---
title: "In-Depth Analysis: How Will Convenience Stores Develop Amidst E-commerce Impact?"
description: "In recent years, the rapid development of e-commerce has posed a strong challenge to offline retail channels, with large supermarkets experiencing declining performance and store closures. However, small-format channels are an exception, with their revenue and market share rising instead of falling. So, under the impact of e-commerce, which of the four franchise models for convenience stores is more profitable? Data from the Nielsen FMCG Industry Report shows that the sales share of small supermarkets increased from 13.1% in 2013 to 15.3% in 2015, while convenience stores grew from 2.6% to 3.2%, an increase of 23%."
author: "蚂蚁虫"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-04-19"
language: "en"
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# In-Depth Analysis: How Will Convenience Stores Develop Amidst E-commerce Impact?

> In recent years, the rapid development of e-commerce has posed a strong challenge to offline retail channels, with large supermarkets experiencing declining performance and store closures. However, small-format channels are an exception, with their revenue and market share rising instead of falling. So, under the impact of e-commerce, which of the four franchise models for convenience stores is more profitable? Data from the Nielsen FMCG Industry Report shows that the sales share of small supermarkets increased from 13.1% in 2013 to 15.3% in 2015, while convenience stores grew from 2.6% to 3.2%, an increase of 23%.

In recent years, the rapid development of e-commerce has posed a strong challenge to offline retail channels, with news of large supermarkets' declining performance and store closures often heard. However, small-format channels are an exception, with their revenue and market share rising instead of falling. So, under the impact of e-commerce, which of the four franchise models for convenience stores is more profitable?
Data from the Nielsen FMCG Industry Report shows that the sales share of small supermarkets increased from 13.1% in 2013 to 15.3% in 2015, while convenience stores grew from 2.6% to 3.2%, an increase of 23%. The impressive performance of convenience stores is partly due to their irreplaceable consumption scenarios and adaptation to modern life rhythms, and partly benefiting from opportunities brought by internet companies' channel下沉.
> However, not all convenience stores can share the growth opportunities brought by market prosperity. Among them, a relatively high proportion of independent convenience stores face difficulties and challenges such as rising costs, homogeneous competition, and e-commerce impact, and the overall situation is not optimistic.
**Challenges and Problems Faced by Independent Convenience Stores**
1. Pressure from rapid growth in rent and operating costs
Convenience stores primarily sell FMCG and daily necessities, with a single store covering nearby communities and business circles. They are usually located in densely populated areas such as residential areas, office buildings, subway stations, and bus stations. Location quality not only affects traffic but also determines business success. As the saying goes, "a step difference leads to a market difference," and better locations mean higher rent. In recent years, with rising urban housing prices, shop rents have also increased; additionally, independent convenience stores typically sign short-term leases (one-year) with landlords or sublessors, leading to more frequent rent increases. Meanwhile, labor costs have also risen rapidly, adding to the operational pressure or opportunity costs of independent convenience stores.
2. Pain points in supply chain management are hard to bear
Compared to chain supermarkets, independent convenience stores have small procurement volumes per store, often sourcing from wholesale markets or having small wholesalers deliver goods, making it difficult to secure better resources and services. For example, the purchase price of popular carbonated drinks like large bottles of Coke often exceeds the retail price at large supermarkets, making it hard to increase sales volume and thinning profit margins. Many convenience stores even go to supermarkets to stock up at the cost of significant time to increase profit margins. The overall disadvantage in the supply chain puts independent convenience stores in a passive position in industry competition: on one hand, price disadvantages cause business loss; on the other hand, profit margins are thin.
3. Business diversion impact from e-commerce and O2O
In developed countries, convenience stores are no longer just FMCG sales terminals. For example, Japanese convenience stores offer services ranging from 24-hour retail operations to payment of utilities, insurance, taxes, and other non-public utility fees, as well as ATM services, parcel delivery, and now home delivery, totaling hundreds of services, becoming an indispensable life service center for ordinary people. In China, however, most convenience stores, especially independent ones, remain at the stage of pure FMCG sales. The more developed e-commerce becomes, the greater the impact on them.
4. Constraints of low management level
From a management perspective, Chinese convenience stores are still at a rough, primary level, and independent convenience stores are often run by couples or families, with weak foundations and severe homogenization, and low management capabilities. Facing various problems in intense competition, the weaknesses of independent convenience stores in operational capability and risk resistance are evident. Lack of funds, manpower, technology, and advanced management concepts constrain the transformation and development of independent convenience stores.
**Franchising is an inevitable trend for independent convenience stores**
Facing such severe challenges, independent convenience stores must take measures quickly to adapt to market changes and survive. For the most numerous and least competitive independent convenience stores, if they cannot achieve business transformation themselves, seeking franchise is an inevitable and good choice. In fact, the number of franchised chain convenience stores is increasing, encroaching on the living space of independent stores. Only through franchising can independent stores gain support from the franchise system, thereby compensating for their shortcomings and enhancing future competitiveness.
**From their own interests, independent convenience stores most expect the following support from franchise cooperation:**
  * Brand support:
Independent convenience stores usually have a name but rarely a brand, and naturally lack brand recognition advantages with consumers. When an unfamiliar user chooses between two or more convenience stores, they typically choose a more credible branded store. Therefore, independent stores most desire brand support from franchising to win more customer trust and recognition, improving conversion rates.
  * Traffic and user support:
With the rapid rise of online supermarkets and the growing popularity of the lazy economy among netizens, convenience store business has been impacted. After franchising, stores hope for traffic and user support, such as importing online traffic within a 0.5-2 km radius, automatically allocating regional online orders, attracting more online customers back, and improving operational performance.
  * Supply chain and logistics support:
As mentioned earlier, the supply chain is a fatal weakness for independent stores, with higher purchase prices than the industry average and no guarantee of product quality or after-sales service. Stores desire to gain advantageous supply chain support from the franchisor through franchising, improving product quality assurance, reducing procurement costs, and increasing profit margins.
  * Store management support:
Independent stores are not unaware of their low management level, but are limited by weak foundations and lack of professional guidance, feeling powerless. In fact, they very much want to learn how to use advanced equipment and software systems, master advanced management methods, and improve production efficiency.
**Comparison of Main Franchise Models for Convenience Stores**
Currently, there are many franchise models available for independent convenience stores in China. After a rough sorting, they can be broadly divided into the following categories.
1. Traditional brand franchise model (e.g., 7-11):
Although domestic convenience store chain brands are developing rapidly, there is still a significant gap in operational services compared to advanced foreign enterprises. However, in terms of model, the difference is not significant, so we can list them all as traditional brand franchise models. This model provides comprehensive support from brand, supply chain, to management. After joining, independent stores can quickly gain support, move towards standardization, and add new service items to explore more markets. Generally, the stronger the brand appeal, the higher the franchise fee, but the better the brand support and services. It is reported that 7-11's brand franchise fee is nearly 100,000 yuan, which is a considerable cost for independent stores.
2. Fresh e-commerce delivery cooperation model:
This logistics and delivery cooperation model is often adopted by emerging fresh e-commerce companies like Miss Fresh and Fruit Day. After joining, convenience stores provide warehousing services similar to front warehouses for fresh e-commerce according to agreements, and complete regional home delivery within specified times, earning delivery service fees. This model does not bring supply chain or other support to the franchisee, nor does it increase traffic or sales revenue. However, it is suitable for stores that are not too busy and have spare labor, as it can activate idle labor and increase overall store income. Fresh business is high-frequency consumption; if orders are concentrated in the store's area, delivery income can be considerable, making it a good way to increase revenue.
3. JD Daojia model:
JD Daojia leverages JD's IT and logistics advantages to provide users with supermarket goods, food delivery, flower delivery, and other FMCG and life services within a 3-kilometer radius, with fast delivery within 2 hours based on mobile positioning. Its main feature is providing online traffic entry and crowdsourced logistics support to franchisees without interfering in daily operations, making it suitable for independent stores that have reached a certain management level but want to expand business. Based on JD's hundreds of millions of users, JD Daojia's traffic support is quite good, helping stores expand O2O markets. However, JD Daojia's franchise threshold is relatively high, with strict requirements on registered capital and brand. It is reported that the registered capital requirement alone is 500,000 yuan, which many independent stores may find difficult to meet, keeping them out.
4. Shanguangou model:
The Shanguangou model is actually a hybrid, similar to a new model of 7-11 plus JD Daojia. It provides franchisees with a series of services from brand to supply chain and management like traditional chain brands, and also has O2O platform support like JD Daojia, importing online traffic to franchise stores based on LBS, promoting order completion, and providing professional delivery services. Basically, Shanguangou can provide all the support and services independent stores want. Shanguangou's convenience stores are currently positioned as community e-commerce, more like small supermarkets, while 7-11 has developed into a more comprehensive and mature community service center. In terms of business format, the Shanguangou model lags behind 7-11. Additionally, as a new brand, Shanguangou's appeal needs to be strengthened. Of course, this is also where domestic chain brands are weaker than advanced foreign brands. How to improve business development capabilities and comprehensive operational management capabilities is an urgent issue for Shanguangou and domestic chain brands.
From foreign development experience and current conditions, convenience stores, as the retail terminal closest to users, will see greater development in the future.
The combination of advanced foreign models represented by 7-11 and local consumption habits such as the domestic internet wave may become the future development trend for convenience stores. However, due to factors such as policy access and construction cycles, this will inevitably be a relatively long process. Before that, domestic convenience stores will enter a stage of coexistence of multiple models, growing through continuous exploration.
This provides valuable buffer time for the transformation of independent convenience stores. In fact, encountering difficulties is not scary; what is scary is not knowing how to deal with them. Under the general trend of franchise chains, different independent stores can choose the franchise model that best meets their needs based on their own situations, to compensate for operational shortcomings, thereby improving service levels and competitiveness, and adapting to market changes.
> Author introduction: Ant Insect, tech commentator, columnist. WeChat public account: Ant Insect (miniant-cn)
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