Walking through the streets of Wuhan, Today convenience stores are as common as hot dry noodles. A few years ago, supermarkets dominated the city. Starting in July 2014, Today has been enriching the city's convenience through its convenience store format.
On November 20, Today announced the completion of its Series B financing, led by China Equity Group, with Series A lead investor Sequoia Capital China continuing to increase its stake, and Taihe Capital serving as exclusive financial advisor.
Entrepreneurial Origins
Song Yingchun, founder of Today convenience store chain, is a post-80s entrepreneur. Before starting his business, he worked at Mengniu Group. Within just four years at Mengniu, he rose from a grassroots salesperson to a regional marketing manager, earning a reputation as a "little rocket" within the group. In 2008, he left to start his own business, founding Dongyi Today ("TODAY" convenience store) in Nanning.
Song told Entrepreneur magazine that his choice of convenience stores as a track stemmed from "a long-held desire to open a small grocery store." When he left Mengniu to start his business, he saw the shift in the era of channel dominance. "In my view, future channels will either be large complexes or small convenience stores, with intermediate formats losing market share, so I decided to start small. Looking back, we entered a bit early, but fortunately we persisted," Song said.
Song Yingchun
Why Did Today Succeed in Wuhan?
Founded in Nanning in 2008, Today operated lukewarmly for six years, developing only 30-plus stores and nearly being acquired for 20 million yuan. It wasn't until moving to Wuhan in 2014 that franchise stores began to appear in large numbers.
During the interview, Entrepreneur asked Song why Today succeeded after moving to Wuhan.
He explained that Wuhan is a city with immense potential. In 2014, Wuhan's GDP surpassed one trillion yuan, ranking first in Central China and eighth among mainland cities. Besides industrial sectors like steel and automobiles, high-tech industries represented by Optics Valley are on the rise.
Secondly, Wuhan is a city of universities with a large number of young consumers and significant consumption potential. While foreign convenience store chains dominate first- and second-tier cities, Wuhan was relatively blank, making it the initial blueprint for Today to conquer Central China with Wuhan as the hub.
Additionally, Today made a crucial decision in Wuhan to transform into an open platform. The entry of franchise partners brought earth-shaking changes. After arriving in Wuhan, Today continuously reflected on the essence of its business model. Notably, over 90% of the three major Japanese convenience store chains operate on a franchise system. Rather than insisting on a direct-operated model to build the brand, it was better to transform into a franchise entrepreneurship platform. Moreover, the franchise system is a consideration of human nature. Compared to store managers who work for wages, franchise partners have natural self-motivation and strong initiative, especially in convenience stores where non-standard products dominate, requiring proactive daily maintenance.
In addition to the above, regional factors such as lifestyle habits are also important. For example, Wuhan is a city with relatively rich nightlife; people have the habit of having late-night snacks, creating high demand for convenience stores. This regional factor is one reason why Today's development outcomes differ significantly across cities.
Currently, Today has over 300 stores nationwide, with nearly 250 concentrated in Wuhan.
Core Competitiveness
The franchise entrepreneurship platform operating model and high-quality supply chain are Today's two core competitive advantages. Simply put, one is the high entry threshold for franchising; the other is a practice similar to JD.com's self-built logistics, but they have built a fresh food factory, which is key to convenience store profitability.
It is understood that since 2015, Today has partnered with Qianji Group to invest 40 million yuan in building a fresh food factory and a bread OEM factory, establishing four modern logistics centers with different temperature zones (ambient, low-temperature, fresh food, etc.) and integrating multiple industry-leading OEM manufacturers.
There is a saying in the convenience store industry: "Without fresh food, you wait to die; with fresh food, you rush to die." Song believes that without fresh food, there is no core competitiveness. "On one hand, making fresh food is a complex project with significant investment and risk. On the other hand, among all products, fresh food has the highest gross margin and purchase frequency, driving sales of other items and increasing convenience store profits. This is Today's killer feature that distinguishes it from community small supermarket-style convenience stores. Strategically, Today must have a strong supply chain, aiming to become a convenience store where fresh food accounts for 50% of offerings, providing consumers with six meals a day that meet diverse needs, are constantly updated, optimized, and localized."
Innovative franchise management model is another core competitiveness of Today. Currently, over 90% of Today's stores are franchised, with franchise partners mainly aged 25-35. According to data from January to October 2017, only 3.5% of prospective franchisees who inquired about Today passed all interviews and training to open stores.
Today's franchise fee is 80,000 yuan, but investing in a store, including decoration, equipment, and all on-site operational equipment, requires about 800,000 yuan for a 100-square-meter store. Additionally, there is no guarantee of recouping the investment, and franchise owners may face the risk of being eliminated. Entrepreneur asked Song about the original intention behind this strict mechanism.
He replied: "A stricter screening mechanism can select people who are truly suitable for this industry and have reverence. There is a human connection between convenience stores and consumers; it requires people who love and revere the business to convey Today's brand spirit to consumers. Eliminating unsuitable entrepreneurs is also the platform's responsibility to each other."
What they strive to do is make Today an entrepreneurial alliance platform. After franchise partners open stores, those with outstanding single-store operating data can apply for full company loans to open a second franchise store, or even multiple stores. Outstanding multi-store partners can compete to become district, regional, or city partners, or even join Today's headquarters as managers.
Currently, multi-store partners account for nearly 30% of all franchise partners, and franchise partners serving in management roles at headquarters account for nearly 10% of headquarters employees.
How to Deal with Unmanned Convenience Stores?
Unmanned convenience stores are currently hot. Will they impact traditional convenience stores?
Song said that first, "unmanned" does not mean completely without people; it represents using technology to better empower the retail industry, which is just one of the better future directions for retail. Second, from the convenience store format perspective, "whether there are people" is not the core pain point; rather, it's your supply chain capability, product R&D capability, and manufacturing capability. Third, "people" I personally consider as assets and investments, like injecting a soul into a store; with people, there is warmth. Moreover, store operations cannot be realized without people for many product operations. "Unmanned" is somewhat supplementary, like vending machines; unmanned stores in residential areas or plazas may exist and can provide auxiliary support.
Song does not deny that Today will also take action in unmanned convenience stores. He said: "In addition to staffed stores, perhaps we will equip the surrounding areas with some vending machines, office mini convenience stores, etc., using a trinity of stores, automated cabinets, and office shelves to empower the entire city and better protect our entrepreneurs and franchise partners."
Source: Entrepreneur -END-