---
title: "Convenience Stores Face Five Major Challenges"
description: "The market environment for retail enterprises is changing, and so is the development environment for convenience stores. In this new environment, convenience store companies must adapt to the changed external environment and adjust their development and business strategies. Overall, the current convenience store market faces five major challenges."
author: "鲍跃忠"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-06-05"
language: "en"
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---

# Convenience Stores Face Five Major Challenges

> The market environment for retail enterprises is changing, and so is the development environment for convenience stores. In this new environment, convenience store companies must adapt to the changed external environment and adjust their development and business strategies. Overall, the current convenience store market faces five major challenges.

The market environment for retail enterprises is changing, and so is the development environment for convenience stores. In this new environment, convenience store companies must adapt to the changed external environment and adjust their development and business strategies.

Overall, the current convenience store market faces five major challenges.

**1. B2B is challenging the traditional convenience store development model**

"Fortune favors the bold"—overnight, convenience stores have become the focus of capital. A new internet channel model—B2B—is developing rapidly, pushing convenience stores to the forefront of capital.

Currently, including e-commerce giants Alibaba and JD.com, as well as industry leaders Zhanghe Tianxia, Zhongshang Huimin, and Xingaoqiao, a group of B2B companies are "running for their lives" in the convenience store sector.

Entering 2017, JD.com announced plans to develop 1 million convenience stores in the next five years, causing a stir; before the dust settled, Retail Link announced it had already developed hundreds of thousands of convenience stores; recently, Zhanghe Tianxia announced it would occupy 1,000 cities; Xingaoqiao announced it would rapidly expand to 500,000 convenience stores. For a time, convenience stores became a hot "buzzword" online.

The starting point of FMCG B2B is to integrate the efficiency of FMCG channels, using internet tools to improve circulation efficiency, reduce circulation links, and lower circulation costs. This starting point is very good. I believe it will surely play its due market value in the FMCG channel in the future.

Currently, most FMCG B2B companies start by integrating the supply chain, quickly entering the FMCG terminal small store market, and ultimately achieving the goal of controlling stores.

At present, as the industry gradually standardizes, a group of excellent B2B companies are emerging, gradually moving from simple rebranding and extensive development to a franchise development model that deeply integrates the supply chain, deeply cuts into small store operations, and systematically improves store management. Controlling stores has become an important direction for B2B development.

Analyzing the development advantages of FMCG B2B: first, internet advantages—using internet thinking and technical advantages to transform and optimize the development model of the convenience store industry; second, technical advantages—many B2B companies initially hoped to win the market with technology, focusing on building efficient technology platforms; third, capital advantages—when capital becomes an important driving force, many traditional industry rules will be rewritten. Under capital-driven B2B and convenience store industries, development speed, scale, and models are changing. Meiyijia's record of 10,000 stores created over more than 20 years may soon be broken by B2B companies.

Although some FMCG B2B companies still have many problems, analyzing now, their internet-based models, technology-driven development methods, and capital-driven systems align with the future direction of FMCG channel reform. They will surely achieve success. I believe that after a period of industry consolidation, a group of excellent B2B companies will grow, and B2B will become a major force in FMCG distribution channels.

**In the convenience store industry with rapid B2B development, traditional convenience store companies need to respond to changes with changes and make corresponding strategic adjustments.** Especially in the current environment of major industry adjustments, it is necessary to adjust development strategies and methods in light of the current convenience store market environment.

Systematically studying B2B development methods, learning from B2B development models, and combining traditional convenience store development models with B2B are important choices for current convenience store companies. If they continue to stick to past development ideas, they will inevitably have their market space squeezed by B2B development.

From a certain perspective, convenience store chain enterprises have unique advantages in transforming to B2B: a complete supply chain foundation, systematic convenience store expertise and experience, and excellent professional teams. The key is to change thinking, introduce internet thinking, seek capital support, and achieve rapid development.

I am very pleased to see that excellent convenience store companies like Putian Wenxian Convenience Store Chain are transforming to develop B2B.

**2. The rapid development of small formats challenges the market position of convenience stores**

The advantage of convenience stores is the small format, focusing on convenience.

Currently, this previous format advantage is facing challenges from more specialized small formats developing rapidly.

Recently, in the Nanjing market, I saw that the density of fruit stores has greatly exceeded that of convenience stores; in the Jinan market, the number of bakery and cake shops has greatly surpassed convenience stores; in the Wuhan market, stores like Liangpin Puzi and Zhou Hei Ya are showing signs of overwhelming convenience stores.

**Currently, various categories of small formats are "rising like wind and clouds" and developing rapidly.** What can be seen in the market now: maternity and baby stores; snack food stores; roasted nut stores; coffee shops; fresh food stores; duck neck stores; toy stores; leisure百货 stores; liquor stores; fashion stores; fruit stores; beauty stores; washing and care stores; drugstores; water bars; milk tea shops; brand stores; bakery stores; sports stores...

The previous convenience advantage of convenience stores is gradually disappearing, and many categories face the danger of being hijacked or replaced by other small formats: for example, bakery stores will replace the bread category of convenience stores, fruit stores will attract more customer traffic away from convenience stores, snack food stores like Liangpin Puzi, Lai Yifen, and Zhou Hei Ya will divert the main customer base of convenience stores, and liquor stores will take away the advantage of the main category—alcohol—from convenience stores.

**Facing the new market environment, convenience stores need to adjust their categories, combining regional market characteristics and consumer demand. Strengthen what should be strengthened, and reduce what should be reduced.** If they continue to stick to past category strategies, with complete categories but lacking strong ones, they will face problems.

From the overall retail development trend, format segmentation and miniaturization are the current development trends in the retail market. In the future, there will inevitably be more specialized small formats that will directly compete with convenience stores.

Convenience stores need to adjust in a timely manner in response to market changes, responding to changes with changes.

**3. The home delivery model challenges the format advantages of convenience stores**

Convenience stores focus on convenience. They mainly target young customers.

**Currently, the home delivery model, as a more convenient retail form, directly impacts the convenience advantage of convenience stores.**

For the main target consumer group of convenience stores—young people—in the current internet society, their lives are basically internet-based. Their "eating, drinking, playing, and having fun" are basically completed through the internet. In the internet environment, they are very "busy"; rich internet scenarios occupy their minds and time. They are very "lazy"; "ordering on the phone and having it delivered home" is their preferred shopping habit and method.

Relying solely on in-store visits is no longer enough to attract them; it is difficult to find them offline because most of their time is "lurking" online. Traditional posters and mass media are no longer effective in influencing them; they pay more attention to internet celebrities, fans, self-media, communities, and other new social relationships of the internet era.

"Laziness" and the pursuit of convenience are human nature. In the future, with a more developed internet and more advanced logistics, more people will choose the home delivery model. This is an inevitable trend.

Convenience stores must seek to transform into an omni-channel retail model. Not doing omni-channel, not doing home delivery, will surely lead to a dead end.

**4. The O2O industry challenges the meal advantage of convenience stores**

**Convenience store + catering is an important practice in the transformation and development of some convenience store companies recently.**

A while ago, during a market inspection in Chengdu, I saw that many convenience store companies, including 7-Eleven, were transforming to catering. One 7-Eleven store I saw had 200 square meters of space, with half of it used for dine-in.

The simple boxed meal model is currently the main method of convenience store + catering.

Currently, this method is facing challenges from the rapid development of O2O companies like Meituan, Ele.me, and Baidu Waimai. Compared to convenience store boxed meals, Meituan's O2O home delivery is more convenient, with richer variety and flavors, and consumers have more choices.

Recently, Analysys released a report on China's internet food delivery market in Q1 2017. Data shows that in Q1 2017, the overall transaction scale of China's internet food delivery market reached 35.88 billion yuan, a year-on-year increase of 96.7%. In terms of user usage, Ele.me had the highest monthly active users, reaching 26.658 million, exceeding the sum of Meituan Waimai and Baidu Waimai's monthly active users.

In terms of market segments, the dominance of the white-collar business market has increased, with transaction scale reaching 30.14 billion yuan, accounting for 84.0% of the overall delivery market, and its share is still expanding. The student campus segment remained basically flat compared to the previous quarter, at 10.6%. In addition, the residential community market accounted for 5.4%.

From the above data, it can be seen that O2O internet catering is developing very rapidly and will inevitably challenge the catering model of convenience stores.

**5. The rapid development of fast food and mass catering markets challenges convenience store + catering**

In recent years, the fast food and mass catering markets have developed rapidly.

At the intersection of Shanda North Road and Honglou West Road in Jinan, within a 100-meter radius, there are nearly 50 fast food restaurants, dumpling shops, baozi shops, hot pot restaurants, coffee shops, malatang, noodle shops, hamburger shops, and mass catering restaurants, but only one convenience store—Uni-Mart.

In the current employment environment, small catering like this will continue to develop rapidly in the coming period.

The rapid development of fast food and mass catering restaurants, while bringing more dining convenience to consumers, will inevitably affect the fast food category of convenience stores.

**Bao Yuezhong Column:**

Special contributing writer for New Distribution
Senior Economist
Expert of the Ministry of Commerce's "Ten Thousand Villages and Thousand Towns Market Project"
Famous FMCG retail expert
Bao Yuezhong New FMCG, New Retail Innovation Practice Studio

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