After completing its conquest of mainstream supermarkets and hypermarkets in China, Alibaba has finally extended its reach into the convenience store sector it has long coveted. What was bound to happen has finally arrived! Recently, New Distribution exclusively learned that Alibaba has completed a strategic investment in the well-known convenience store brand C-Store. According to sources, Alibaba's investment amounts to 500 million RMB, acquiring a 20%-25% stake. This move signifies Alibaba's formal entry into the chain retail sector. 1 Riding on RT-Mart's Coattails, Boarding Alibaba's Big Ship Why C-Store? Before answering this question, let's first take a look at who C-Store really is. In April 2001, Shanghai C-Store Convenience Chain Co., Ltd. was established by Taiwan's Ruentex Group in mainland China, with Shanghai as its center, radiating to East China, South China, and other regions, covering major cities such as Shanghai, Suzhou, Hangzhou, Shenzhen, and Dongguan. To date, C-Store has nearly a thousand directly-operated and franchised stores nationwide. According to the latest statistics from the China Chain Store & Franchise Association, C-Store's store count far exceeds that of well-known convenience store brands like Quanshi and Today. 2018 China Convenience Store TOP 70 Ranking, Source: China Chain Store & Franchise Association When mentioning C-Store, one cannot avoid RT-Mart. As another important layout of Ruentex Group in the domestic retail market, RT-Mart's development predates C-Store by a significant margin. In the early stages of C-Store's development, RT-Mart's accumulation in store operations, backend supply chain, and retail industry played a crucial supporting role. There is even industry talk that wherever C-Store has a dense store distribution, RT-Mart stores are bound to exist, highlighting their close relationship. It is worth noting that on November 20 last year, Alibaba invested a hefty HK$22.4 billion, directly and indirectly holding 36.16% of Sun Art Retail Group. This means that China's largest supermarket and hypermarket group will join the new retail revolution promoted by Alibaba through both business model and capital structure, and subsequent actions have demonstrated Alibaba's determination to implement its new retail strategy. On January 2, Tmall Supermarket put millions of products on RT-Mart shelves, covering 167 RT-Mart stores across 20 cities in East China, while also launching interactive experiences such as "Catching Cats" and AR/VR; on March 1, Tmall's smart maternal and baby zone first landed at RT-Mart's Shanghai Yangpu store, featuring not only regular products but also two cloud shelves, bringing a refreshing consumer experience to offline users... In addition, Hema Fresh, Alibaba's vanguard in new retail practice, is also actively cooperating with RT-Mart. On June 2, Hema Fresh joined forces with RT-Mart to open the country's first hybrid new retail model store in Suzhou: "Hema Mini". Nearly half a year into the cooperation, RT-Mart COO Yuan Bin described the partnership with Alibaba as "like fish in water," which may have laid the groundwork for Alibaba's investment in C-Store. 2 Why Invest in C-Store? Returning to the protagonist of this event, setting aside its relationship with RT-Mart, why would Alibaba take a liking to C-Store? 1. C-Store's store management and fresh food supply chain capabilities are relatively high, with a small gap compared to Japanese convenience store brands Convenience determines whether consumers will shop at a convenience store, but the rationality of the category structure determines consumer stickiness and loyalty to the brand. Domestic convenience stores generally focus on FMCG food products, with daily necessities accounting for a low proportion. In the fresh food segment where Japanese convenience store brands excel, domestic brands still have a significant gap. A corner of a C-Store, image from the internet After nearly 20 years of development in China, C-Store's gap with Japanese convenience store brands is narrowing. Especially in the rapidly developing East and South China regions, C-Store's product and cooked food supply chain capabilities have been repeatedly iterated and refined, and its product quality and market acceptance have been greatly tested. In addition to common items like oden and rice balls, some products such as red oil Yudi noodles, chocolate bread, and handmade sandwiches have even become internet-famous products attracting young consumers. Secondly, in terms of store management, drawing on RT-Mart's experience in the supermarket sector, C-Store has accumulated a complete and systematic store operation management model. In terms of store expansion, although C-Store adopts a strategy combining direct operation and franchising, its franchised stores perform at a high level in terms of product structure, terminal merchandising, and daily business operations and maintenance. In some markets, C-Store's franchised stores even outperform certain foreign convenience store brands. 2. Absorb modern convenience store management experience to fill the supply chain and management shortcomings of Tmall Xiaodian On September 3, at Alibaba Retail Link's strategic launch conference "Woods into Forests, Rivers into Seas," Lin Xiaohai revealed that after more than three years of development, Retail Link has established an intelligent supply chain based on a three-tier warehouse distribution system in 17 provinces, covering over one million small stores, successfully becoming the industry's leading FMCG B2B platform. Image of Tmall Supermarket, image from the internet However, Tmall Xiaodian, as an important foothold, has not developed as smoothly as Retail Link. The current situation of high-profile entry but low-key performance still cannot conceal the platform's lack of store stickiness. "Apart from the storefront, there's little difference from traditional retail stores, and performance improvement is not obvious," "Product prices are high, with no advantage compared to distributors," are often cited as reasons for criticism. Cooperation with C-Store, however, would allow Retail Link to effectively graft C-Store's excellent store management experience onto its store empowerment system. Furthermore, C-Store's accumulation in the fresh food supply chain also provides more imagination for Retail Link's store empowerment plan. Especially in areas lacking coverage by Japanese convenience store brands like 7-Eleven, FamilyMart, and Lawson, internet-famous products and fresh food are particularly lethal in competing with other B2B platforms. In the future, whether Alibaba Retail Link will continue its strong-control layout strategy and increase its stake in C-Store remains to be seen. And in terms of convenience store brand operations, whether Alibaba will reference its Tmall + Taobao strategy and adopt a dual-brand approach in the convenience store sector (Tmall Xiaodian + C-Store, using Tmall Xiaodian's loose franchising as a base, selecting quality stores to upgrade to C-Store) to strengthen control over franchised stores—it may be too early to draw conclusions now. Traditional retail convenience store companies such as Meiyijia and Meiyitian have made many attempts in informatization, but compared with Alibaba, which has been practicing the reconstruction of people, goods, and venues, there is still a significant gap. For traditional enterprises, is Alibaba's investment in C-Store a "wolf is coming" or a "false alarm"? Whether to side with the giants or remain independent and solitary has become a question that many chain convenience store enterprises must consider. Expert Commentary Wang Jun, a well-known retail expert, commented: Alibaba's hunt for chain convenience stores began with a wide-ranging screening of targets at the end of 2017. They have basically contacted all the top 30 chain systems nationwide. It wasn't until the end of 2018 that we heard the first deal was struck with C-Store, an old chain with 1,000 stores. Compared to the spectacular new retail acquisition wars of the past year, Alibaba's strategic investment team has been nothing if not cautious with this small retail format. C-Store may not be the largest or strongest chain convenience store, but it is the one with the best genes. This is attributed to the excellent retail chain capabilities of Taiwanese retail entrepreneurs: among the three major Japanese chain convenience stores, FamilyMart, operated by Ting Hsin, was the first to achieve full profitability in China and has the most stores among Japanese chains. RT-Mart has dominated the supermarket and hypermarket sector for years. Henan's Dennis has carved out a stronghold with its matrix of department stores, hypermarkets, and community supermarkets. Indeed, excellent! C-Store's actual controller is said to be the legendary Mr. Huang, whom the media has called "the one who beat all opponents but lost to this era." According to the current centralized approach in Alibaba's new retail, it will certainly gradually increase its controlling stake while continuing to acquire other quality targets. Who will be next to join this family? Some rejoice, others worry. Hou Yi has been vocal: when it comes to convenience stores, strike while the iron is hot; now is the best time. For B2B enterprises, controlling stores is both a pain point and a necessity, whether it's Retail Link's Tmall Xiaodian, New Way's JD Xiaodian, or Best Store Plus, Yijiu Pi, and Huimin Net. They have tried many tactics: first rebranding, then franchising, providing POS systems—but with little effect. At this point, looking back, people sigh and realize that light-franchise chains like Meiyijia and Furong Xingsheng are essentially B2B, and moreover, they have completed store control in a B2B form, needing only an information system. Retail Link, which holds an extremely important strategic position for Alibaba, faces the challenge of how to meet the upgrade demands of one million mom-and-pop stores awaiting transformation, and how to provide standardized operational management to boost sales! It urgently needs a model that can export brand, experience, and talent training systems. Then, it can gradually select from Retail Link's massive base of small store users: supply stores → rebranded franchise stores → standard franchise stores. In this process, Retail Link lacks nothing but one thing: retail genes! Therefore, the merger and acquisition path for chain convenience stores has just begun. What do you think about Alibaba's foray into offline chain convenience stores? Feel free to leave a comment at the end of the article to share your thoughts! You can also scan the QR code below to add the editor's WeChat and join the group for discussion and exchange. We look forward to sparking new ideas with you. -END-