---
title: "Convenience Stores Get Their Biggest Boost Ever, Mom-and-Pop Shops Face a Time of 'Recruitment'"
description: "The Ministry of Commerce has issued a policy to promote the branding and chain development of convenience stores, marking unprecedented official support. This move raises industry standards with 'six unifications' and signals a potential major reshuffle for mom-and-pop shops, which may face recruitment or elimination."
author: "房煜"
publisher: "New Distribution"
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published: "2019-07-20"
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# Convenience Stores Get Their Biggest Boost Ever, Mom-and-Pop Shops Face a Time of 'Recruitment'

> The Ministry of Commerce has issued a policy to promote the branding and chain development of convenience stores, marking unprecedented official support. This move raises industry standards with 'six unifications' and signals a potential major reshuffle for mom-and-pop shops, which may face recruitment or elimination.

Click to read the original article for details.
Source: Ten Billion Consumers (ID: gjgc168) Author: Fang Yu

**Now, are you willing to admit you're convenience stores?**

This is a moment that makes peers envious. Following the June meeting on the development of branded chain convenience stores chaired by Vice Minister of Commerce Wang Bingnan, in July the Ministry of Commerce issued the document **"Notice of the General Office of the Ministry of Commerce on Promoting the Branding and Chain Development of Convenience Stores"** . The document shook the entire industry.

Some were so excited they couldn't sleep. "Are they forming a national team for convenience stores?" an industry insider asked HUXIU, pointing at the document on his phone.

Typically, convenience stores, as a sub-sector of retail, are managed by the Department of Circulation Industry Development under the Ministry of Commerce, and it's just one of many tasks for that department.

Now, the Ministry of Commerce, as the ministry in charge of all commercial circulation, has taken the unusual step of having a vice minister lead a working meeting on a single sub-sector, issuing an executable document requiring local commerce departments to prioritize it. This is extremely rare.

Of course, the speculation about a "national team" is not rigorous. According to insiders, at the June meeting, the heads of over 30 branded chain convenience store companies attended, including the three major Japanese convenience store chains. The Ministry of Commerce plans to start with leading domestic and foreign enterprises, set examples, and drive rapid industry development.

This is a roller-coaster trilogy: **In 2017, convenience stores were touted as a hot trend by capital; in 2018, due to capital chain breaks in some Beijing convenience store brands, the industry faced skepticism; in 2019, the Ministry of Commerce stepped in to support. This young but fastest-growing retail sub-sector has finally ushered in its best historical development opportunity.**

However, a closer reading of the Ministry of Commerce documents reveals that this policy has far-reaching implications. For the mom-and-pop shops scattered across streets and alleys, this could be an unprecedented **moment of major reshuffle**.

**Six Unifications Raise the Bar**

The document "Notice of the General Office of the Ministry of Commerce on Promoting the Branding and Chain Development of Convenience Stores" is 1,303 characters long, but it's packed with information, including many quantifiable operational clauses, which is why the industry is excited.

Key information includes:

"**The development of branded chain convenience stores is promoted on a city-by-city basis.** Following the work steps of 'comprehensive deployment, key advancement, and step-by-step extension,' **the development of branded chain convenience stores in municipalities directly under the central government, cities with independent planning status, and provincial capitals should start in 2019. On the basis of focusing on these cities, local governments may, according to their economic development, choose other cities to promote.** "

This indicates that for first-tier and quasi-first-tier cities, convenience store work is urgent. Regarding "formulating a work plan for the development of branded chain convenience stores," the Ministry of Commerce has set a clear timeline: **municipalities, cities with independent planning status, and provincial capitals must submit work plans to the Ministry of Commerce by the end of July; other cities by the end of September**.

To avoid half-hearted efforts, the Ministry of Commerce also proposed, "**The Ministry of Commerce will establish a three-level linkage mechanism at the ministry, province, and city levels, research and formulate development indicators for branded chain convenience stores from aspects such as layout, development quality, policy environment, and working mechanisms, focus on guiding municipalities, cities with independent planning status, and provincial capitals, and collect, summarize, and feed back progress and problems quarterly.** " That is, the Ministry of Commerce will provide feedback on the linkage mechanism every three months.

In summary, it's fair to say this is unprecedented attention from a national ministry to a sub-sector.

At this point, capital investors who have bet on brands like Xiamen Jianfu, Hunan Xinjiayi, and Xi'an Every Day are overjoyed. The Ministry of Commerce has set a scale threshold for branded chain convenience stores. According to the "Notice on Collecting Typical Cases of Branded Chain Convenience Store Development," typical case enterprises should "**have high brand awareness, good operating conditions, continuous growth in total store count over the past three years, and a total of no fewer than 100 stores nationwide** ."

A store count of 100 can be seen as an official threshold at this stage. The brands mentioned above, with over 1,000 stores and provincial leadership, belong to the second tier of the convenience store industry.

Inspector Zheng Wen, Director of the Circulation Industry Development Bureau of the Ministry of Commerce, and his team visited Xinjiayi Convenience Store in Hunan Province.

But hold your applause. In the history of convenience store development, there have been many instances of rapid store expansion, including the current one, with the easiest method being to "re-brand" mom-and-pop shops. That trick may no longer work. It's conceivable that once the Ministry of Commerce policy is issued, favorable local policies will follow quickly. How to avoid those who fish in troubled waters? This time, the Ministry of Commerce explicitly proposed the "six unifications" in the detailed rules, setting a high threshold for branded chain convenience stores in the Chinese market from the start.

The six unifications are: "Branded chain convenience stores refer to convenience stores that **unify image and logo, store management, facility configuration, service standards, product procurement, and logistics distribution**, and operate through direct operation or franchising. Enterprises with only a unified trade name and logo but low standardization in other aspects are not included in the statistics of branded chain convenience stores." HUXIU believes the order of these six unifications is from easy to difficult.

Wu Haibin, General Manager of FamilyMart Beijing, believes: "All unifications can be achieved in form but not in spirit. One can simply copy a brand's approach, but it will deviate during continuous operation. So personally, I think the hardest part of the six unifications is the final 'conducting operations,' which refers to operational activities over a period (fiscal year) or more."

He also pointed out, "Among these six unifications, unified logistics presupposes unified product procurement, requiring a single purchasing channel to ensure product quality and safety, and using system data to comprehensively manage the supplier system, forming a **data-sharing platform among stores, headquarters, suppliers, and logistics** . This is difficult for existing convenience store brands."

**Why the Affinity for Convenience Stores**

Among the various formats in commercial circulation, objectively speaking, convenience stores have a shorter development history in mainland China than supermarkets and department stores. But this time, the convenience store format has been deployed as a key task by a ministry, which has surprised many.

Although the China Chain Store & Franchise Association has been advocating for convenience store development and established a dedicated convenience store committee years ago, it's through the association's annual industry report that the public has come to realize that this unassuming industry can achieve nearly 20% annual growth. Even so, opinions on the prospects of convenience stores are polarized among retail insiders and the public. Some strongly advocate, while others dismiss them.

According to insiders, at an internal meeting, a big name in the industry, famous for new retail, directly said, "What's so great about convenience stores? I'll definitely kill them in the future." Several convenience store CEOs were so angry their hands trembled, and one jumped up to grab the microphone to debate him.

More interestingly, some companies are essentially convenience stores but seem reluctant to be associated with the circle. A typical example is Chengdu Hongqi Chain, which is content with its niche. In terms of format, Hongqi Chain's main stores are generally within 500-1,000 square meters. Although they lack fresh food, their basic business logic is that of a bona fide convenience store. However, in February this year, at Hongqi Chain's headquarters, staff told HUXIU, "We can be called convenience stores, or community supermarkets." The author once asked some retail analysts in Shanghai who follow the secondary market, and they didn't seem to realize it was a "convenience store stock," generally classifying it as a supermarket.

Additionally, due to overly rapid store expansion, Suning Xiaodian has been regarded as an outlier by convenience store peers. Suning Xiaodian has repeatedly emphasized that it is not just a convenience store but an internet community service platform. It seems that adding the word "internet" makes it sound more high-end. Similar questions can be posed to Yonghui Life: Do you consider yourself a convenience store? Or is it only now, with the Ministry of Commerce policy, that you finally admit you're convenience stores?

Public perception of convenience stores is also riddled with misconceptions. A quick online search reveals articles like "Why the North is a Desert for Convenience Stores" and "Which is Harder in Beijing: Finding a Convenience Store or a Boyfriend?" However, if Beijing Party Secretary Cai Qi saw such articles, he would be the first to disagree.

In 2018, Beijing became a disaster zone for convenience store failures. But the turnaround began with Party Secretary Cai Qi. On October 11, 2018, just after the National Day holiday, Cai Qi visited three branded chain convenience stores on Beijing streets, including FamilyMart, Haolinju, and Bianlifeng. Cai Qi said: "Convenience stores are an indispensable part of a modern city. Small stores support big services. They may seem trivial, but they are actually important matters at the doorstep of the masses and major events related to people's lives. We must focus on providing services at the doorstep of the masses, implement measures to promote the development of convenience stores, improve the 15-minute community service circle, and perfect the convenience service system."

Beijing Party Secretary Cai Qi inspects Beijing convenience stores. Photo from Shizheng.

Notably, Cai Qi's advice was professional and specific: convenience stores should create a "15-minute community service circle." This differs from the current supermarket-to-home and front-warehouse models.

This statement set the tone for the "counterattack" of Beijing's convenience store industry. Soon, Beijing issued what is touted as the most lenient convenience store policy in history: "Notice on Printing and Distributing Several Measures to Further Promote the Development of Convenience Stores." The notice includes expanding the variety of light meals and improving restrictions on permits for making and selling machine-made beverages. For example, freshly ground coffee, freshly made ice cream, and other beverages and foods formed directly from closed containers will be opened to convenience stores. Another major breakthrough in product categories is pharmaceuticals, allowing chain convenience store enterprises to engage in retail of Class B over-the-counter drugs.

The Ministry of Commerce document also mentions the experiences of Beijing, Xi'an, and Fuzhou. Zhang Li, Chairman of Xiamen Jianfu Convenience Store, told HUXIU that the favorable policy for convenience stores should be viewed from a more macro perspective. **In terms of stimulating domestic demand, expanding consumption upgrades, and promoting growth, convenience stores have a significant demonstrative role** . Additionally, at the national level, ensuring urban employment is also an important task, and branded chain convenience stores are a major employer. Furthermore, food safety issues are receiving increasing attention, so the Ministry of Commerce's proposal to develop "branded chain convenience stores" also considers this aspect.

The next question is, **what about those non-branded small shops?**

**The Time of Recruitment**

One important reason many people are pessimistic about convenience store development is the belief that there are a large number of mom-and-pop shops in China, which are flexible in operation and have significantly lower costs than branded chain convenience stores.

This group is huge, reportedly numbering 6.8 million. When the new retail concept emerged in 2017, Alibaba and JD.com both extended olive branches to this group. Alibaba launched Alibaba Retail Link, which, according to its introduction, is a one-stop procurement platform for offline retail small shops under Alibaba's B2B business group. Through this platform, Alibaba plans to empower one million mom-and-pop shops. In September 2018, Alibaba Retail Link released the Tmall Xiaodian 2.0 plan, upgrading to create a 300-meter convenient living circle.

JD.com launched JD New Channel, once listed as a "JD Group Locomotive No. 1 Project." Later, both Alibaba and JD.com began to enter the branded chain convenience store field. Alibaba strategically invested in C-Store, under RT-Mart, acquiring about 20% of shares for 500 million yuan. JD.com was reported to have poached a team from 7-Eleven, possibly to operate its own direct-operated convenience stores.

From the current situation, "Enterprises with only a unified trade name and logo but low standardization in other aspects are not included in the statistics of branded chain convenience stores" basically blocks the possibility of formalizing rebranded convenience stores. So, **will there be a situation where branded convenience stores, through franchising, massively absorb mom-and-pop shops?**

An industry insider pointed out: "Alibaba and JD.com have already been acquiring mom-and-pop shops, but they are currently facing bottlenecks because mom-and-pop shops currently operate independently, saving backend costs (services are greetings; adding product categories relies on chatting about needs; data sales analysis relies on impressions at checkout). When the brand value added by Alibaba and JD.com doesn't generate enough incremental revenue to offset the increased shared profits, they won't actively participate. Eventually, when the market develops to a certain extent, **personal retail, like in Japan, will only be able to do personalized needs, and then a trend of brand unification will naturally emerge** ."

However, from the actual situation in the Chinese market, the development space for mom-and-pop shops still needs to be tailored to local conditions, with city-by-city discussions. With the development of branded convenience stores, it's not impossible that many mom-and-pop shops will be recruited, but some will find their own way to survive. After all, China's market space is large enough, and consumption levels are diverse.

On the other hand, although the Ministry of Commerce has led the way in giving the convenience store industry its biggest boost ever, many pain points and development bottlenecks in the industry itself, such as funding difficulties, talent shortages, and high rent costs in first- and second-tier cities, will not change because of the policy. **The competitive landscape of convenience stores is still a highly market-regulated industry, not one with strong policy intervention.**

HUXIU believes that for the current development of convenience stores in China, the industry has explored two directions: **Direction one is to refine a franchise model more suitable for local companies, achieving rapid store coverage and becoming a nationwide FMCG distribution company; the other is to build a truly competitive private brand system and, relying on a mature supply chain, transform into a manufacturing-oriented retail enterprise that caters to young tastes** . Whichever path is taken, the industry must rely on itself; policy is only a favorable wind, not a savior.


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