Among various retail formats, convenience stores have been relatively less affected by the COVID-19 pandemic. Looking at the past few years, the market size and density of convenience stores have been on the rise. In addition to continued expansion in first-tier cities, the "store opening wave" has also begun to flow into second- and third-tier cities. With the lifting of pandemic controls, the convenience store industry will also usher in a new round of "enclosure movement." Sun Wenju, an audit partner at KPMG China, stated that from the perspective of other countries globally, the global convenience store market size has recovered to pre-pandemic levels. Given the significant decline in 2020, the current recovery is merely back to pre-pandemic levels. It is expected that the compound annual growth rate of global convenience stores from 2022 to 2023 can reach 8.7%. He said that in terms of penetration rate, in 2021, mainland China had one store per 7,033 people, which is far lower than South Korea, Japan, and the United States. This indicates that the market space for China's convenience store industry still has significant development potential. Meiyijia, Linji, and Jianfu are three representative companies in China's convenience store industry.
Meiyijia Breaking Through 30,000 Stores Currently, the brand worth paying attention to in the industry is Meiyijia, a convenience store brand that quietly rose from Dongguan. On November 30, the number of effective stores of Meiyijia nationwide exceeded 30,000. Whether in terms of city coverage, store count, or the performance growth brought by its digital transformation, it has attracted the attention of the industry. Meiyijia's expansion speed, from 10,000 stores to 28,000 stores, took less than 5 years. Regarding the growth code of Meiyijia, its chairman Zhang Guoheng frankly said, "I say Meiyijia has no secret at all. To survive, to live well, to live longer, we have slowly walked through these 25 years." On the 24th of last month, at the convenience store conference hosted by CCFA, Zhang Guoheng stated that Meiyijia now covers 20 provinces, 1,180 cities, and 4,385 townships, with over 60 million members. In fact, the entire Meiyijia consists of one headquarters, 5 war zones, 28 major regions, and 114 business divisions, which has built Meiyijia's net growth of 3,000-4,000 stores per year in recent years. Meiyijia also has 4 industrial parks and 37 logistics distribution centers. "Of course, the entire service system, information system, and development system all support Meiyijia to where it is today." In the development process of Meiyijia, he has the following considerations: First, what kind of path does a convenience store take? The logic behind this question is actually the issue of choosing who to serve. "You choose what kind of consumers, and you open what kind of store," Zhang Guoheng said. In China, there are 1.4 billion people, 34 provinces and municipalities, 333 prefecture-level cities, 2,843 counties, and 38,724 townships. There are abundant consumption scenarios for personal consumption, family consumption, and CBD consumption. CBD is just one part, and consumer demand is also increasing. But the Chinese market is very complex and diverse, so we need to think about what to choose and what to do when operating a convenience store. He said that Meiyijia considers a full-market, full-store-type development strategy, which is based on Meiyijia's own corporate considerations. "If you choose this strategy, the entire resource allocation, talent structure, and service support have requirements. So when we consider this issue, we hope to develop from CBD to communities, to rural areas, including fresh food stores, community stores, theme stores, and lifestyle stores. But this places very high demands on our entire system; this is just a choice for Meiyijia." Second, how to proceed? Should we operate direct stores or franchise stores? Franchising can quickly expand the market, while direct operation is conducive to deepening and thoroughly penetrating the market. But whether direct or franchise, there are many ways, and different ways require different actions. "Especially for franchising, how do you manage uniformly, how do you achieve unified procurement and distribution, and how do you achieve a consistent image? These are very big challenges," Zhang Guoheng said. Meiyijia mainly uses franchising, with multiple models simultaneously. So in terms of franchising, strong franchising, and city partner models, Meiyijia is also considering these issues. Third, where are China's convenience stores heading? Should convenience store companies develop regionally or nationally? This is also a strategic choice. If you want to develop nationally, you must have the capability for national development; if you want to develop regionally, you must have the capability for regional development. Especially for national development, at least you need a cross-regional national supply chain capability and a nationwide integrated information system; otherwise, you cannot support subsequent development. In addition, you need funds to support market cultivation and expansion, and the entire organizational system. For national development, everything is done by people; without organizational support, it is difficult to achieve strategic development. "Meiyijia's choice is a national development strategy, which has been accumulated for a long time before we could take this path. We hope to cover cities from first-tier to sixth-tier, and cover the entire rural areas; this is Meiyijia's choice," Zhang Guoheng said. Fourth, how to proceed in the future? Meiyijia's choice is digital retail. Through such a digital process, we aim to connect the entire chain of Meiyijia, carry out industrial upgrading, better integrate resources, improve efficiency, reduce costs, and serve customers. Zhang Guoheng emphasized, "We are in the convenience store business; we must learn well, and we must have our own strategic focus. Once we choose a strategy, we should do it with dedication." "More importantly, we must be down-to-earth. Once we choose, we should find ways to do it well."
"The Third Space of the City" Linji Convenience Store, which started in Anhui, achieved scale growth in just 5 years. "We achieved from 0 to 1, to over 980 stores, covering 16 prefecture-level cities in Anhui Province. In Fujian, Linji has opened nearly 50 stores in Xiamen, Quanzhou, and Zhangzhou," said Liu Zhongjian, founder of Linji. In Liu Zhongjian's view, a convenience store is not just a place to sell goods; in many cases, it is a place for emotional communication with customers. "I really want to make this store a third space in the city beyond home and office. Whether it's day or night, sunny or rainy, there is a place where you can sit freely, charge your phone for free, have a cup of coffee, and listen to music. This is what I want to do." Although rent in Hefei and Xiamen is not cheap, every Linji store, if conditions allow, has 12 tables for people to rest for free. "Many people don't understand, including some shareholders within Linji, but I insisted in the end. Today, many young people choose to discuss business there, and some even date there. Some children do homework there, and when there's nowhere to go late at night, they can sit there. I always believe this is the warmth of a convenience store," Liu Zhongjian said. The convenience store industry is a long-term investment industry; without ten years of dedication, it is difficult to achieve results. Regarding the choice between direct operation and franchising, he said that no matter what, we must make money for franchisees; any model that cannot make money for franchisees is not a successful model. "We have opened nearly 1,000 stores before we started trying franchising, because I think we now gradually have the capability to serve franchisees. It is essential that franchise stores make money; if they don't, relying solely on franchise fees is overdrawing the brand and harming the industry," Liu Zhongjian frankly said. To do well in convenience stores, the supply chain is very important. "First, what kind of customers do we have in mind? Our customers want low sugar, low salt, low calories, low fat, and most importantly, low prices. All customers want low prices; no one wants high prices." In terms of category management, he summarized five interesting "rather than" principles: First, "dry rather than wet." For example, instant noodles are dry; a person can't eat much of two packs of instant noodles, but many beverages are wet; Second, "eating rather than drinking." Using the instant noodle example, two packs of 200g are hard to eat, but 200g of drink is easy as a base; Third, "sour rather than spicy." For example, spicy strips are selling better and better; Fourth, "salty rather than sweet." Desserts are also an increasingly good market; Fifth, "sweet rather than bitter." Bitter is still a new market. Based on understanding customers through customer profiling, Linji focuses on operating "five high" products: First, high-appearance products, such as Genki Forest and Juice Ripe; Second, high-margin products, such as soy milk and grilled sausages; Linji makes the quality better and sells at a higher price, which consumers accept; Third, high-value products, such as premium milk like Yuexianhuo and Classy Kiss; Fourth, high-turnover products, like rice balls and sandwiches that young people like; Fifth, high-repurchase products, such as coffee. "Linji's coffee uses real Arabica beans because many of my investors have invested in coffee and know which beans are good, so we use good beans and pair them with fresh milk from Yuexianhuo." Liu Zhongjian said that Linji now has nearly 800 coffee machines, combining coffee with buns, hot dry noodles, sandwiches, and anything that can be combined, continuously selling coffee. "At first, we only sold 2 cups a day, but now many stores exceed 300 cups, so coffee is a huge market." In the Hefei area, although competition among convenience store brands is not as fierce as in Xiamen, after years of cultivation, the market and consumers have put forward higher requirements for convenience store consumption scenarios, not only in fresh food and product updates but also in store environment, convenience services, operating hours, and home delivery services, requiring continuous improvement and optimization of brands. "The future retail industry will definitely be digital and omnichannel with physical stores; the proportion of online sales will continue to rise. The pandemic has forced online shopping, and the decline in offline traffic and the increase in online share will also force retail enterprises to continuously improve their informatization and digitalization levels. After the pandemic, the digital transformation of retail enterprises will usher in a new climax," Liu Zhongjian said. Currently, convenience store brands in first-tier cities are numerous, each with its own strengths, fierce competition, and increasing difficulty in opening stores, while second- and third-tier cities and county markets still have significant development space. The uneven regional development provides huge imagination space for convenience store development. Liu Zhongjian said, "As a veteran with 20 years in the convenience store industry, I have to say that it is a very hard industry that requires long-term persistence. It takes ten years to sharpen a sword; you need to settle down, specialize, refine, and build brand advantages."
"Convenience Store Is a Lifestyle" With over 2,300 stores, ranking ninth in the 2021 China Convenience Store Top 100 list published by the China Chain Store & Franchise Association, and first in Fujian Province, Jianfu has been focusing on building its "internal strength" over the years and has continuously succeeded in passing challenges. Jianfu Chairman Zhang Li stated at the Xiamen Convenience Store Conference that a convenience store is actually a lifestyle. "We should ask more: why do customers come to us? Ask more: why do they come again? In my personal opinion, the entrance of traffic plus the entrance of cognition are the reasons why customers come to our convenience stores. Today, I regard this aspect as a scenario, called experience, space, community, and data, which constitute the big scenario of modern convenience stores." In Zhang Li's view, ten keywords are the decisive factors. First, customers. The source of business; we must return the right to choose to consumers. "Helping consumers choose is fine, but we cannot deprive them of the right to choose. Stores should become an important mechanism of the scenario, understand customer needs, respect customers, understand customers, and know customers. It's easy to say, but being thoroughly customer-oriented is extremely difficult, harder than reaching the sky," Zhang Li said. The biggest cost for an enterprise is customer acquisition cost, and the biggest loss is customer churn. Clarifying product structure and business portfolio is the solution for customers. A people-centered understanding defines new scenarios and creates new categories. Second, model. Deliver value and create unique value for customers. "Strategic goals and strategic resources must match. Pay more attention to who gives us our rice bowl, and less to who is snatching it; don't put the cart before the horse," Zhang Li said. Third, product. How to achieve "few but complete"? Convenience stores are not like supermarkets where SKUs can be many. Due to area and location constraints, convenience stores can only achieve "few but complete" to reduce customers' choice pain. In terms of product positioning, we should choose four positions: the "little white rabbit" that attracts customers, the "watchdog" that must exist in customer cognition, the "wolf" that can bring high profits, and the "mountain-guarding tiger" that can connect highly with customers. Fourth, channel. Meet unexpectedly and reduce customers' purchase costs. "From the past '4P'—product, price, place, promotion—to our '4D'—customers' knowing, getting, thinking, and buying. From the separation of online and offline to the full integration of online and offline now," Zhang Li said. Fifth, organization. Organizational growth reduces customers' communication costs. Convenience stores should be small, beautiful, and quick to respond, maintaining flexibility and resilience, especially for private convenience stores. Sixth, brand. Pay attention to the first principle and start with the end in mind. If you can't be the first nationally, be the first in Xiamen; if you can't be the first in Xiamen, be the first in Haicang. It's all possible. Adhere to long-termism and do the right but difficult things. Seventh, role. Convenience stores play multiple roles to provide customers with extraordinary experiences. From supplier to co-player with customers, supplier of goods, co-creator of content, co-thriver of services, and co-builder of the ecosystem. Based on the supply chain, serve the industry chain, and create customer value. Eighth, environment. Awaken confidants and create a comfortable atmosphere for customers. Handle the spatial relationship among employees, customers, and products well. Don't pursue customer loyalty; ask more and strive to be loyal to customers. "The biggest difference between us and internationally renowned brands is that customers who come to our Jianfu basically come once every three days, while customers of international brand convenience stores basically go three times a day, because our products and services cannot meet customers' needs for three visits a day." Ninth, franchising. The soul of chain operations; let more customers serve customers. Share the visible money, earn back the invisible money, operate the brand together with customers, and let customers earn money easily and with dignity. At the same time, understand that "a father is strong for his children, and a boss is strong for his employees." Tenth, cycle. Cross life and death, and serve customers forever. "I hope to tell everyone that except death, everything will gradually drift away from us. Brand value, organizational value, and customer value are what can cross cycles." Creating value, delivering value, and perceiving value for customers is the only value for us "convenience store people" to survive. "Realize the modernization, branding, chain operation, standardization, and capitalization of China's convenience stores. Make convenience stores the infrastructure of modern consumer society and an important part of consumers' lifestyles," Zhang Li said.