---
title: "Three Years of the Pandemic: Changes in the Convenience Store Industry"
description: "The pandemic has changed consumer behavior and driven digital transformation across the retail industry, leading to changes in the convenience store sector. From 2017, convenience stores saw a resurgence with capital investment, but by 2020, the pandemic impacted all industries, altering consumption patterns and accelerating digitalization. Comparing before and after the pandemic, Chinese convenience stores have shown divergent paths based on localization strategies."
author: "东方"
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published: "2022-10-21"
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# Three Years of the Pandemic: Changes in the Convenience Store Industry

> The pandemic has changed consumer behavior and driven digital transformation across the retail industry, leading to changes in the convenience store sector. From 2017, convenience stores saw a resurgence with capital investment, but by 2020, the pandemic impacted all industries, altering consumption patterns and accelerating digitalization. Comparing before and after the pandemic, Chinese convenience stores have shown divergent paths based on localization strategies.

The pandemic has changed consumer behavior and driven transformation across the retail industry, leading to changes in the convenience store sector.

**01** The COVID-19 pandemic has altered the business ecosystem and become a watershed for the convenience store industry. Starting in 2017, the convenience store sector saw a resurgence, with capital pouring in for expansion. However, by 2020, the pandemic affected all industries, changing consumer behavior and driving digital transformation across retail, and the convenience store sector has evolved accordingly. Comparing before and after the pandemic, in terms of path selection, Chinese convenience stores have gradually branched out based on localization thinking. For example, highway convenience stores like Sinopec Easy Joy and PetroChina Kunlun Hao Ke; Meiyijia, which uses a franchise model and targets lower-tier markets; JD.com and Tmall convenience stores aimed at acquiring traffic entry points; and tech-driven convenience stores like Bianlifeng and Xi'an Every Day, which apply internet thinking. In reality, even without the pandemic, convenience store operations have never been an easy business. On one hand, although China's convenience stores started relatively late, online shopping, express delivery, and the fast-food industry are relatively prosperous, meaning the retail focus has increasingly shifted to e-commerce distribution. On the other hand, convenience stores are a business that heavily tests the supply chain, requiring dense regional store openings and joint distribution to reduce operating costs through planning and centralization, fully leveraging network and scale effects. This is why Chinese convenience stores exhibit regional and fragmented characteristics, making it difficult to form national chains. Under the influence of the pandemic, the performance and changes of regional brands have varied.

Yang Xiang, founder of Jiangxi Ledoujia, told Ling Shou that before and after the pandemic, Ledoujia underwent significant changes: first, in terms of development path and business results, efficiency has outweighed scale; second, talent and organizational capability building, as well as information capability building, have become more important; third, greater emphasis on providing differentiated services to customers to reduce homogenization; fourth, a greater focus on business reforms that yield long-term returns. In the first half of the year, amid repeated pandemic shocks, Ledoujia achieved growth. "In the first half of this year, overall performance and comparable store performance both grew, thanks to a year-on-year increase in store numbers and improved internal operational capabilities," Yang Xiang told Ling Shou. In terms of store expansion, Ledoujia currently has over 500 stores. Since its founding in Nanchang in 2012, its first major market has been Nanchang, and it now covers all 11 prefecture-level cities in Jiangxi Province, with a team of over 1,000 people. In 2017, revenue reached 450 million yuan; in 2020, it successfully achieved monthly sales exceeding 100 million yuan, maintaining an annual compound growth rate of over 60%. It now covers Nanchang, Jiujiang, Shangrao, Ganzhou, Ji'an, Yichun, Fuzhou, Jingdezhen, Yingtan, and other cities. By the end of this year, Ledoujia plans to open 600 stores.

In recent years, Jiangxi's "instant retail" business has developed rapidly. Data from the retail platform Meituan shows that from January to July this year, the instant retail orders of various market entities in Jiangxi Province, including convenience stores, vegetable markets, large supermarkets, and mom-and-pop shops, all grew faster than the national average. Among them, convenience store instant retail orders grew by 31% year-on-year, large supermarkets by 83%, and mom-and-pop shops by 160%. Ledoujia has built its competitive moat by creating a unique near-field consumption scenario. First, in terms of distance setting and the entire transaction logic, Ledoujia must be half or even one-third of the delivery distance to ensure customers get what they see. Second, in Ledoujia's concept, convenience store operations are a 10-meter business, measured in meters, not kilometers or hundreds of meters. Yang Xiang said that in the future, there are no clear plans for store numbers or regional expansion, but rather a priority on internal talent and organizational building, product differentiation competitiveness, sustainable franchise models, transferable organizational capabilities, and information capabilities. Amid the pandemic, Ledoujia, which is not eager to expand store scale, focuses more on cultivating its "internal strength."

**02** In addition to steadily growing store numbers, the improvement of internal operational capabilities is also key to Ledoujia's performance growth. Yang Xiang told Ling Shou that currently, Ledoujia has 4,000 SKUs, fresh food accounts for 32%, store gross margin is 30%, and daily sales per store average around 7,000 yuan. Ledoujia's core is to serve consumers and manage individual products, rather than becoming a tool for any supplier. Taking tea eggs as an example, tea eggs are a standard convenience store product. Last year, Ledoujia upgraded its tea eggs: first, the yolk must be infused within 30 minutes of cooking; second, peeling the tea egg must be as clean and neat as peeling an apple; third, there must be a certain price advantage. The egg can be cooked so that the flavor penetrates the yolk within a specified time, and the key lies in breeding and feed. The shell strength of eggs can be adjusted through breeding. Last year, after the second half of the year's update, Ledoujia's tea egg sales saw some year-on-year growth. With continuous refinement, even original single products have great potential. Last year, Ledoujia invested in a factory specializing in rice noodles, producing beef offal noodles, egg noodles, and stir-fried noodles. This unique localized product and industrial production is also a very important thing for Ledoujia. Including various beverage cups exclusively developed by Ledoujia, with a 72-hour shelf life, sales are quite good. In Ledoujia's view, uniqueness must start with the industrialization of catering. This also makes the R&D center a core asset of Ledoujia.

Regarding the future market development of the convenience store industry in the post-pandemic era, Yang Xiang holds an optimistic attitude, stating that the market will continue to improve. For future development changes, Yang Xiang gave his own judgments: first, within the convenience store industry, more convenience store enterprises that create "true value" for consumers will achieve long-term sustainable growth; second, in terms of operational performance, the industry will further detach from the convenience store format represented by "Japanese-style" convenience stores; third, more socialized differentiated product organization forms, rather than closed organizational forms; fourth, information capabilities will become a basic standard capability; fifth, convenience stores will show more precise ability to capture target customer groups, and clearer boundaries for the enterprise itself; sixth, more excellent industry talent will join the industry, promoting innovation in convenience store organizational capabilities, management capabilities, and profit models.

In addition to Jiangxi Ledoujia's adjustments and changes, Linji Convenience Store, which started in Anhui, has also undergone significant changes compared to before the pandemic.

**03** Linji founder Liu Zhongjian told Ling Shou that the pandemic has had a significant impact on all industries, with the most direct impact being on customer flow. However, for the convenience store industry, the impact is relatively small. For stores in certain regions, due to various reasons, performance has even grown. He said that during the repeated pandemic periods, online channel sales growth for convenience stores has been stable. Compared to before the pandemic, Linji's WeChat mini-program orders have grown more than threefold. Now, Linji's mini-program and online user base has reached around 300,000. "The future retail industry will definitely be digital and omni-channel with physical stores, and the proportion of online sales will continue to increase. This pandemic has forced online shopping, and the decline in offline customer flow and the increase in online proportion will also force retail enterprises to continuously improve their informatization and digitalization levels. After the pandemic ends, the digital transformation of retail enterprises will usher in a new climax," Liu Zhongjian said.

Regarding the Hefei region, competition among convenience store brands is not as fierce as in Xiamen, but after several years of cultivation, the market and consumers have put forward higher requirements for convenience store consumption scenarios, not only in terms of fresh food and product updates, but also in store environment, convenience services, business hours, and home delivery services, requiring brands to continuously improve and optimize. For Linji, a "local tyrant," with the large market saturated, can more brands be accommodated outside Anhui's "comfort zone"? The development models of different regions will be a major challenge. Facing challenges outside the "comfort zone," Linji continues to deepen its efforts: first, it insists on positioning itself as a business-oriented convenience store, targeting white-collar workers in second- and third-tier cities as the main customer group, with a younger store decoration style, many fresh food categories, and a leisure area as a major feature. Second, in terms of site selection, it focuses on business buildings, hotels, apartments, urban complexes, and transportation hubs where young people gather, emphasizing customer experience. It provides nearby consumers with five meals a day: breakfast, lunch, afternoon tea, dinner, and late-night snacks. It insists on 24-hour operation, with an average of 12 leisure tables and chairs in each store for customers to rest, charge, and use the internet for free 24 hours a day, and also provides free humanized scales and makeup mirrors in the store. "Creating an urban leisure third space, building a fashionable social space and business function area on top of the convenience store, allowing consumers to reduce travel costs while gaining new consumption experiences and stimulating more consumption potential," Liu Zhongjian said. Third, open franchise opportunities to increase coverage density. Linji adopts a "direct operation first, then franchise" business model, and its two brands, "Linji" and "Xianglin," vigorously develop franchising, with the goal of making franchise owners money, with the vision of jointly growing the chain brand, jointly promoting regional market development, improving the replacement and operation of mom-and-pop stores, and increasing brand coverage density. Fourth, build a fresh food and bakery factory, create self-owned supply chain customized products, and transform into a manufacturing-oriented convenience store. After the fresh food factory is completed, Linji will leverage its "regional customization" fresh food operation model, advocate and implement the goal of "better understanding Chinese tastes," and reverse-customize the fresh food supply chain based on consumer insights. Fifth, further strengthen Linji's digital intelligence construction, making efforts in both membership and online channels.

**04** Liu Zhongjian believes that the "convenience" of convenience stores is reflected in distance convenience, instant convenience, time convenience, and service convenience. First, convenience stores are generally located in places with high foot traffic, such as stations and residential areas, usually within walking distance. Second, convenience stores mainly operate instant goods or services, greatly reducing shoppers' time and energy consumption. Third, most Linji stores insist on 24-hour operation, which is more convenient in terms of time for young white-collar workers in first- and second-tier cities compared to supermarkets. Fourth, convenience stores can provide various convenience services such as leisure tables and chairs, mobile phone charging, free wifi, and item storage, meeting customers' needs for shopping, waiting, meeting friends, and gaming at any time. At the same time, Liu Zhongjian emphasized that the "Linji speed" is supported by IP operations. Geographically, Linji adopts an encirclement strategy, opening multiple stores in the same area, forming a spatial effect where consumers can see Linji stores within a few steps, such as "one Lawson, four Linji." Combined with online ordering and offline delivery, it leverages geographical and quantity advantages to acquire traffic, becoming the preferred convenient consumption choice within 500 meters for consumers. In terms of brand image, Linji stores have undergone a second-generation upgrade, embedding a smiling face symbol representing happiness and warmth into the store logo, with warm tones in both interior and exterior decoration, aligning with the mission and vision of "making life more convenient" and "where there is a home, there is Linji." At the same time, with dense store network coverage, this distinctive brand image is conveyed to consumers.

"As of the end of June 2022, Linji has over 900 stores, and it is expected to exceed 1,000 by the end of the year, approaching 1,100. Within 5 years, Linji plans to open 3,000+ stores in Anhui Province and 1,000 stores in Fujian Province," Liu Zhongjian said. At a time when the country and provinces are vigorously advocating the construction of convenient living circles, convenience stores, as part of urban infrastructure, are receiving increasing attention. "Although the market environment is not ideal under the influence of the pandemic, Linji still insists on opening more stores, opening good stores, thoroughly penetrating regional markets, and achieved cross-provincial development in June this year, opening 20 stores simultaneously in Xiamen, leveraging brand and network advantages to capture customer mindshare," Liu Zhongjian said. Compared to the pre-pandemic store opening speed, Linji's store opening speed has also grown steadily over the past three years since the pandemic: In May 2017, Linji started with 2 stores; in May 2018, it reached 70 stores; in May 2019, 192 stores; in May 2020, 400 stores; in May 2021, 700 stores; and in May 2022, 900 stores, fully covering 16 cities in Anhui, becoming the leading convenience store brand in Anhui. At the end of June this year, Linji entered Fujian, opening 20 stores simultaneously in Xiamen, achieving cross-provincial development. Store scale growth speed and comparable store sales have increased to varying degrees each year. "In terms of category and product structure, we focus on solving people's five-meal needs. Currently, SKUs are around 3,400 and still being streamlined. Convenience stores require refined product categories, fewer but better, using differentiated products to form brand recognition and stickiness, such as Lin Coffee, customized sausages, customized big meat buns, customized shaomai, and freshly ground soy milk. These are all carefully refined products and have gradually become Linji's star products," Liu Zhongjian told Ling Shou. "The overall sales proportion of Linji's fresh food category exceeds 50%, and the overall trend is positive. I believe that after our fresh food factory is completed, we will achieve even more."

Although the normalization of the pandemic has had a certain impact on Linji, during static management in some areas, offline customer flow decreased sharply, and some fresh food sources were significantly affected by the pandemic, overall, from the first half of this year's performance, the impact is relatively small. In the first half of the year, except for the insignificant year-on-year increase in customer flow, comparable store customer orders increased by 9.97% year-on-year, and the average PSD increased by about 10%.

**05** Regarding the future development of core competitive advantages, Liu Zhongjian said that there will be a focus: First, continue to strengthen the advantage of regional store network points. Continue to accelerate the speed of opening Linji stores from point to surface, opening stores densely and well. In the existing Anhui and Fujian regions, continue to strengthen the radiation of store networks, thoroughly penetrate existing cities, and expand coverage to other cities. At an appropriate time, steadily promote expansion to other provinces, strengthen and expand the Linji brand, and strive to create a scale of 30,000+ stores, making it a well-known convenience store brand of the Chinese people. Second, leverage the advantages of local specialty fresh food and freshly ground coffee operations. Linji's "five meals a day" has been well known and accepted by residents in various cities in Anhui, thanks to Linji's deep cultivation of specialty fresh food that conforms to Chinese eating habits. For example: Linji's big meat buns, shaomai, freshly ground coffee, tea eggs, and local specialties such as hot dry noodles, rice noodles, beef soup, and braised chicken rice, which many foreign convenience stores cannot match. "Freshly ground coffee has been a product that Linji has insisted on since its early days, always using Arabica beans and Yuexianhuo fresh milk. From 2 cups 5 years ago, now more than 30% of stores can exceed 100 cups in a single day. This is a track with unlimited prospects. Linji's 5 years of persistence have brought us results and confidence, and we will continue to build the convenience store coffee brand with the highest operating density and the largest annual sales," Liu Zhongjian said. Third, build a fresh food and bakery factory to enhance dessert and bread operations. Linji is already planning its fresh food and bakery factory, planning independent R&D and production of fresh food, bread, and desserts to better meet customer needs. Fourth, continue to upgrade stores to create store spaces that are closer to customer needs and meet more scenario requirements. Expand the existing "urban third space" needs, continuously improving store image, functional design, and convenience service satisfaction. Fifth, improve digital operation models. Continuously improve digital product selection, digital sales analysis, self-checkout, digital ordering and processing, remote store inspection management, online operations, membership operations, and customer group operations.

Regarding the current convenience store industry in the Chinese market, compared with foreign enterprises, the franchise systems of foreign convenience stores are more complete. The proportion of franchise stores among Japan's top three convenience store brands exceeds 95%, while the proportion among China's top ten convenience store chains is less than 50%. "Therefore, the space for local convenience stores to achieve rapid brand chain development through franchising is very huge," Liu Zhongjian said. At the same time, he believes that although foreign convenience stores are more prominent in cold fresh food operations, with sushi, desserts, bread, and sandwiches having advantages over local convenience stores and richer categories, local convenience stores have strong hot fresh food operations—such as baozi, tea eggs, corn, and sausages—which are managed well. This is an area that local convenience stores need to actively strengthen once they reach a certain scale. "With the continuous changes in people's lifestyles and the impact of the pandemic, the extension of convenience services in 24-hour convenience stores is a common issue that both foreign and local convenience stores need to consider," Liu Zhongjian said. He believes that convenience stores are not just shopping spaces now, but also a place of dependence and relaxation. "Making Linji a store that customers want to enter even when they don't want to buy anything is our motivation for store upgrades." In terms of store location, category management, and supply chain system construction, each enterprise has its own unique insights and advantages, and what suits the brand's development is the best. At the same time, Liu Zhongjian is full of confidence in the future market development of the convenience store industry. First, China's convenience store market has a large capacity and huge development potential. With a market capacity of about 400,000 stores, currently there are fewer than 20,000 fresh-food-focused convenience stores. With the development of the industry, the upgrade needs of many mom-and-pop stores urgently require the support of branded convenience stores. Persistently doing fresh food well and developing manufacturing-oriented convenience stores has huge market capacity. Second, in recent years, the state has continuously introduced supportive policies for convenience stores, advocating the construction of convenient living circles, and the industry is ushering in vigorous development. At present, convenience store brands in first-tier cities are numerous, each with its own strengths, and competition is fierce, making it increasingly difficult to open stores. However, second- and third-tier cities and county markets still have large development space, and the imbalance in regional development provides huge imagination space for convenience store development. "As a veteran with 20 years of experience in the convenience store industry, I have to say that the convenience store industry is a very hard and long-term persistent industry. It takes ten years to sharpen a sword, and you need to calm down, specialize, refine, and build brand advantages," Liu Zhongjian said.

Source: Ling Shou (lingshouke) Author: Dongfang

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