---
title: "The Besieged Convenience Store"
description: "In mid-July, a convenience store owner in Sichuan Province saw his daily sales drop by a third after several snack stores opened nearby, selling at low prices and drawing away customers. The rise of these bulk snack stores, backed by capital, is reshaping the retail landscape, impacting not only convenience stores but also distributors, forcing traditional retailers to adapt or face decline."
author: "十里"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-08-10"
language: "en"
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---

# The Besieged Convenience Store

> In mid-July, a convenience store owner in Sichuan Province saw his daily sales drop by a third after several snack stores opened nearby, selling at low prices and drawing away customers. The rise of these bulk snack stores, backed by capital, is reshaping the retail landscape, impacting not only convenience stores but also distributors, forcing traditional retailers to adapt or face decline.

**The "Besieged" Convenience Store**

In mid-July, inside a convenience store in Dachuan District, Dazhou City, Sichuan Province, owner Lin Feng was chatting in a WeChat group while keeping an eye on his store's surveillance. The group had 200 members, all fellow convenience store and supermarket owners. They were fiercely discussing how to deal with the competition from nearby snack stores. Some advocated a long-term competitive war to wear down opponents; others wanted to "if you can't beat them, join them," while the passive ones could only choose to close their stores. Lin Feng's convenience store is located at a crossroads in a county town under Dachuan District and has been operating steadily for nearly a decade. Unfortunately, in the past three months, the other three corners have been "occupied" by different snack stores. Moreover, new snack store brands have been popping up frequently on the deeper streets. "Since these street-side snack stores opened, my daytime business has plummeted. From 7 a.m. to 10 p.m., I can only sell a few hundred yuan worth of goods. Only after the snack stores close at 10 p.m. do I get some sales," Lin Feng revealed.

Now, his daily turnover is only 2,000 yuan, of which 60% comes from cigarettes. On the cost side, monthly rent is as high as 8,000 yuan, utilities cost 1,500 yuan, and there's an 800 yuan management fee. Sales have dropped by a third compared to the past. Lin Feng's experience is just the tip of the iceberg. Specialty stores represented by brands like Snack Busy, Snack Youming, and Zhao Yiming Snacks have been "galloping" at a visible pace in recent months: on one hand, they've received major financing; on the other, they've been rapidly expanding their store counts and expansion speed. **Driven by capital, snack stores have spread like wildfire. Although there hasn't yet been a life-or-death battle, their relentless competition has significantly impacted other retail formats.** The most affected in this fierce battle are traditional convenience stores—the capillaries hidden deep in the city. Since these bulk snack stores are mostly rooted in regional markets—for example, Snack Busy focuses on Hunan, Zhao Yiming Snacks on Jiangxi, and Snack Youming on Sichuan—and these regions happen to be the most densely populated and active areas for traditional convenience stores, the invisible competitive pressure has put these stores in a difficult position. However, **the outbreak of bulk snack stores is not accidental.** On the surface, they share similarities with the previously popular discount stores, solving inventory problems for brands and distributors while offering low-priced goods to consumers. The underlying logic can be attributed to the **"lipstick effect"** in economics, where consumers tend to buy cheaper goods during economic downturns.

**Take the snack store's business strategy as an example: the primary strategy is to attract customers with low prices.** These stores sell big-brand beverages at 30% below market prices—Red Bull for only 4.5 yuan, Yibao and Nongfu for just over 1 yuan, and potato chips for 3.5 yuan—using low prices to draw in a large number of customers.

"Moreover, snack stores are located very close to nearby convenience stores, possibly right across the street or next door," someone in Lin Feng's group complained. Beverages are already the fastest-moving among FMCG products, and consumers have a basic understanding of their retail prices, so the close-quarters competition from snack stores poses a real threat to traditional convenience stores. Low-priced goods are only for attracting traffic; the real profit source for bulk snack stores is actually "white-label" products—that is, bulk snacks and unbranded snacks produced by small manufacturers, or private-label products from the snack collection stores themselves. These products typically have gross margins above 30%, providing significant profit space for snack collection stores. Because of this series of simple yet crude business strategies, nearby convenience stores feel unable to cope, with business declining sharply and both foot traffic and revenue severely impacted. "Currently, only selling cigarettes can support the convenience store's livelihood and cover costs like rent," Lin Feng said.

**"Implicating" Distributors**

**Bulk snack stores attract customers with low prices, indirectly creating a new price reference system in the market, and their impact on traditional retail goes far beyond what's visible on the surface.** Their influence is like a stone thrown into a lake: the surface ripples are just the beginning of the impact, and the deeper currents also "shake." "Customer traffic has decreased, but the salespeople (distributors) come more often than before," Lin Feng said. They scan the store several times each visit, observing product sales. Due to slow movement, many products don't sell, but he can't get better prices from distributors.

Moreover, an FMCG supplier also said that if there are several snack stores nearby, whether it's a large supermarket or a convenience store, the purchase volume of snack categories will drop by about 40%. **With lower store shipments, profit margins naturally decline, and business noticeably worsens.**

Distributors—the crucial link supplying the ends of the city's capillaries—are also on this chain of impact, and their system has been disrupted by bulk snack stores. In the past, for snacks produced by brands or manufacturers to be distributed to offline retail terminals, they typically went through a lengthy chain including agents, distributors, retailers, and other intermediaries, each taking a share of the profit. If offline retailers were strong, like some large supermarkets, manufacturers had to pay various fees to get their snacks placed in prominent positions, such as entry fees, barcode fees, anniversary fees, and promotional fees. This is one reason large supermarkets have struggled. When these fees pile up, the price of snacks to consumers increases significantly compared to the cost. The aforementioned distributor told the author that for the beverage brand he handles, last year's sales were 200 million yuan, with products mainly reaching offline supermarkets and mom-and-pop stores through a multi-tier distributor channel. However, **the emergence of bulk snack stores directly competes for market share in the snack category within the retail format, and they directly connect with brand manufacturers or upstream agents, bypassing the middlemen.** According to the distributor, his company was originally a first-tier distributor (not distinguishing between provincial capitals and prefecture-level cities), with a unified ex-factory price. But snack stores skip these steps, choosing distributors in provincial capitals or even cooperating directly with brands. "Provincial capital logistics is more convenient, and on top of the ex-factory price, the platform gives subsidies, so the price is very affordable." As snack collection stores grow in scale, their bargaining power increases, allowing them to get better ex-factory prices from manufacturers, lowering snack costs and retail prices. **Currently, many brands regard snack stores as important sales channels and customize products for them. In this situation, traditional distributors have less and less say in the retail format.** A retail industry expert said that although bulk snack stores and distributors are in a parallel relationship in terms of channels, and there is inevitably competition between them, the actual situation is not so pessimistic. Since the total number of SKUs in the snack category is vast, snack stores still need to cooperate with distributors in certain categories, and even rely on distributors for some product selection work, indicating that distributors still play an important role in product and brand promotion.

In fact, as shown in many FMCG annual reports, the numerous mom-and-pop stores, small supermarkets, wholesale markets, and convenience stores reached through distributors remain the main sales channels. For example, distributors account for nearly 90% of Weilong's performance, and Qiaqia Food reaches 70%.

**A Brief "Pain"**

After being "beaten" several times, Lin Feng and his peers began to plan a counterattack in their operations. Through repeated trials and adjustments, they reshaped their products and prices. "I go to these stores every day to see which products are priced low, and then I adjust my prices accordingly," Lin Feng said. For example, for price-sensitive products like Yibao and Nongfu Spring water, he would lower the selling price to the same level as the snack stores. But after a short trial, Lin Feng found that discounting not only reduced product profits but also led to a decline in overall revenue.

He then tried **adjusting product strategy and seeking differentiated operations.** For example, in seasonal sales, in summer he would prioritize displaying and promoting popular products like large bottles of carbonated drinks, beer, and juice, while staggering promotional times to avoid overlapping with snack store promotions.

Additionally, Lin Feng discovered that **bulk snack stores have limited product variety, mainly snacks, while daily necessities, as consumers' daily needs, are not covered by snack stores.** Afterward, he began to focus on introducing such products, attracting consumers with price advantages, and adding special offers like whole boxes of milk, rice, and eggs.

At the same time, he also **eliminated slow-moving products and introduced high-quality products preferred by mid-to-high-end customers.** This differentiated business strategy aims to increase customers' average purchase value, **satisfying the needs of 20% high-end customers with quality service, creating a competitive difference from snack stores.** After a series of strategy adjustments and attempts, Lin Feng's business approach seems to have a new direction, but the battle continues. In fact, from a historical perspective, there are many cases of traditional retail formats facing competition from discount stores. In the 1970s, hard discount stores sprang up like mushrooms in the United States. Facing such a competitive environment, 7-Eleven initially chose a strategy similar to retail giant Walmart: abandoning high margins, opening stores in low-cost gas stations, and trying to gain market share with low costs. However, this strategy eventually got 7-Eleven into trouble, even forcing it to be acquired by a Japanese company. Subsequently, under new leadership, Toshifumi Suzuki, 7-Eleven began to readjust its strategy. 7-Eleven realized that its competition with hard discount stores was not on the same level, so a low-cost strategy couldn't provide a competitive advantage. Thus, 7-Eleven abandoned low costs and turned to densely opening stores in cities, attracting consumers with convenience. By selling fresh food to increase gross margins and achieving high turnover through single-item management, this strategic choice allowed 7-Eleven to successfully compete with hard discount stores in a differentiated way, eventually standing on equal footing in the market.

From the 7-Eleven case, we can see that the winner in business competition is not necessarily the one with lower prices. Competition between formats is a complex process that tests the wisdom and resilience of operators in depth, breadth, and height. **Business competition is not simply a price war, but about finding your own advantages, providing better services, and more accurately meeting consumer needs.**

In China's retail industry, convenience stores and snack stores seem to be competing on the same track, but in essence, they are not. An industry insider said that snack stores, through professional backend operations and supply chains, have siphoned off all the high-margin categories from convenience stores, making their operations very difficult. Therefore, convenience stores need to transform, leveraging better locations and category differences—such as cigarettes and betel nuts—plus low-discount products, to leverage their competitive advantages. In other words, **convenience stores need to amplify their geographical advantages and adjust their product structure to find a way to survive in competition with snack stores.** Perhaps the ultimate fate of some bulk snack stores is already sealed, and they will fade away in competition, but there will still be profitable snack stores that survive and achieve long-term development. **New formats or models, from emergence to development to growth, will cause long-term "pain" to existing formats, but survival of the fittest means that formats that can meet consumer needs in the long run will eventually win.** Currently, the convenience store format is facing a long-term challenge.


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