Click on the image for details Quanshi, amidst its turbulent times, may have no direct connection with Yinlu or its parent Nestlé, but its full acquisition has become an indisputable fact.
Core Guide:
Is Quanshi caught in an acquisition "Rashomon"?
What is the value of Quanshi convenience stores?
Quanshi's fate is temporarily settled, but where is the road for small-format retail chains? Quanshi has finally found its best归宿! Recently, New Distribution exclusively learned from inside Quanshi that the well-known domestic convenience store chain brand Quanshi has completed the package sale of its chain stores in Beijing, Tianjin, and Chengdu, with asset transfer basically completed, bringing an end to the nearly one-year acquisition saga. 1 The Rashomon of Quanshi's Ownership Change Through the WeChat official accounts of Beijing Quanshi Convenience, Tianjin Quanshi Convenience, and Chengdu Quanshi Convenience, we can see that although the three accounts were established not long ago, their entities have been certified as "Beijing Shanhai Lantu Commercial Co., Ltd.", "Tianjin Shanhai Lantu Commercial Co., Ltd.", and "Chengdu Shanhai Lantu Supermarket Management Co., Ltd." (collectively referred to as Shanhai Lantu). On the Beijing and Chengdu Quanshi convenience store official accounts, we even see the Quanshi trademark protection mark held by Beijing Quanshi, indicating that Shanhai Lantu and Quanshi have established cooperation and consensus at some level, not just a unilateral registration of the official account name by Shanhai Lantu. Image source: Tianjin Quanshi Convenience Store WeChat Official Account Image source: Chengdu Quanshi Convenience Store WeChat Official Account Image source: Beijing Quanshi Convenience Store WeChat Official Account So what is the background of Shanhai Lantu? Image source: Qixinbao As shown in Qixinbao information, the actual controller of Shanhai Lantu in all three locations is Cai Xueyan. Coincidentally, the former vice president of Yinlu Food Group (a wholly-owned subsidiary of Nestlé) is also named Cai Xueyan, and he also serves as legal representative or executive in multiple companies, including some with "Shantu" in their names. According to insiders at Yinlu Group, Cai Xueyan has already left Yinlu Food Group, but the acquisition of Quanshi was indeed his doing. Image source: Qixinbao Prior to this, there were industry rumors that Quanshi was frequently in talks with Suning and Wumart about acquisition, but these were shelved due to high asking prices. However, it is now certain that Shanhai Lantu finally offered a price acceptable to both parties. After all, with the capital winter approaching, there is not enough money in the market to support Quanshi's high asking price, and Quanshi has finally found a good home for itself. 2 Quanshi Faces Its "Seven-Year Itch" Now let's look at the other protagonist in this event - Quanshi Convenience Store. Founded in 2011, Quanshi had reached its seventh year of development by the end of 2018. As a brand hailed in the industry as "the only convenience store brand that can rival 7-Eleven," Quanshi has been at the forefront of the industry in both development speed and innovation. Its journey to where it is today has not been easy. In February 2011, Quanshi opened its first convenience store in Beijing Wanda Plaza. From the very beginning, then-General Manager Zhang Yungen (who joined Quanshi in 2012 and is now the Managing Director of Guoduomei) established the positioning of "heavy-asset chain convenience store" for Quanshi, benchmarking against the three major foreign convenience store brands. In subsequent development, it continuously improved its backend construction, gradually added fresh food supply chain, and completed the transition from first-generation stores to fourth-generation stores. Even when facing giants like 7-Eleven, Quanshi in its early development chose to rise to the challenge. In terms of store location selection, dozens of Quanshi stores were within 100 meters of 7-Eleven stores, creating direct competition. It was this attitude, coupled with "featured services + business format innovation + heavy asset support," that enabled Quanshi to gradually establish a foothold in the Beijing market. In 2015, Quanshi officially expanded beyond Beijing and began its development in other regions. Its first stop was Chengdu, led directly by current General Manager Yang Bo. Since then, Quanshi entered the fast lane of development. By May 2016, Quanshi had opened 260 stores in Beijing, successfully becoming the number one convenience store brand in Beijing, and 30 new stores in Chengdu. In 2017, Quanshi fully expanded its business lines, self-built logistics, entered B2B through Quanshi Hui, and created Quanshi MINI, etc., with combined business formats flourishing. It gradually expanded into markets such as Hangzhou, Suzhou, Tianjin, and Wuhan. In just over two years, by 2018, Quanshi's store count in Beijing had risen to over 400, officially surpassing 7-Eleven and Linjia to continue leading the Beijing convenience store market. Quanshi's national store count also exceeded 600, while 7-Eleven, which had been operating in Beijing for 12 years, had only 219 stores in Beijing at the beginning of 2017. Unlike the dense distribution of convenience stores in Shanghai and Guangdong, the northern region has far fewer convenience stores due to weather, road conditions, and past policies, and Quanshi has undoubtedly become a representative of the convenience store brand in North China. The turning point came in the second half of 2018. In November, Quanshi was affected by the P2P incident related to Fuhua Holdings, and its capital chain broke completely. All five stores of the sister brand "Earth Harbor" nationwide were closed. Quanshi naturally could not stay immune, with negative news such as unpaid wages, unpaid supplier accounts, and store stockouts constantly emerging. Now that this acquisition event seems to have settled, it can allow Quanshi to land smoothly in the short term. 3 What is Quanshi's True Value? 1. Policy support for the development of the convenience store industry, with a promising future. On October 18, 2018, seven departments including the Beijing Municipal Commerce Commission, Development and Reform Commission, and Finance Bureau jointly announced the "Notice on Printing and Distributing Several Measures to Further Promote the Development of Convenience Stores," which from a policy perspective helps reduce operating costs and standardize business processes for the convenience store industry, conducive to long-term sustainable development. Quanshi is undoubtedly a good foundation for development. 2. The special nature of the convenience store format, connecting upstream to brand owners and channels, and downstream to consumers, with strong connectivity attributes. Whether it was the B2B that was all the rage a few years ago or the currently hot community group buying e-commerce, offline stores are a crucial part of the entire supply chain. 3. Store density and supply chain capability. Although it has been plagued by capital chain issues since last year and stores have frequently experienced stockouts, it is undeniable that Quanshi remains a leading convenience store brand nationwide, especially in the Beijing market. In the "2018 China Convenience Store TOP 70 Ranking" released by the China Chain Store & Franchise Association, Quanshi ranked 23rd with 600 stores, a remarkable achievement. In the Beijing market, Quanshi stands out with over 400 stores. 2018 China Convenience Store TOP 70 Ranking Image source: CCFA As is well known, the store density of a convenience store enterprise is directly proportional to its bargaining power with upstream brand owners. That is, the higher the store density, the stronger the bargaining power, and the higher the efficiency of warehousing and distribution, and the better the gross margin performance. Undoubtedly, Quanshi has this capability in some markets, which also means Quanshi has a relatively excellent business team and operations team. 4. High proportion of fresh food. The core business of convenience stores is fresh food. To some extent, the quality of a convenience store enterprise can be measured by the proportion of fresh food in its sales. Therefore, we see that the three major foreign convenience store brands have their own characteristics in fresh food categories, and they account for a relatively high proportion of overall store sales. Domestic convenience store brands have also been making unremitting efforts to develop fresh food in recent years, but with little success. Although Quanshi's fresh food category still has a significant gap compared with 7-Eleven, FamilyMart, and Lawson, compared with most domestic convenience store industry participants, it is something that the latter cannot match in the short term. In addition, in terms of sales per square meter and single-store output, Quanshi's revenue capability is far higher than other domestic convenience store brands. 4 What Impact Does the Sale of Quanshi Have on the Chain Retail Sector? What impact does the package sale of Quanshi's core store assets have on the entire offline chain convenience store sector? In this regard, Wang Jun, an expert in the new retail industry, believes: This news finally settled the last suspense of the chain convenience store capital wave pushed to the forefront by new retail in 2018. With the arrival of the capital winter in 2019, the vigorous investment and acquisition boom in chain convenience stores has come to an end. Invested enterprises affected by the P2P thunderstorm have also found their own归属. The most lamentable is Linjia Convenience. With nearly 200 stores in Beijing, except for a few store properties taken over by Wumart, it has disappeared. People still remember the feat of Wang Zi almost emptying the middle management of Beijing 7-Eleven when he founded Linjia. Now he is the operating CEO of Bianlifeng. The core brain team of Sanxin Chenghai, which was part of the retail chess game laid out by Chunxiao Capital, came from 7-Eleven executive Liu Yue, who led the team to join Xi'an Every Day Convenience, continuing to combine Japanese management and supply chain capabilities with local convenience store models. In Hefei, Linji Convenience has opened over 100 stores, establishing a foothold in Hefei and starting to open stores in Wuhu. This entrepreneurial project by former Shizu Convenience executives seems to have been little affected by subsequent issues with the investors. As the chain brand with the most stores in Beijing, Quanshi has long been recognized by local consumers for its location value, operational capability, and especially its fresh food section. In a city like Beijing, where convenience store operations are difficult, a layout of nearly 400 stores is of great strategic value. Chengdu is the earliest external market Quanshi expanded into, with steady development and solid locations, including multiple subway station locations. Although Quanshi entered the Tianjin market relatively late, it has developed rapidly. During this process of seeking investment and acquisition, it went through many hardships. Several FA institutions contacted almost all possible buyers in China, but most failed to reach an agreement due to valuation issues. Time passed until the cold of 2019 arrived, and it is not hard to imagine the difficulty of negotiations. But regardless, this most standardized heavy-asset local convenience store chain brand seems to have weathered this crisis. We hope it can be steady and create new brilliance. In the vigorous new retail wave, chain convenience stores have also received unprecedented capital attention. But two years have passed, and capital has to face the reality that this retail format requires long-term investment and has a slow return cycle. The road of innovation and change is still long. Every chain convenience store enterprise is experiencing system upgrades and iterations. With rising housing prices and labor costs, it is necessary to build a layout density of over 200 stores in each city. This is a format where opening a store is easy, but operating it is difficult. Suning Xiaodian has become the biggest highlight in 2019. With such rapid development, its supply chain, talent training system, and capital reserves will face enormous pressure. All convenience store people who have studied in Japan have the biggest feeling about the gap in service levels. There are many "unlearnable" things everywhere. Because it is easy to improve the operation of a single store, but it is extremely difficult to replicate it to thousands of stores nationwide. "Products + Services" is the essence of retail. How far can a retail enterprise that does not make money run? In the second half of the internet in the traffic era: Combining online and offline, highlighting home delivery services, and increasing the proportion of fresh and short-shelf-life products are all challenges that require trial and error. In 2019, both investors and chain brand operators are thinking about ways to break the deadlock. Here are three perspectives for retail practitioners: 1. Trends in the value of traffic
In the past, the most valuable thing was location (golden corner, silver edge), acquiring offline traffic.
Now, the most valuable thing is traffic, competing on the ability to acquire online + offline traffic.
In the future, the most valuable thing will be fans, focusing on member recognition and value-added services. All of this will eventually converge into brand value, and channel brands will only succeed with this capability. Every retail chain enterprise needs to re-understand "new marketing." 2. Trends in technology and full-chain dataization Don't easily try to develop proprietary systems. What is the significance of a 300-person development team doing repetitive work?
Last year, Tencent refined 7 tool combinations to empower stores, calling this system Smart Retail.
Alibaba released an 11-item digital business capability, called the All-Round Digital Business System. In the era of technology and digitalization, recognizing your boundaries and core capabilities lies in application innovation and service capabilities. Every retail enterprise should fully utilize "IP marketing" to build its fan economy. 3. Trends in sharing and being shared of basic capabilities Building and marketizing urban distribution capabilities for multiple deliveries per day: Urban distribution is a big topic. Currently, the single-city operating efficiency of the most professional urban distribution companies in the country may not be as good as the distribution system of a chain convenience store in that city. The reasons behind this, besides the fixed locations and planned distribution of chain convenience stores, hide huge marketization space.
Sharing of store locations and shelves: Composite stores have become an important form of huddling together for warmth, sharing costs, and diverting traffic to each other. Over-the-counter drugs, breakfast projects, and vegetable basket projects are all major livelihood projects. Besides government subsidies, they can also become the business logic of composite stores.
Traffic sharing: Store traffic is the most important resource for offline retail, and it has not been developed well enough because the average time customers spend in the store is less than three minutes, and store staff often hold multiple roles and cannot engage in too much interactive marketing. But the rise of community group buying models has shown retailers the huge value of low-cost offline store traffic once it has a monetization path. Chain convenience stores are the smallest granularity format related to a city's livelihood, scattered on streets and communities throughout the city. Their unified and integrated management system makes them the most valued partners for all brand owners and channel providers. Their location value will become increasingly prominent. Recognizing core competitiveness and finding the second growth curve is the way to go. Relying on payment terms and deducting backend fees will only quench thirst with poison and accelerate decline. The traditional theory of "fat headquarters, thin stores" is no longer suitable for modern development. A small headquarters with a large middle platform, fully serving stores, and achieving "thousand stores with thousand faces" under big data support is the future! Chain convenience stores have been in China for 20 years. Under the dual pressure of external forces and internal high pressure, it is believed that the first evolution and change is about to come. New Distribution will hold the 2019 (5th) FMCG + Internet Conference during the Chengdu Spring Sugar and Wine Fair from March 16 to 18. This conference will focus on the topic of "Breaking the Deadlock" and conduct in-depth discussions with many brand owners, supply chain service providers, distributors, and retailers. Compared with previous conferences, this summit will be fully upgraded. In addition to the original topics such as channel innovation, urban distribution logistics, and distributor transformation, it will also add multiple parallel forums on new marketing cases, IP + FMCG empowerment, community group buying, and innovative retail. Through three days of ten high-density, high-quality expert sharing and exchanges, we believe every brand owner and distributor can learn the latest business models, expert opinions, and practical methods, finding new tools and methods to break the deadlock in 2019 and return to the track of rapid growth. Review of Previous Conferences -END-