Since announcing profitability in its main business last year, Lawson has significantly accelerated its development. Despite a slowdown due to the pandemic, it has maintained steady growth in total store count.

After the pandemic eased, Lawson has become even more aggressive in store expansion. From April to July this year, Lawson opened 28 stores in Chongqing; on June 30, three stores opened simultaneously in Hefei; on August 2, Lawson entered Tangshan with six stores; on August 8, it entered Wuhu with six stores; on the same day, it entered Nantong with five stores... At this pace, it is highly likely that Lawson China will surpass 3,000 stores by the end of 2020.

From the layout of these new stores, it is clear that Lawson's first entries are all in third- and fourth-tier cities, indicating a shift from traditional first- and second-tier convenience store markets to third- and fourth-tier and below regions with strong consumption power. This shift is related not only to rising rents and labor costs in first- and second-tier cities but also to the increasing development space for convenience stores in third- and fourth-tier cities driven by overall consumption upgrades.

As of the end of June, Lawson had 2,707 stores in mainland China after 24 years, with over 1,540 in East China, expected to exceed 1,700 by year-end, and Wuhan in Central China also expected to surpass 500 stores by year-end. Among foreign convenience store chains, Lawson ranks second, behind FamilyMart's 2,856 stores. Given the current expansion pace, it is almost certain that Lawson will surpass FamilyMart to become the largest foreign convenience store chain in mainland China by the end of 2020.

-01- Seizing the Lower-Tier Market

Since August, Lawson has entered several prefecture-level cities including Tangshan in Hebei, Wuhu in Anhui, and Nantong in Jiangsu, opening nearly 20 stores.

Among them, on August 8, six Lawson stores opened simultaneously in Wuhu, Anhui. This is Lawson's first city outside the provincial capital Hefei since entering Anhui in July 2018, and it is also the first time a major Japanese convenience store chain has entered a third-tier prefecture-level city like Wuhu. It is understood that Lawson plans to open 100 stores in Anhui this year, covering cities in southern Anhui such as Hefei, Wuhu, and Ma'anshan.

It is evident that Lawson is now focusing on third- and fourth-tier cities in key regions such as East China, Central China, and the Beijing-Tianjin-Hebei area, forming urban business circles by radiating from key cities to surrounding lower-tier cities, and seizing the lower-tier market. Regarding the strategic layout in lower-tier markets, Wang Jianfeng, General Manager of Lawson Anhui, stated, "We want to be pioneers, not founders."

This reflects Lawson's ambition for the lower-tier market and its demand for expansion speed. Unlike 7-Eleven and FamilyMart's expansion models in China, Lawson adopts a more flexible franchising approach, mainly divided into the large franchise model and the regional authorization model. The difference lies in whether the local market has Lawson's own supply chain; the regional authorization model requires agents to build the supply chain.

Taking the Anhui market as an example, Lawson's authorized operator in Anhui is Nanjing Central Emporium, whose supply chain mainly relies on its shareholder Yurun Group and its fresh food supply chain. Yurun Group, originally a food company, has hundreds of factories and thousands of products nationwide.

Currently, Yurun Group cooperates with Lawson's food R&D and production department to customize small-format products more suitable for convenience store sales, such as small food items weighing 25g to 75g. It is reported that Lawson frequently rotates products in stores, changing an average of 12% to 15% of products each month based on factors like popularity, with 130% to 150% of products being replaced annually.

"For Lawson, the most important thing is to master core resource integration capabilities, so we often position ourselves as resource integrators. " Zhang Sheng, Vice President of Lawson China, said. From Nanjing to Hefei, and then from Hefei to Wuhu, Lawson's authorized operators are all Nanjing Central Emporium, aiming to enable resource sharing and synergy between southern Anhui and southern Jiangsu, which have similar distances and consumption habits, thereby improving operational efficiency.

Based on this approach, Wuhu, located between Nanjing and Hefei, became Lawson's second stop in Anhui, and it will naturally enter cities like Ma'anshan to strengthen the density of the southern Jiangsu-southern Anhui business circle.

-02- Focusing on Community Retail

"During the pandemic, in locations where convenience stores previously had advantages, such as transportation hubs, schools, and hospitals, sales declined to varying degrees," Zhang Sheng said.

According to Zhang Sheng, during the pandemic, Lawson's store performance in East China achieved a 30% month-on-month growth, with growth in third- and fourth-tier cities far exceeding that in first- and second-tier cities. Taking Zhangjiagang, a county-level city under Suzhou, as an example, Lawson's community convenience store sales grew nearly 80% year-on-year, while Shanghai stores only grew about 10% to 20%.

Given such a stark contrast, Lawson has accelerated its layout of community convenience stores. Lawson's strategy mainly involves regionalized concentrated store opening, i.e., high-density store opening in a specific area, such as a certain district of a city, to form user awareness and attract more consumers to enter stores.

Once users have a certain level of brand awareness, the most important thing is to improve and refine product attributes in response to changes in consumer demand. At the same time, Lawson will also make efforts in category breakthroughs, introducing new retail formats such as "convenience store + coffee, catering, pharmacy," and other "convenience store+" models. In Zhang Sheng's view, changes in consumer demand not only need to be discovered from relevant data reports but, more importantly, relevant management personnel should go down to stores to actively listen to consumers' voices.

The boxed meal with a shelf life extended from 36 or 48 hours to 30 days came from Zhang Sheng's store visit during the pandemic. According to him, due to the pandemic, people generally reduced the frequency of going out to buy daily necessities, which prompted them to increase the quantity of single purchases. However, due to the short shelf life of boxed meals, it was difficult to meet customers' demand for single-purchase quantity, especially among young customers.

"These things cannot be fully reflected in data. After receiving the above information, I made some strategic adjustments for community retail, focusing on launching the 30-day shelf life boxed meals. Sure enough, sales immediately rose," Zhang Sheng said. Community retail must have three standard features: refined products, refined management, and precise marketing. The key to product refinement is to meet consumers' actual needs while ensuring product quality.

"When you can make 30-day shelf life boxed meals as delicious as short-term ones, you will have different opportunities," Zhang Sheng said.

-03- Maintaining a Young Customer Base

Among people aged 15 to 19, Lawson's stores in East China have ranked first in popularity in the convenience store industry for two consecutive years.

"Stay sensitive to the times, capture the needs of new consumer groups, and lock the user base to young people aged 12 to 19. " Lawson believes this is the key to achieving profitability in its main business and one of the core elements of its differentiation.

So how does Lawson capture the 'hearts' of young consumers? Zhang Sheng's understanding is to create three reasons for consumers to visit stores: first, dessert-driven visits that are easy to share and differentiated, coupled with reservation and in-store pickup functions to enhance customer experience; second, continuously optimize daily necessities such as fresh food to increase consumption stickiness; third, do well in regular products like cola and toothbrushes to increase consumer visit frequency.

At the operational level, first is perception, discovering and understanding the potential needs of young customers through frontline operations; second is paying attention to books, magazines, and activities that young people like; third is relying on third-party institutions to conduct market research reports on various age groups.

In addition, it is necessary to be flexible and adapt to circumstances. For example, affected by the pandemic, Lawson found that the nightlife of people aged 12 to 19 was somewhat restricted, so it made three "differences": first, age difference, doing more precise marketing for the 12-19 age group, such as joint promotions with beverage manufacturers like Cola and Sprite; second, temperature difference, further strengthening products in the 0-10 degree range; third, time difference, based on their habit of buying breakfast in advance, partnering with Meituan to launch fresh food delivery services.

Through this series of operations, Lawson's nighttime consumption and delivery sales reached 8%-10% of total sales, showing significant growth.

Currently, Lawson has over 10 million members, with more than 80% under 35 years old. From Lawson's perspective, maintaining the youthfulness of the target customer base and keeping the target customer age within the specific range required by the brand is always the key to maintaining brand vitality and competitiveness, and it is also the fundamental reason for the brand's longevity.

Source: Supermarket Weekly (ID: cacszk), Author: Lai Zhangping, Editor: Hu Yidao