How long has it been since you last visited a mom-and-pop convenience store on your way home from work? When you're hungry and thirsty, the first thing that comes to mind might be the Lawson or FamilyMart at the street corner. Through the glass window, seeing the steaming oden and steamed buns inside, aren't you eager to rush in? Meanwhile, the old Zhangs and Lis who run mom-and-pop shops have grown accustomed to sitting around all day, sipping tea and scrolling through Douyin, only getting up to ring up a sale when someone buys a bottle of water.

Currently, mom-and-pop shops are facing a "siege" from various retail formats such as convenience stores, community group buying, and instant delivery services. The "Buddha-like" attitude of mom-and-pop shop owners seems to carry a hint of helplessness.

Faced with this predicament, what changes should mom-and-pop shops make? How will chain convenience stores, as formidable competitors, evolve in the future? Let's explore these questions one by one.

The Rise of Chain Convenience Stores and the Decline of Mom-and-Pop Shop Traffic

From 2013 to 2019, the convenience store industry grew at an average annual rate of 18.1%, higher than the 1.6% growth rate of the overall offline retail industry, with a total of 160,000 stores. In 2020, traditional convenience stores achieved total sales of over 276 billion yuan, setting new records in both store count and sales, with rapid growth.

Mom-and-pop shops in first-tier cities are visibly disappearing. According to the New Distribution "2020-2021 FMCG Retail Small Store B2B2C Research Report" , mom-and-pop shops in lower-tier markets account for 75% of the national total. The frequency of consumer visits and average transaction value are significantly declining, and shop owners have mixed feelings about the future, indicating that mom-and-pop shops are on a downward trend.

(Image source: New Distribution "2020-2021 FMCG Retail Small Store B2B2C Research Report")

Online retail grew at an average annual rate of over 17.1% from 2018 to 2020, capturing a portion of the original offline traffic.

Consumer traffic is finite. Under the influence of online e-commerce, offline convenience stores, and community group buying, the foot traffic to mom-and-pop shops is visibly decreasing.

From a broader market perspective, consumption is rapidly changing. Driven by national policies promoting urbanization, higher income levels, and improved quality of life, mass consumption is moving toward "higher prices and higher quality." The younger generation is becoming the main consumer force, and due to their favorable upbringing, they pursue consumption quality more than the previous generation.

From a commercial standpoint, traditional mom-and-pop shops are independent business entities without organization, with outdated business models. They face higher procurement costs and offer product assortments highly similar to competitors, resulting in low market competitiveness.

In contrast, many new chain convenience stores not only introduce fresh food categories to attract consumers but also build strong supply chain systems to develop and sell private-label products.

Compared to mom-and-pop shops, chain convenience stores have significantly higher gross margins. They also have professional teams analyzing consumer behavior to continuously improve product display and shelf layout, thereby increasing repurchase rates.

Of course, compared to chain convenience stores, mom-and-pop shops are not entirely without advantages. Customer relationships are precisely their core appeal, especially in China's relationship-oriented society. Additionally, mom-and-pop shops have a price advantage; for price-sensitive groups, convenience stores may not be their first choice.

Chain convenience stores have more advantages: high-quality fresh food and desserts, selected imported goods, streamlined SKUs, seating areas, excellent in-store environments, young and energetic staff, self-checkout, bright lighting, and more.

In terms of location, chain convenience stores are often situated in commercial areas and near schools, where the surrounding consumer base has strong purchasing power. Mom-and-pop shops are closer to communities and nearby streets, catering to a middle-aged and elderly demographic.

At first glance, chain convenience stores indeed have more advantages in retail.

Since chain convenience stores are so good, will mom-and-pop shops be replaced?

Competition or Divergence?

Before chain convenience stores disrupted offline retail, other players had already threatened mom-and-pop shops: food delivery services and community group buying.

O2O services not only discourage consumers from going out but also shift traffic. Previously, consumers might go out to see a movie, have lunch outside, and buy a drink from a small shop when thirsty on the way. Now, staying at home, they order meals and drinks via their phones, and their computers and phones satisfy all entertainment needs, with food and drink delivered to their doorstep.

Community group buying follows a similar logic, using "direct sourcing from origin and door-to-door delivery" to take away customers from many traditional small shops that rely on selling vegetables and fresh produce. Even if some small shops cooperate with food delivery and community group buying platforms, most terminal stores still suffer unavoidable traffic losses.

Fewer people go out, fewer people are on the streets, and mom-and-pop shops along communities and streets are having a harder time.

Chain convenience stores are less affected by O2O. Convenience stores in communities, office buildings, and subway stations cater to many office workers' breakfast needs. Additionally, their distinctive fresh food and desserts continuously attract repeat customers, making them more resilient to the impact of O2O compared to traditional stores that rely on selling fruits and vegetables but do not venture into fresh food.

Returning to the mom-and-pop shops and convenience stores themselves, the two terminal formats have both differences and overlaps in competition, with main differences in location, product selection, and labor costs.

Many mom-and-pop shops do not open in commercial areas or subway stations because these locations have high foot traffic but also high rents; mom-and-pop shops without financial strength cannot afford these locations.

In terms of product selection, chain convenience stores typically carry 1,000 or fewer SKUs, while mom-and-pop shops can reach 3,000 to 4,000+, covering categories like hardware and daily household items. Compared to convenience stores, mom-and-pop shops are truly the "general stores" of the community.

Additionally, chain convenience stores offer fresh food, desserts, and imported goods, targeting younger consumers. Those who frequent mom-and-pop shops are often families, more concerned with price, practicality, and product variety.

The difference in labor costs is even more pronounced. Mom-and-pop shops have no wages; the couple is self-sufficient, typically open from 6 or 7 a.m. to 11 p.m. or midnight, with no holidays. Since they are their own bosses, they go all out to manage the store well.

In contrast, chain convenience stores not only pay staff salaries but also 24-hour operation increases costs by one-third, and many chain convenience stores require two or three staff members to operate, needing to consider shifts, procurement, and delivery, leading to a sharp rise in costs.

For employees, they may not put in their best effort, and sometimes their service attitude is lacking, discouraging customers from returning.

Therefore, in terms of consumer groups, the two formats have clear differences. For chain convenience stores, the main user group is the younger generation seeking novelty and quality of life, while for mom-and-pop shops, customers are mostly families and middle-aged to elderly groups.

From a location perspective, the differences are also significant. Chain convenience stores are typically located in commercial areas and subway stations where foot traffic is high and young people frequent, while mom-and-pop shops rely on community traffic and are found in residential areas with a lively atmosphere.

Although many chain convenience stores are expanding into communities, a closer look reveals that only young people patronize these community chain stores, while the mom-and-pop shops in the same community are the favorites of families and the middle-aged and elderly.

Considering the target demographics, chain convenience stores have taken away some young customers who buy drinks and snacks from mom-and-pop shops, and also some customers from restaurants, but it is too early to say they seriously threaten the position of mom-and-pop shops.

The Future of Mom-and-Pop Shops and Chain Convenience Stores

Compared to the unorganized and weak mom-and-pop shops, chain convenience stores will have an edge in future competition.

First, chain convenience stores have stronger financial resources, with sufficient investment in product development and facility improvements to create customer loyalty. Additionally, since they are often located in high-traffic areas, this investment yields quick returns.

Mom-and-pop shops are at a disadvantage. Lack of funds not only prevents them from offering good products and services but may also cause them to "reverse" due to insufficient marketing experience. Moreover, mom-and-pop owners generally have lower education levels and are focused on making money without patience for learning, making the Matthew effect increasingly evident.

Second, chain convenience stores have more market experience and know how to solve problems when they arise, making expansion much easier.

Not to mention domestic chains like Meiyijia, which have expanded nationwide and are already familiar with the domestic market, even foreign companies like 7-Eleven, which has stores worldwide, will open the door to lower-tier markets in time unless policies restrict them.

Meanwhile, mom-and-pop shop owners are busy all year round with purchasing, moving goods, stocking shelves, cashiering, and bookkeeping, leaving no time to go out, learn, and summarize experiences, so they remain stagnant.

Most importantly, mom-and-pop shops are just a channel without their own brand and supply system. Why are so many chain convenience stores striving to develop private labels, improve supply chain management, and enhance supply efficiency? It is to stand out in a highly homogeneous market and have unique charm.

Mom-and-pop shops are more like shelves for displaying goods, relying on thin margins to sustain operations, making it difficult to become market leaders. Depending on others for their livelihood, they face starvation if supplies are cut off.

In conclusion:

To survive future competition, mom-and-pop shops must keep up with market trends, leverage their advantages of low operating costs and flexible displays to differentiate their products and services, continuously learn and improve their understanding of the industry and their own business, and find their precise market positioning.

The end of competition is not a life-and-death struggle, but finding your own position and serving your customers well.

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