“Suddenly disappeared” “Closed so soon?” a community resident exclaimed to the staff of a former 7-Eleven store, where the sign had been removed and the interior was being rearranged for renovation. “Physical stores are changing every day now. A store that was operating normally just two days ago can suddenly disappear,” the resident said. It is understood that this “suddenly disappeared” 7-Eleven store was located in a community commercial unit on the South Fifth Ring Road in Daxing District, Beijing. From its location, it was a typical community small store, about 60 square meters, with one cash register. It had been open for less than two years before its sudden closure. “When it first opened, there were about four or five young staff members. By the end of last year, only two were left. The day before yesterday, it seemed there was only one person watching the store,” the resident said. The store was about 400 meters from Xihongmen subway station and about 300 meters from the bustling Huiju Shopping Center in Daxing District. With dense surrounding communities and a rich living atmosphere, foot traffic was not small. The author learned that on this community commercial street, about 800 meters long, there were two other convenience stores: Ai Bianli and JD Convenience Store. In addition, there was one community supermarket, one Gongmenkou Mantou (steamed bun) shop, one community discount store, one Mixue Ice City, one Cha Bai Dao, two fruit shops, and three community fresh food stores. “This area has a strong living atmosphere. People passing by the store in the morning and evening are mostly nearby residents. They usually have breakfast and dinner at home. At noon, young people are at work, and the remaining older people—who would spend ten or twenty yuan on chilled bento boxes at a convenience store?” the resident said. The resident said that when chatting with the store staff at the end of last year, they learned that daily sales were sometimes only five or six hundred yuan for several consecutive days. “It should have been continuous losses; they couldn't hold on.” “Strangely, this one couldn't survive, but another one took over,” the resident said. The glass on the storefront had been replaced with the sign of another convenience store brand: Haokeshi 24-hour smart convenience store. According to the staff rearranging the equipment inside, the owner who changed the sign was the same person who had previously franchised 7-Eleven. The reason for closing and changing the sign was that he felt 7-Eleven's products were a bit expensive and not suitable for the consumption level of this location. The new brand's products would be cheaper and more comprehensive, and the store would also provide free hot water, allowing people to sit inside even without buying anything. The resident joked, “Many stores have come and gone on this street. New stores open, but few stay. Overall, those that remain are the ones that fit the surrounding living atmosphere. Those that don't connect with the local vibe definitely won't last.”

Not short of franchisees, short of good locations Newbies guarding the store In contrast to the “suddenly disappeared” store in Beijing, Wang (pseudonym), a novice franchisee of 7-Eleven in Jinan, was also facing daily losses and a dilemma. Last year, Wang said on social media that his store was located in a commercial unit of a high-end residential community with about 1,500 households and a 90% occupancy rate. The store was about 130 square meters, with an annual rent of 150,000 yuan, plus a property management fee of 3,000 yuan per year, averaging 12,750 yuan per month. The total investment was about 600,000 yuan. Daily sales were 4,000 to 4,500 yuan, including cigarettes and online delivery, with a gross margin of 35%, but the headquarters took 11% of sales. That meant about 13,200 yuan was taken each month. There were four employees, with labor costs of 18,000 yuan per month, utilities of 2,000 yuan, miscellaneous expenses of 800 yuan, and shrinkage of 6,000 yuan per month, of which fresh food shrinkage was relatively large, about 4,000 yuan. In total, the store was losing nearly 20,000 yuan per month. After persisting for a while, Wang had no choice but to transfer the store for only 100,000 yuan, including decoration, goods, and equipment... From 2019 to 2020, 7-Eleven vigorously expanded its national market, opening first stores in cities such as Zhengzhou, Fuzhou, Xi'an, and Wuhan, and then settled in Jinan in April 2021. The plan at that time was to open 100 stores in Jinan within two years and gradually expand to surrounding areas. Wang said that before deciding to franchise, he investigated 7-Eleven's performance in other cities in Shandong. “There were media reports that when 7-Eleven's first three stores opened in Yantai in 2020, their combined sales on the opening day exceeded 920,000 yuan, with the highest single-store sales reaching 750,000 yuan, setting a new global record for 7-Eleven single-store sales. When 7-Eleven's first store opened in Jinan, it also achieved sales of 340,000 yuan,” Wang said. Such data made him tempted, so he chose to franchise. But things didn't go as planned. As a newcomer, he didn't know what was wrong. Facing daily losses, he had no choice but to cut losses as soon as possible. In this regard, a former 7-Eleven franchisee said that when he chose to franchise a Japanese convenience store, he had two main considerations: first, the store image was good, and the customer experience was decent; as a side business, it was something to be proud of when talking to friends, rather than saying he ran a grocery store. Second, Japanese convenience stores, including Lawson and FamilyMart, had relatively good policies, product development, and returns. With full trusteeship, the main issue was location selection. The franchisee said that as global giants, their operational capabilities and product development were not in question. Stores like 7-Eleven, Lawson, and FamilyMart were not short of franchisees; they were short of good locations. They wouldn't “fool” you into franchising just to earn your franchise fee, but they had a common drawback—letting newcomers guard new stores, which could be “fatal.” In recent years, besides the difficulty of finding good locations, the onslaught of various discount stores has also taught convenience store owners with higher prices a lesson. Zhang Yang (pseudonym), a convenience store owner in Anhui, said that a bottle of Nongfu Spring water sold for 2 yuan in his store, while a discount store sold it for 1.5 yuan, and the nearby supermarket, originally selling at 1.5 yuan, later reduced the price to 1.3 yuan. Products that should have sold well gradually became unsellable. The risk of losses is increasing, and more and more franchisees are saying on social media that convenience stores are no longer profitable, even if you bend down to pick up coins. However, for franchisees who have already entered the franchise threshold, escaping the industry is not easy.

More stores, harder to make money In the past few years, with the support of capital, China's convenience store industry experienced rapid expansion. According to the “2023 China Convenience Store Development Report” jointly released by CCFA (China Chain Store & Franchise Association) and KPMG, the total number of convenience stores in China increased from 132,000 in 2019 to over 300,000 in 2023. Among the nearly 300,000 convenience stores, tens of thousands are franchise stores. Like coffee, milk tea, and noodle shops, convenience store giants such as 7-Eleven, Lawson, Meiyijia, and FamilyMart have used the franchise model to expand, grab market share, and build consumer mindshare. Now, to find new growth, going down to lower-tier markets has become a consensus for many convenience store brands. Coupled with policy guidance in recent years, many convenience store brands have begun the path of sinking, and even sinking further. Brands like Lawson, 7-Eleven, FamilyMart, and Bianlifeng have all moved into third- and fourth-tier cities, and even county-level cities. In 2021, Shinji Uchida, chairman of 7-Eleven China, said in an interview that 7-Eleven's goal was to expand nationwide and enter second- and third-tier cities. He said the pandemic accelerated this move, as many people who left Beijing and Shanghai stayed in their hometowns and didn't return. This would lead to a consumption boom in second- and third-tier cities, and those returning from Beijing, Shanghai, and Guangzhou would bring back the habit of consuming at Japanese convenience stores. Not only 7-Eleven, but Lawson is also expanding aggressively with a combination of franchise models. In 2020, Lawson began its layout in lower-tier markets, first entering Wuhu, a prefecture-level city in Anhui, and then quickly opening more than ten stores in this city with a population of only over 3.6 million. Since then, Lawson's expansion into lower-tier markets has been rapid, successively entering lower-tier cities and even county areas. In February this year, Lawson held a ceremony for the establishment of its Shandong headquarters in Jinan and signed strategic cooperation agreements. In the coming years, Lawson will strive to achieve 1,000 stores in the Shandong market as soon as possible. This is also part of Lawson's penetration into North China and its goal of achieving 10,000 stores in China by 2025. According to the latest data, in 2022, among the top five convenience store brands in China by store count, besides Meiyijia, which topped the list, and three petroleum-related convenience store chains, Lawson was the only foreign brand to enter the top five, with 5,641 stores in 2022, a number that had reached 6,000 by August 2023. The industry is still developing rapidly, but individual franchisees are not doing well. With intensified competition, both average sales per store and average population covered per store have declined to some extent. In plain terms, more stores mean harder to make money. A regional chain convenience store operator said that aside from the difficulty of doing business, in the current environment, convenience stores are indeed easier to operate than other businesses for those looking for something to do—almost zero threshold, no technical content, just capital investment, and renting a store to start. If you franchise, it's even easier: you just need to choose a location, pay the rent and franchise fee, and the rest is handled by dedicated staff. You don't even need to stock goods; you can just “lie down” and open the door. For convenience store franchisees, it's also worry-free. You don't need to know the purchase price of goods or worry about retail prices; everything is done by machines, just scan and collect payment. “When inventory is insufficient, the system automatically matches, and the next day dedicated staff deliver the goods to your store and help you stock them. You don't need to worry much. So, for these people, convenience stores are truly zero-based and zero-threshold. But whether you make money is another story.” Looking back at the development of the convenience store industry in recent years, “one hot, one cold” might be the most accurate description. The hot part is the continuous growth in scale; the cold part is the decline in average revenue per store. In terms of scale, the total number of convenience stores in China grew rapidly in just three years, from 132,000 in 2019 to 300,000 in 2022. Breaking it down, an average of more than 150 convenience stores opened every day. In terms of revenue per store, the average daily revenue per convenience store in 2021 was 5,297 yuan, which fell to 4,794 yuan in 2022. This is also a gap compared to 4,936 yuan in 2017. In the past few years, China's convenience stores have achieved scale in numbers, but operating a convenience store is not a simple task. Doing it well is a fine craft. Opening a store is easy, but keeping it open is hard. Many “veterans” in the convenience store industry have personal experience, and those newcomers who chose to franchise for “convenience” are rushing toward their “dead end” one after another.

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