---
title: "RT-Mart Opens Convenience Stores, 7-Eleven Starts Selling Vegetables: After Capital Passion and Corporate Impulse, Will It Leave a Mess for the Industry?"
description: "Convenience stores will not be like bike-sharing or ride-hailing apps, an area that can be ignited instantly by capital alone. Capital may ultimately be disappointed, and so may the companies hoping to make a mark in this field with capital."
author: "陈岳峰"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-08-16"
language: "en"
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# RT-Mart Opens Convenience Stores, 7-Eleven Starts Selling Vegetables: After Capital Passion and Corporate Impulse, Will It Leave a Mess for the Industry?

> Convenience stores will not be like bike-sharing or ride-hailing apps, an area that can be ignited instantly by capital alone. Capital may ultimately be disappointed, and so may the companies hoping to make a mark in this field with capital.

**Preface:**
Convenience stores will not be like bike-sharing or ride-hailing apps, an area that can be ignited instantly by capital alone. Capital may ultimately be disappointed, and so may the companies hoping to make a mark in this field with capital.
1
How important is selling vegetables?
So important that even 7-Eleven, the world's largest convenience store giant, has joined the ranks—in July, 7-Eleven's Beijing Dongzhimen store began selling vegetables, setting up three shelves of vegetables and fruits, including more than 20 types of vegetables such as tomatoes, potatoes, carrots, green peppers, and various leafy greens, more than ten types of pre-cut vegetables like sliced winter melon, cut chives, and kung pao chicken, and more than ten types of fruits including oranges, bananas, cantaloupe, and apples.
It is said that this is the first 7-Eleven store to sell vegetables, and if the results are good, it will be rolled out to other stores.
Similarly, Japanese company Muji recently opened its first global fruit and vegetable market in its flagship store in Yurakucho, Tokyo, selling more than 300 types of fruits and vegetables.
Muji is taking a different approach, which we won't discuss for now. But 7-Eleven's move to sell vegetables is worth careful study. This is not a fashion but a qualitative change: the Japanese are extremely strict about business formats, and fresh food supermarkets and convenience stores are completely different formats. But now they have made a 360-degree turn. Does this mean that retail formats on Earth can no longer exist without the fresh fruit and vegetable category? To some extent, whoever is absent may be out, and even convenience stores, which are only a few dozen to over 100 square meters, must carve out a section from their extremely limited sales area.
**A small category affecting the future of a format—could this be a major signal for the direction of the convenience store format in the Chinese market?**
Sometimes I think, times change. A few years ago, the industry would have looked down on convenience stores selling fruits and vegetables. Even earlier, when chain drugstores tried diversified operations, they introduced fruit and vegetable categories, which basically ended in failure. Who would have thought that a few years later, this "Hu Hansan" would make a comeback in such a high-profile manner?
2
**If we were to select the hottest business format in China in 2017, it would definitely be convenience stores.** Although it's only August now, with four months left in the year, it's estimated that no one else will steal the spotlight in the next four months.
Don't believe it? Even unmanned retail is clustering to open unmanned convenience stores—of course, whether manned or unmanned, the reason convenience stores are so sought after is more due to capital pushing from behind.
So you see, in unmanned convenience stores, Tianhong, as the first entity in physical retail to try it, opened its first unmanned convenience store, Well Go, in Shenzhen. And RT-Mart, the king of hypermarkets, couldn't resist the urge to get involved in the convenience store format, recently opening a Feiniu convenience store in Jiaxing.
**This year, Meiyijia convenience stores surpassed 10,000 stores, a major breakthrough for local convenience store brands. This year, after capital hit the rocks in the O2O field, it turned its attention to offline physical stores, and convenience stores became its target. This year, JD.com also loudly announced plans to open 5 million convenience stores (JD's convenience store plan seems not to have gone as smoothly as expected, and it is now mentioned less).**
Lingshoujun has quietly observed all this and just wants to say seriously: don't be like the O2O field, where after capital passion and corporate impulse rush in, what's left is a mess when they withdraw.
Image source: Beijing Business Today
3
**Corresponding to capital is the collective "sprint" of foreign convenience store companies in the Chinese market.**
7-Eleven said it will grow at a pace of entering a new city every one to two years, with major cities maintaining 30-40 new stores per year. Additionally, according to rumors, after Uni-President sold its Starbucks stake, it will put more energy into expanding 7-Eleven in the East China market.
Another Japanese convenience store company, Lawson, is also ramping up efforts in the Chinese market. Its China head said they hope to reach 10,000 stores by 2025. FamilyMart also plans to achieve a target of 10,000 stores by 2024.
Lawson's expansion method in the Chinese market is worth noting. Currently, Lawson has about 1,200 stores in China. According to the plan, it will open more than 1,000 stores annually over the next 7-8 years, **and it has chosen to cooperate with regional retailers in various forms.** In 2016, Lawson reached a cooperation with Wuhan Zhongbai, granting regional authorization for the Hubei market. By the end of August, Wuhan Zhongbai Lawson will have 150 stores, and within the next two years, it will expand to 500 stores.
In July 2017, Lawson reached a cooperation with Beijing Chaoshifa, adopting a single-store franchise model where Chaoshifa provides the store and staff, and Lawson handles daily operations. In late August, the first three "Chaoshifa Lawson" convenience stores will open, with 20 new stores by August next year, and a pace of no fewer than 10 stores per year in the future.
Just a few days ago, Lawson cooperated with Nanjing Central Emporium, adopting a large franchise system. On August 28, the first five Lawson convenience stores will open, with no fewer than 300 stores in Nanjing within the next 3-5 years.
Clearly, Lawson will adopt flexible cooperation models in the Chinese market in the future to expand aggressively. **If such cooperation proves effective, the 10,000-store scale is plausible. Similarly, other foreign convenience store brands like FamilyMart may also consider this approach.**
Although foreign convenience stores have been shouting about rapid expansion in previous years, it was all thunder and little rain. But this time, we can faintly smell the scent of a fierce battle in the foreign convenience store competition for the Chinese market. For local Chinese convenience store brands, this is definitely not good news.
4
The convenience store market is so lively, and RT-Mart, which has been restless for years, certainly wants to "show its presence."
**RT-Mart's first Feiniu convenience store is a franchise store,** located in Jiaxing city, with an area of 150 square meters. The store's products are mainly fresh food and FMCG, including fruits, oden, coffee, milk tea, bread, and bento boxes, with about 1,500 SKUs, covering various daily necessities and life convenience services, and also provides a coffee bar for customers to rest.
**RT-Mart's expansion of Feiniu convenience stores is based on its 2B business, that is, providing goods to franchisees through the Feiniu.com e-lufa platform.** In RT-Mart's words, it aims to cover areas within 15-20 kilometers of its stores, which are beyond the reach of hypermarkets, by franchising convenience stores. Interestingly, Feiniu convenience stores may also operate fresh fruits and vegetables in the future, which is consistent with what 7-Eleven is doing.
In addition, besides Feiniu convenience stores of 50-200 square meters, RT-Mart can also provide community life supermarket franchises of 500-2,000 square meters. This format, called "Feiniu Life Supermarket," will be located in townships, communities, or industrial parks.
Both franchise businesses seem to have great market potential. Everything seems beautiful. **However, for RT-Mart, will it be involved in too many business areas, leading to an imbalance in resource allocation?** Moreover, the product structure of the convenience store format differs significantly from that of hypermarkets. If RT-Mart adopts a KA supply system, whether the price advantage of the 2B business can be fully reflected will directly affect its attractiveness to franchisees.
Furthermore, competition in the 2B business is no less fierce than in 2C. Besides giants like Alibaba Retail Link and JD New Channel, there are also Huimin.com, Diangshang Interconnect, Zhanghe Tianxia, 96 Ordering, Yi Ordering, Duola Ordering, Jinhuobao, etc. The "2017 China FMCG Industry Annual Report" released by "FMCG" shows that **as of November 2016, there were more than 70 large FMCG B2B platforms in the market. Another point that must be reminded is that capital is also eyeing this field, and these platforms received a total of over 5 billion yuan in investment in 2016.** Therefore, if RT-Mart wants to carve out a place in this field, if it still operates on a small scale like Feiniu.com (compared to the huge strategic losses in the internet), it may not be easy in the future.
More importantly, if a company enters the convenience store business mainly to expand its 2B business rather than to do well in this format, is it a strategic deviation from the start?
Lingshoujun believes that traditional retailers often hope to divert traffic from offline to online, but this starting point is wrong. To be honest, this is just a wishful idea. It's easy to bring online traffic offline, but bringing offline traffic online—after so many years, don't we know it's many times harder?
Of course, enriching the combination of formats is necessary for retail enterprises. **But with no hope for a breakthrough in Feiniu.com** (Huang Mingduan pointed out that although Feiniu.com is still losing money, the loss has narrowed, and the group is actively changing its operating model, including expanding B2B business, expecting annual revenue to reach 2 billion yuan; it has also added Feiniu's "Jisu Da" service, covering more than 370 physical stores, and by accelerating the integration of online and offline services, it is confident that Feiniu.com can turn losses into profits by 2019-2020)—**the reason it's said there's no hope for a breakthrough is that for Feiniu to be profitable in the future, it would mean it has already given up the strategy of competing as a major e-commerce platform.**
Under such circumstances, RT-Mart should pay more attention to its hypermarket business, which is still at the upper level of the industry—the transformation of its hundreds of physical stores. After all, these stores can't just be closed one by one in the future, right? (On August 9, Gaoxin Retail's first-half performance report showed that RT-Mart closed two stores in Shanghai and Qingdao in the first half, and will close a third store in the second half.)
It's no exaggeration to say that without these stores, RT-Mart's other businesses would be insignificant.
5
Let's continue with convenience stores. That's enough about RT-Mart. Not all cities are suitable for large-scale convenience store development. **China is so big; there is space for convenience store development and cities suitable for them, but definitely not all cities.** Moreover, the prospects for convenience stores are becoming increasingly uncertain as other business formats continue to innovate and iterate.
First, let's talk about the advantages of convenience stores.
**1. Location.** No need to elaborate; they don't have the strict requirements for commercial property like other large formats. Although location is important, relatively speaking, properties from a dozen square meters to 200 square meters can be used for stores, which is a major advantage for expansion.
**2. Franchising.** This cooperation model is also conducive to quickly promoting the company's brand and format in the market. Compared to other formats, convenience stores have certain advantages.
**3. Business hours.** Convenience stores have long business hours. From international experience, nearly 50% of convenience store sales are completed at night, so many convenience stores operate 24 hours. Convenience stores also generally have longer business hours than hypermarkets and supermarkets.
**4. Easier to create a brand tone.** Currently, there are some convenience store brands with brand tone and sentiment that cater to the needs of young consumers. But it should be noted that tone and sentiment are important but not long-lasting.
**5. Online-offline integration and proximity to communities.** Convenience stores are the best channel for the last mile of O2O. They are also one of the best channels for connecting offline and online, with inherent advantages compared to other formats.
Now let's talk about the shortcomings and threats facing convenience stores:
**1. The biggest competitor is not peers.** Many people think the biggest competitors of convenience stores are other convenience store brands, such as 7-Eleven vs. Lawson and FamilyMart, or Wuhan Zhongbai Lawson vs. Today. That's true, but they overlook a bigger competitor—mom-and-pop shops. There are nearly 6 million such small stores nationwide. While competing with peer brands, these mom-and-pop shops are also one of the biggest competitors. Moreover, you must be standardized, while they are fragmented, casual, kinship-based, and acquaintance-economy-based, with completely different tactics, not even on the same competitive dimension or fair market environment.
**2. Fresh fruits and vegetables are a weakness.** Although 7-Eleven is selling fruits and vegetables, most convenience stores lack this category. Moreover, due to limited sales area and format positioning, it's impossible to fully stock this category, making it even harder to do well. When convenience and immediacy are being eroded by new formats brought by new technologies and more community-based formats, have convenience stores considered that threats are at the gates?
**3. Higher prices.** No need to elaborate. Convenience store prices are generally higher. This may not matter much to immediate consumers and young customers, but it's still a fact.
**4. Convenience services have become a chicken rib.** Utilities payments, train ticket booking, and even housekeeping services were once considered effective and profitable value-added services for convenience stores, but the development of the internet has made these services fully accessible via mobile phones. These convenience services have become a chicken rib and are unlikely to bring business improvements.
**5. Facing competition from community supermarkets.** Community stores like Fresh Legend will be a major killer for convenience stores. Community stores themselves have the functions of convenience stores and are closer to communities, with even better site selection requirements than convenience stores.
**6. The advantage of staple food products may diminish.** A major source of revenue for convenience stores is staple food products, but the uniqueness of the Chinese market is that it has the richest dining formats, with restaurants scattered everywhere. In the future, with the further development of Chinese fast-food brands and higher standardization, it will definitely significantly affect the sales of staple food products in convenience stores.
**7. Other specialized small formats are moving toward micro-convenience.** Fruit and snack specialty stores are developing rapidly. Under the trend of consumption upgrade, the market competitiveness of these formats is also improving, and they are moving toward micro-convenience, adding and expanding categories, providing some products and services that convenience stores and community supermarkets offer. Undoubtedly, if these specialty stores succeed, it will be another headache for convenience stores.
Admittedly, convenience stores have their advantages. As Beijing Chaoshifa Chairman Li Yanchuan said, Chaoshifa's other five formats do "family business," while the cooperation with Lawson for Chaoshifa Lawson convenience stores, besides catering to young people, also aims at "single-person business."
I think this positioning is very accurate. But to elevate it to the future of retail or the new retail trend—well, that's a bit too much. It would be an unbearable burden for this small format.
6
According to the 2017 China Convenience Market Report released by the China Chain Store & Franchise Association, the convenience store industry grew at 13% in 2016, with a market size exceeding 130 billion yuan. Both the number of stores and same-store sales grew.
Indeed, it's very hot. A format with double-digit growth is rare in retail, so it's no wonder capital moves with the wind—how many stores does Bianlifeng have? Media reports say its valuation is as high as $1 billion, which is simply a "crazy stone."
Image source: Pintu Business Review
The capital windfall does not equal a bountiful harvest.
Let's end with the view of Xu Dawei, founding partner of Hougu Investment, at the 2016 China Convenience Store Conference:
The high cost of the convenience store opening model impacts the company's competitiveness, and a growth model based on direct operation is difficult to gain capital recognition. Franchising will encounter bottlenecks when it develops to a certain scale.
Domestic convenience store brands are clearly regional. Although there are leading brands in certain regions, such as Meiyijia and Tianfu in Shenzhen, FamilyMart in Shanghai, and Haolinju in Beijing, there are almost no national brands. In a mature market, a regional chain with only a few hundred stores has very limited value to capital.
Lingshoujun wants to say in conclusion: convenience stores will not be like bike-sharing or ride-hailing apps, an area that can be ignited instantly by capital alone. Capital may ultimately be disappointed, and so may the companies hoping to make a mark in this field with capital.
Of course, life always gives us surprises—among those convenience store companies that persist and work solidly in this field, how could there not be some exceptions?!
**Source: Lingshou ID: lingshouke**
-END-


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