---
title: "Valuation Explosion: How Much Are Convenience Stores Worth in 2018?"
description: "On October 29, 2017, an announcement confirmed the most important news in China's convenience store industry for 2017: a veteran Beijing convenience store chain was sold! 300 stores, $84 million, 560 million yuan. The industry buzzed with excitement, not just because of the store itself, but because it was the first complete acquisition with a clear price disclosure in the industry that year, and it raised the question: how much are convenience stores worth? Were they sold at a high or low price?"
author: "王某"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2018-03-14"
language: "en"
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# Valuation Explosion: How Much Are Convenience Stores Worth in 2018?

> On October 29, 2017, an announcement confirmed the most important news in China's convenience store industry for 2017: a veteran Beijing convenience store chain was sold! 300 stores, $84 million, 560 million yuan. The industry buzzed with excitement, not just because of the store itself, but because it was the first complete acquisition with a clear price disclosure in the industry that year, and it raised the question: how much are convenience stores worth? Were they sold at a high or low price?

On October 29, 2017, an announcement finally confirmed the most important news in China's convenience store industry for 2017: a veteran Beijing convenience store chain was sold! 300 stores, $84 million, 560 million yuan. The industry buzzed with excitement, not just because of the store itself, but because it was the first complete acquisition with a clear price disclosure in the industry that year, and it raised the question: how much are convenience stores worth? Were they sold at a high or low price?

Let's review the transaction:

**First, the announcement:**
Hong Kong-listed Greentown Service Group Co., Ltd. (hereinafter "Greentown Service", 2869.HK) issued an announcement disclosing that it would form a joint venture, China CVS, with Xianlife (Fresh Life) and Anxian Da (a subsidiary of Shanghai Yiguo E-commerce Co., Ltd.), and signed a transaction agreement with Morgan Stanley to acquire the Beijing convenience store chain "Good Neighbor" for $84 million (approximately 560 million yuan).

**Interpretation:**
Seller: Morgan Stanley, nicknamed "Big Mo". In 2012, the original controlling shareholder, China Financial Investment Management Co., Ltd., sold 72% of Good Neighbor's shares to Morgan Stanley for 100 million yuan.
Big Mo spent 100 million, held for 5 years, and sold, netting a profit of 460 million yuan. That looks good, if you ignore the investment over those five years.

**Now let's look at Good Neighbor in 2012:**
According to financial reports, in the first half of that year, the convenience store business of China Financial Investment (CFI) had revenue of 140 million HKD, an 18% increase from 119 million HKD in the same period last year, but its share of total revenue dropped from 85.7% to 49.2%. The number of stores, about 183, had not changed significantly from previous years.
If the above data is reliable, then in 2012, Good Neighbor's first-half revenue was 115.2 million yuan (based on the high exchange rate in 2012), with an average daily sales per store of 3,497 yuan. Of these 183 stores, 90% were directly operated.
So at that time, Good Neighbor's 183 stores were valued at 138 million yuan, with an average valuation per store of 759,000 yuan.

**Beijing's oldest chain convenience store:**
Good Neighbor, as a veteran Beijing convenience store chain, was established in 2000. At that time, CFI was still called Gangjia Holdings, which had started laying out convenience stores in Beijing in 1997. After 20 years of development, in 2015, during the O2O era, it began extensive cooperation with major e-commerce platforms and built its own WeChat mall. In terms of store count, in 2012 it ranked 35th in the national chain convenience store ranking, with about 183 stores.
In 2016, it ranked 33rd, with 280 stores. That same year, Beijing Quanshi Convenience, founded in 2012, surpassed Good Neighbor with 290 stores, becoming the largest convenience store chain in Beijing. (Data from CCFA and Lianshang.com)

**Now let's look at the acquirer:** In the new joint venture China CVS, Xianlife holds 50%, Greentown holds 35%, and Alibaba's fresh food company Yiguo holds 15%.
Xianlife: Founded in 2014, positioned as a premium cross-border shopping platform, founder Xiao Xin, disclosed a $10 million Series A round in 2016, led by Bertelsmann and CDH. In 2015, it attempted cooperation with Good Neighbor, placing product images in stores to drive orders, shipping from bonded warehouses. Based on the transaction scenarios of SF Hei Dian and convenience stores, this model has limited value. Xianlife's community convenience brand "Xian Yizhan" has also cooperated with Greentown Service and Yiguo Fresh. Greentown Service, which does high-end residential property management, recently reached a strategic cooperation with Yiguo Fresh, announcing deep cooperation in community new retail.
According to media reports, Xian Yizhan, as a community convenience store, had 30 stores in 2017, while Dianping listed 40, of which 16 had delivery services, and Meituan Delivery showed 24 stores in Beijing. Mainly community stores, they sell not only FMCG but also fruits, fresh produce, and fresh meat, and are open 24 hours.
After acquiring Good Neighbor, Xiao Xin told the media that they would use the Good Neighbor brand as the core to create a "Hema for convenience stores," increasing the proportion of fruit and fresh produce SKUs. They also plan to cooperate with Greentown to open stores in Hangzhou. Of course, given the current locations and operations of Good Neighbor stores, a full upgrade to fresh produce is very risky. It is believed that some stores will be used as experiments for transformation and upgrading. Recent media reports indicate that the first batch of community experimental stores have seen good trends in fresh produce and online orders, and the experiments are continuing.

**Valuation of a chain convenience store:**
Looking at the final transaction valuation, excluding intangible assets like brand value, team value, and system development, for a veteran chain convenience store with over 200 stores in first-tier cities, ranking around 34th nationally in store count.
From the final announced price, Good Neighbor's average valuation per store is approximately 2.2 million to 1.86 million yuan. This is nearly three times the 750,000 yuan per store valuation five years ago.
So, the industry sees this transaction as a benchmark. Future chain convenience store transaction valuations now have a reference point. As for whether it was sold high or low, it's just a reference for everyone, because from the trend, 2018 is already more crazy: the era of AT (Alibaba and Tencent) retail integration has arrived! Everyone expected it, but the trend and speed have far exceeded expectations.
Chain supermarkets, hypermarkets, community fresh food chains, home appliance chains, clothing chains, and home furnishing chains have begun forming super teams through investment and mergers. The first to be affected are department stores, supermarkets, and hypermarkets, with leading companies quickly being divided up.
Now let's look at chain convenience stores. Under the general trend, after the good news of the Good Neighbor acquisition, veteran regional chain convenience stores suddenly became hot commodities, with acquisition offers coming in constantly. Hou Yi, founder of Hema and formerly of Shanghai Kedi Convenience, also posted that "now is a good time to sell convenience stores." From 2017 to early 2018, the hottest investment and M&A market for convenience stores was the western region, which suddenly became a battleground.

**Western region convenience store integration is blooming everywhere:**
**—Chengdu—**
**Hongqi Chain:** On January 26, 2018, Yonghui Superstores held 286 million shares, accounting for 21% of total shares, becoming the second largest shareholder. Thus, this veteran A-share listed local chain convenience store fell into the T-system (Tencent), becoming Yonghui's southwestern strategic base, with deep cooperation in supply chain, logistics, and fresh produce.
Changes and upgrades after investment: The latest two fresh produce community convenience stores have opened, starting the upgrade and transformation of larger stores.
At this time, Hongqi Chain had over 1,600 stores in Chengdu and over 2,713 stores in 9 cities in Sichuan Province, mostly directly operated. In the first half of 2017, it earned nearly 100 million yuan, making it the undisputed king of southwestern convenience stores.
**WOWO Chain:** Nearly 300 chain convenience stores in Chengdu, mainly 24-hour directly operated stores. In 2017, it cooperated deeply with Best Group, leveraging Best's rapidly developing delivery and supply chain platform to expand from a single-city model to nationwide development. Best Dianjia, as a fast-growing force in the FMCG B2B market in 2017, did not choose to build its own chain brand like Lingshoutong, Xintonglu, Zhanghetianxia, Huiminwang, Xingaoqiao, Yihao Shenghuo, Yatang Xiaochao, or Yu Bianli, but instead chose deep cooperation with local advantageous brands, which is a quick way to gain time and resource advantages.
**GOGO Chain:** 13 stores in Chengdu, all with daily sales exceeding 10,000 yuan, benchmarked against Japanese-style heavy renovation stores. In 2018, Quanshi Convenience announced the completion of the acquisition, making it the first acquisition case in Quanshi Group's nationwide expansion.
Chengdu's market competition is very intense, with community stores, 24-hour stores, and fresh produce stores each having their own leaders. The three major Japanese brands have also entered early, making Chengdu the most competitive city for chain convenience stores after Shanghai.

**—Xi'an—**
**Every Day Chain:** In the ancient capital of Xi'an, a key western city, at the end of 2017, the local leader Every Day Chain, mainly franchised, exceeded 700 stores, with signed stores reaching 1,000. In March 2018, media reported that Every Day had introduced strategic VC, raising 200 million yuan with a valuation of 1 billion yuan. It has fully launched a new generation of B2B2C ecological chain convenience model.
It can be said that Every Day, as the most typical traditional chain franchise convenience store in China, is a representative example of introducing capital to accelerate development and upgrade.
Direct-operated stores + franchise stores + rebranded supply stores, evolving from chain stores to regional B2B supply chain platforms, and with the support of capital in the new retail posture, achieving full-channel offline touchpoints from supply chain to wholesale business to store chain systems and unmanned retail terminals around stores. On this basis, it connects 2C traffic to create a complete product landing channel scenario. This concept is already the consensus of many domestic regional chains. Who will be the first to complete the closed loop and form a model? Let's wait and see.

**—Wuhan—**
**Today Chain:** Also a founder from Mengniu, as the earliest local chain brand invested by well-known VC in China, after many twists and turns, it finally got a Series B round at the end of 2017. Reports say the valuation was 1 billion yuan, raising 200 million yuan. At that time, Today had 300 stores nationwide, with over 250 in Wuhan, all franchised. This unconventional convenience store marketing master will bring fresh elements to the convenience store format, which is worth watching.
Today was the first to get VC investment from Sequoia, and for a long time after, no venture capital followed convenience stores until 2017, when the wind finally blew in the new wave of consumption upgrade.
**Youjia Convenience:** Five executives from Today left to join Jiangxi Youjia Convenience, which reportedly received a 480 million yuan intended investment from its parent company Xinyi Real Estate. The model of real estate developers building chain convenience stores based on their own commercial properties has also emerged. Poly and Greenland have successively made moves, and more developers are actively planning around this logic. The big consumption upgrade has become the hottest topic.
Deep cultivation in core cities, occupying a large number of high-quality locations, with over 300 stores in a single city, and the ability to influence surrounding cities. Valuation exceeds 1 billion yuan. This is the recognition given by the capital market in 2018!
Behind the surface data are professional evaluations of brand value, team structure, supply chain capability, product capability, operational efficiency, and store efficiency.
Opportunities and challenges: Chain convenience stores are not unprofitable, but it's hard to make quick money; they rely heavily on scale.
Even with capital support, the chain convenience store industry cannot avoid common survival and development challenges:

**1. Rising costs.**
1. High rent costs, few high-quality locations; competition between two brands can drive up commercial property rents in a city.
2. Rising labor costs, with aging population, declining birthrate, and urbanization, frontline staff costs are rising and recruitment is difficult.

**2. Limited profitability.**
1. The traditional FMCG supply chain model is showing fatigue.
2. Expanding into food and fresh produce categories is difficult and risky.

**3. Slow brand building cycle, high cost of expansion to other regions.**
1. Low return on capital, long cycle.
2. High cost of national expansion for local brands.
3. High demand for professional management talent, intense competition, and high turnover of frontline staff.

**4. Regional operation, lack of replicability in innovation.**
1. Small formats need strict standardization while meeting the different needs of a thousand stores, and facing market environment segmentation at various city levels.
2. Although the trial-and-error cycle for innovation is short, replicability remains difficult.

When a slow-heating traditional retail industry faces capital support and the heat of the trend, how to fully utilize this trend without overstepping and causing problems? This is a question that all entrepreneurs already in or planning to enter this industry need to actively consider in 2018.
I'm at the Chengdu Spring Sugar Fair; feel free to meet and chat during the forum!

**In 2018, under the L-shaped economic structure, how will convenience store chains develop? Where are the trends and breakthroughs?**
1. Driven by both capital and technology, brand integration is inevitable.
2. Chain convenience stores are rapidly expanding from first- and second-tier cities to third- and fourth-tier cities.
3. Food and fresh produce categories become the breakthrough for category structure adjustment, with vertical formats becoming more segmented.

**How to integrate supply chain resources to break through? See you at the Spring Sugar Fair!**
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