Tianmeng Beverage to launch its first functional drink—'Jinchun' small bottle energy drink. It focuses on anti-fatigue and retails at 10.9 yuan. The 'Yi' family's product sales kept up with trends and received good feedback. In 2021, own-brand sales exceeded 10 billion yuan, accounting for more than a quarter of Yijie's basic category sales.

03

Greater Ambitions

'Today's Yijie is not limited to products; it has expanded to four major categories: products, services, platforms, and activities,' said Li Hong, vice president of Sinopec Yijie. Yijie has built more than 9,100 gas station car service outlets, expanded more than 1,300 catering stores, developed 150,000 advertising media, and has over 200 million members across all channels nationwide.

Source: China Petrochemical

Yijie Chairman Ye Huiqing admitted that from traditional oil sales to selling 'non-oil' products, cross-border innovation faces a series of challenges. Domestic retail competition is fierce. Online shopping and offline supermarkets and convenience stores have a well-developed lineage. The 7 million mom-and-pop stores alone contribute 40% of retail channel shipments. It's difficult for gas stations to get a share.

However, Yijie is good at using single-store performance to attract more franchisees to build together. According to data provided by a Yijie franchisee, a large store in a first-tier city can achieve a monthly gross profit margin of about 38%, which is at the upper-middle level in the industry.

Where to focus next? Ye Huiqing said the focus is on building a 'people-car-life' ecosystem. In retail, Yijie operates 15,000 brands and over 100,000 individual products, and will continue to expand its lineup at a pace of creating one large-scale category per year. By 2025, the company plans to form six categories with annual sales of over 10 billion yuan each: tobacco, environmental protection, alcohol, grain and oil, automobiles and related products, and water drinks, and cultivate 100 brands with annual sales of over 100 million yuan.

By the end of last year, China's car ownership exceeded 300 million, and the auto aftermarket size exceeded 800 billion yuan. Ye Huiqing plans to integrate high-quality off-site car wash outlets within 2-3 years, build 11,000 gas station car wash points, and form the largest car wash service platform in China. On this basis, it will build a comprehensive car service platform covering maintenance, repair, purchase, and replacement, and expand businesses such as car washing, beauty, supplies, maintenance, and insurance. In September, Yijie cooperated with insurance institutions to launch the 'Yiqibao' section on its APP, training 10,000 employees to become registered insurance agents, providing car owners with products and services such as private car insurance, commercial vehicle insurance, health insurance, and home property insurance.

Secluded in a corner, hidden in gas stations, can no longer contain Yijie's ambitions.

Cover image source: VCG

Article source: 21st Century Business Review (ID: weixin21cbr)

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