---
title: "Is 7-Eleven Losing in China?"
description: "7-Eleven's development in China has reached a turning point, with no new stores opened in Shanghai for over a year. The company's rigid adherence to Japanese models and lack of localization have led to stagnation and store closures, as domestic competitors like Bianlifeng and FamilyMart gain ground."
author: "梅新豪"
publisher: "New Distribution"
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published: "2019-06-18"
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# Is 7-Eleven Losing in China?

> 7-Eleven's development in China has reached a turning point, with no new stores opened in Shanghai for over a year. The company's rigid adherence to Japanese models and lack of localization have led to stagnation and store closures, as domestic competitors like Bianlifeng and FamilyMart gain ground.

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Investigation | 7-Eleven's development in China has reached a turning point, with no new stores opened in Shanghai for over a year.
Preface: 7-Eleven's history in China is a typical case of "early start, late arrival." Its entry into China dates back to 1992, when it opened five stores in Shenzhen, and expanded to Beijing in 2004. It can be said that compared to traditional mom-and-pop shops, 7-Eleven played a positive role in enlightening and upgrading China's convenience store industry. However, like many Japanese consumer electronics brands that have retreated from China, 7-Eleven has been hesitant to move forward in a fiercely competitive environment where technological innovation and business model reinvention are rapidly changing. It has not transformed as thoroughly as Panasonic and other Japanese "partners" that have shifted to enterprise-level services, but its growth has slowed, and it has even begun closing stores.
This is lamentable but not surprising: the successful experience and inertia of an enterprise in a previous era can become shackles in the next. From site selection to the mix of food SKUs, 7-Eleven has adhered to the dogma that succeeded in Japan, lacking adaptation and flexibility in China. Twenty years ago, we looked at 7-Eleven as if opening the door to a new lifestyle; twenty years later, we see its outdated stores and turn to FamilyMart on the left and Bianlifeng on the right.
**The myth of Japanese convenience stores is ending.**
On the 3rd of this month, Nikkei reported that in addition to slowing store openings due to criticism of 24-hour operations, Japan's largest convenience store chains, 7-Eleven and Lawson, will launch substantial price cuts.
The well-known Japanese financial newspaper pointed out that **"Japan's convenience store industry, which has continued to grow, has reached a turning point."**
In China, 7-Eleven, once elevated to a pedestal by convenience store practitioners, is facing stagnant store growth and declining same-store sales. In East China, 7-Eleven is helpless against FamilyMart's dominance in Shanghai, having failed to open a new store for over a year. In North China, in Beijing and Tianjin where 7-Eleven established its mainland foothold, it has been comprehensively surpassed by Bianlifeng, with store closures increasing year by year. In Chengdu, 7-Eleven's market share continues to shrink, with a net closure of 10 stores in the past year.
**With slowing growth in Japan and increasing pressure from local competitors in the highly anticipated mainland China market, will 7-Eleven become the latest example of an international retail giant failing in China, following Amazon?**
**Stagnant Growth**
In 1973, Suzuki Toshifumi, then a director of Ito Yokado, signed a regional franchise agreement with the American Southland Corporation to introduce 7-Eleven to Japan. Thirty years later, 7-Eleven had over 10,000 stores in Japan, becoming part of Japan's commercial infrastructure. By February 2019, 7-Eleven had expanded to North America, Europe, and East Asia, with 67,656 stores, making it the chain with the most stores globally.
But in the two most critical markets, China and Japan, 7-Eleven is passing the peak of its prosperity.
7-Eleven's China business is divided into two main entities: stores in the Guangdong-Hong Kong-Macau region are managed jointly by 7-Eleven International (SEI) and Hong Kong's Dairy Farm, and are included in its overseas business statistics; stores in other mainland regions are directly managed by 7-Eleven China (SEC) and are included in its domestic business statistics.
According to the latest financial report released by 7-Eleven's parent company 7&i in April this year, the average daily sales per store in Japan and mainland China last year were 656,000 yen (approximately 41,800 RMB), down from the peak in fiscal 2017. More seriously, the average number of customers at existing stores has declined for two consecutive years, and only through price increases and other measures to raise the average transaction value were some of the declines in daily sales per store recovered.
**Its overseas convenience store business is also not optimistic. In the financial report, 7-Eleven lowered its revenue outlook for next year by 2.87% to 2.74 trillion yen.**
With the rapid development of China's convenience store market in recent years, 7-Eleven has also accelerated its expansion in China. However, compared with its old rival FamilyMart in Japan, 7-Eleven has never established a solid "base" in China.
**Shanghai is fertile ground for China's convenience store market.** 7-Eleven did not enter Shanghai until 2009, a full five years later than FamilyMart. Facing FamilyMart, operated by a Taiwanese team, 7-Eleven was almost overwhelmed. According to industry insiders, after 7-Eleven entered Shanghai, whenever it opened a store with daily sales of 20,000-30,000 yuan, two or even three FamilyMart stores would open on its left and right to encircle it.
**After 10 years in Shanghai, 7-Eleven has only 118 stores, with zero growth for over a year. Compared with FamilyMart, which has over a thousand stores in Shanghai, 7-Eleven has almost no say.**
In the North China market, 7-Eleven is facing fierce impact from local convenience stores like Bianlifeng. Beijing is the headquarters of 7-Eleven China and its second market in mainland China after Guangdong. After 15 years in Beijing, 7-Eleven has only opened 266 stores, fewer than Bianlifeng, which was established only two years ago. In Tianjin, 7-Eleven took 10 years to open 155 stores, and is being quickly caught up by Bianlifeng, which entered only a year ago.
What's more embarrassing is that under fierce competition, 7-Eleven's store closures in Beijing have been increasing year by year over the past three years: 8, 13, and 19 stores closed in 2016, 2017, and 2018 respectively.
The works of 7-Eleven Japan founder Suzuki Toshifumi have been repeatedly studied by Chinese convenience store practitioners, but his management philosophy does not seem to have been fully implemented by 7-Eleven China.
**Take the "dense store opening" strategy, which is regarded as a guideline by the industry. According to CCFA data, by the end of 2018, 7-Eleven had 1,882 stores in mainland China. These stores are widely distributed across 9 provinces and cities, so that in any regional market, 7-Eleven has not achieved a dominant position. The net decrease of 10 stores in Chengdu last year is an example.**
**The Cost of Stubbornness**
A retail investor believes that the "blame" for 7-Eleven's failure to implement dense store opening in China should not be placed on the execution ability of the Chinese team, but on dogmatic understanding and rigid mechanisms.
This investor has conducted in-depth inspections of convenience store markets in both China and Japan. In his view, **a major difference between the two markets is that Japanese stores can be easily subdivided, while Chinese stores face great difficulty in subdivision.** 7-Eleven's standard store type is 120 square meters, and it never operates non-standard-shaped stores. This site selection requirement is easy to meet in Japan, but if you look for stores in Beijing according to this standard, "there are only about 1,000 available sites."
Convenience stores are a systematic project. To open stores in large quantities and on an assembly line, 7-Eleven designed 7 store type templates. Each store obtained by front-end development has a corresponding model in the back end. These models determine the store's interior design, shelf placement, and traffic flow planning. This means that **when a developer secures a store, the back-end system automatically matches a model, and the store's traffic flow, shelves, and budget are fixed by this model.**
7-Eleven uses three mainstream templates in Beijing, but with these three templates, the 7-Eleven team spent 15 years finding only 800-900 stores that met the standards in Beijing. According to Japanese headquarters regulations, if there is a pillar on the main traffic flow line of the store design, or if an oversized store cannot be divided and subleased, the store cannot be opened even if it is obtained.
Even ordinary customers can feel 7-Eleven's stubbornness. While Bianlifeng researches steamed buns, FamilyMart sells hot tea eggs, and convenience stores in Wuhan and Changsha even sell hot dry noodles and stinky tofu, 7-Eleven still prides itself on introducing Japanese cold meals like rice balls and sushi, seemingly not understanding the Chinese palate's preference for hot food.
In the convenience store industry, 7-Eleven is known as the "Whampoa Military Academy," which is both a compliment to this veteran convenience store chain and an objective reflection of its severe talent drain.
For most Chinese employees, the career ceiling at 7-Eleven is only regional manager, and this experience is widely recognized by the market, so it becomes a rational choice for frontline managers to be promoted to regional manager and then jump ship.
**7-Eleven's expansion is highly dependent on people.** According to its internal experience, on average, for every 100 stores operating for a full year, only 30 qualified store managers can be trained in a year. In an ideal situation without talent loss, the annualized store growth rate is limited to 30%. But the severe loss of these senior managers will undoubtedly further reduce 7-Eleven's expansion speed.
With no localized strategy, stubborn product preferences, and lack of trust in management, 7-Eleven's performance in China over more than two decades is very similar to Amazon, which exited China last month.
A few years ago, Liu Qiangdong predicted the failure of Amazon's China business in an interview. He said: **"When we fought with them, I felt that their core problem was that they didn't give the Chinese team authority or trust. Look, their general manager was a foreigner, and one who had never lived in China... Can you fight a war like that?"**
Liu Qiangdong's words came true. But this time, will it be 7-Eleven that loses in China?
Source: Business Street Detective (bustanan)


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