In 1992, Japan's 7-ELEVEn opened in Shenzhen, pioneering the mainland convenience store market. Since then, with foreign enterprises entering and local enterprises rising, convenience stores, supermarkets, and department stores have jointly opened the curtain on China's retail industry. The development landscape of the retail industry has been constantly changing over the past 30 years. E-commerce swept through physical retail, department stores went from prosperity to decline, and supermarkets saw their golden age pass... Under the torrent, convenience stores have once again steadily entered the next stage. Note: The supermarket industry data in the table is the sum of "supermarket commodity sales" and "large supermarket commodity sales" from official data. According to data from the National Bureau of Statistics, over the past decade (2014-2022), overall commodity sales in the supermarket and department store industries have shown a downward trend, while convenience stores are the only format among the three that has steadily risen. Data shows that convenience store commodity sales increased by 66.28% overall, from 34.6 billion yuan in 2014 to 57.53 billion yuan in 2022; supermarket industry commodity sales fell 9.73% to 688.68 billion yuan; department store industry sales fell 25.09% to 285.12 billion yuan. Sales growth for major convenience store enterprises has been even more prominent. According to comparable sales data from the China Chain Store & Franchise Association's top 100 retail enterprises, the sales growth of the top 100 convenience stores has generally been greater than that of supermarkets, department stores, and other formats. Except for 2020 and 2022 (where segment sales data were not disclosed), convenience store top 100 sales achieved positive growth, always higher than the industry average, and for at least 6 of the 10 years, they were the retail format with the highest sales growth. Industry Scale Continues to Expand According to data from the China Chain Store & Franchise Association, the convenience store industry scale has been expanding, with both sales and store numbers increasing year by year. In 2022, national convenience store sales reached 383.4 billion yuan, more than double the 2015 figure. Among this, branded chain convenience stores are the main contributors to sales. In 2022, branded chain convenience store sales reached 326.4 billion yuan, accounting for 85.13%. In terms of store numbers, the number of convenience stores nationwide has been rising year by year. Since 2019, the growth in convenience store numbers has shifted from "small steps" to "big strides." By 2022, the total number of convenience stores nationwide reached 300,000, a 127.27% increase from 132,000 in 2019, and the growth rate was three times that of 2015-2018. In 2022, branded chain convenience stores reached 187,000, a year-on-year increase of 14.72%, accounting for 62.3% of the total. Entry Barriers Rise, Industry Concentration Declines Over the past decade, branded chain convenience stores, especially leading enterprises, have been in a period of rapid expansion, racing to capture territory. On April 23, the China Chain Store & Franchise Association released the "2023 China Convenience Store TOP100," and the scale of listed convenience store enterprises has undergone significant changes. In response, Lianshang.com compiled a comparison of data changes for the TOP20 convenience stores from 2014 to 2023, to review and forecast the development of China's convenience store industry over the past decade. Specifically, the 2023 TOP20 convenience store enterprises are, in order: Meiyijia, Sinopec Easy Joy, PetroChina Kunlun Hao Ke, Tianfu, Lawson, Furong Xing Sheng, 7-ELEVEn, Shizu & Zhishang, Hongqi Chain, Yizhan, FamilyMart, Jianfu, Tangjiu, Jinhu & Zaozhao, Meiyitian, Lianhe Yibai, Yidu Bianli, 36524, and Xintian Yue Hejiahuan. Among them, Meiyijia topped the list with 33,848 stores, forming a leading tier with a significant gap over the petroleum-affiliated Easy Joy and Kunlun Hao Ke in terms of store numbers. Comparing the listed enterprises in 2014 and 2023: ● The top enterprise changed. In 2023, Meiyijia topped the list for the second consecutive year with 33,848 stores, more than quadrupling its store count compared to a decade ago. ● Entry barriers have been rising. In 2014, C-store ranked 20th with 600 stores; in 2023, the entry threshold for TOP20 convenience stores had risen to 1,746 stores, occupied by Yuehejiahuan. ● The gap between the top and bottom enterprises in TOP20 has widened. Over the past decade, competition among small and medium-sized convenience store enterprises has intensified, with frequent changes in the NO.20 enterprise, but their growth speed still lags behind the leading enterprises, further widening the gap. ● The total number of stores in TOP20 has increased year by year. In 2023, the total number of TOP20 stores was approximately 136,900, an increase of 7,400 from 2022, and double the 68,200 in 2014. The fastest growth in TOP20 total stores was in 2021, with an increase of 16.0%, adding about 17,000 stores. It is worth noting that the concentration of the convenience store industry is declining year by year. Data shows that in 2022, the total stores of TOP20 convenience store enterprises accounted for about 69.25% of the total branded chain convenience stores, down 10 percentage points from 79.6% in 2015. ● In terms of growth rates of different brands, at least 14 of the TOP20 convenience store brands in 2023 achieved positive growth. Note: Six convenience store brands—Furong Xing Sheng, Yizhan, Lianhe Yibai, Yidu Bianli, Xintiandi, and Yuehejiahuan—have no comparable data for 2014. Among local convenience stores, Meiyijia is truly the "King of Convenience Stores," maintaining a growth rate of 429.7% from 6,390 stores in 2014 to 33,848 stores. Also growing rapidly are regional convenience store brands Jianfu and Meiyitian. Among them, Jianfu from Xiamen grew from 400 stores in 2014 to 2,521 stores in 2023, more than six times its original size; Xi'an convenience store brand Meiyitian grew from 357 stores to 2,011 stores, expanding about fivefold. In the view of Zhou Yong, director of the Lianshang.com Senior Advisory Group, the current landscape of domestic convenience stores can be summarized as "foreign capital on top, domestic capital in transformation." He pointed out that franchising is the only way for convenience store operations. In the past decade, many regional convenience stores have grasped this basic stance and logic, and their store numbers have soared, "suddenly exceeding one thousand, two thousand, three thousand," such as Shizu and Jianfu, not to mention Meiyijia, the king of convenience stores developed through franchising. In terms of overall scale, local convenience stores have taken the lead. However, in terms of comprehensive strength, Japanese-style convenience stores represented by FamilyMart, Lawson, and 7-ELEVEn still dominate the industry. In addition to outstanding operational capabilities, Japanese-style convenience stores also have ambitions for store expansion that cannot be underestimated, rapidly expanding nationwide. In 2014, FamilyMart and 7-ELEVEn ranked 13th and 14th among national convenience store enterprises, while Lawson narrowly missed the TOP20 by one place. After ten years of development, by 2023, Lawson had surpassed a large number of competitors, ranking fifth among national convenience store enterprises with 6,330 stores. 7-ELEVEn and FamilyMart also improved their rankings, coming in 7th and 11th, respectively. Among them, Lawson grew the fastest. With the dual support of regional franchising and acquisitions of local convenience stores (WOWO Convenience and Tianhong Weio Convenience), Lawson's store numbers experienced explosive growth, with a 10-year increase of 1,146.06%. Lawson has now entered Shanghai, Chongqing, Liaoning, Beijing, Shandong, Henan, Hubei, Hunan, and other places, and plans to achieve its 10,000-store goal by 2025. Among the three, FamilyMart grew the slowest, constrained by contract disputes with Ting Hsin Group and the impact of the pandemic, resulting in a development stagnation period of about three years in China. According to rankings of Chinese convenience store enterprises from 2014-2020, FamilyMart's layout in mainland China was in a leading position among Japanese-style convenience stores. Starting in 2021, the brand's national store numbers decreased rather than increased, with a net closure of 301 stores by 2022, and it was overtaken by Lawson and 7-ELEVEn, becoming the tail end. In 2023, FamilyMart's store numbers saw a slight recovery, with a net increase of 41 stores compared to 2022. At the same time, the relationship between Japan's FamilyMart and Ting Hsin Group has also eased. In March 2024, FamilyMart adjusted its operating model in China, splitting into two teams to continue operating the FamilyMart China brand: a new joint venture between FamilyMart and Ting Hsin Group will be responsible for operations in East China (2,114 stores), while other regions in China (currently including Beijing, Guangzhou, Shenzhen, Dongguan, etc.) will continue to be operated by Ting Hsin under an agency franchise model. This reconciliation with Ting Hsin is seen by Japan's FamilyMart as a new starting point for development in China. From this perspective, restoring the pace of development in the Chinese market will become a short-term focus for FamilyMart. In addition, 7-ELEVEn has maintained a certain growth rhythm. Although its speed is not as fast as Lawson's, in terms of growth rate, it is still faster than local convenience stores of the same scale in the TOP20. 9 Brands Eliminated Looking at the listed brands, nearly half of the convenience store brands in the TOP20 have been replaced. Nine convenience store enterprises, including Gongxiao Bianli & Jialian Bianli, Shanghao, Kuaike, Kedi & Haode, Suguo & Haode, Jiayi, Zhongbai, Wudongfeng, and C-store, have disappeared from the TOP20 convenience store list. Replacing them are nine convenience store enterprises, including Lawson, Furong Xing Sheng, Yizhan, Jianfu, Meiyitian, Lianhe Yibai, Yidu Bianli, Xintiandi, and Yuehejiahuan. In addition, 11 brands are regulars on the TOP20 convenience store list. These include Meiyijia, Easy Joy, Kunlun Hao Ke, Tianfu, 7-ELEVEn, Shizu & Zhishang, Hongqi Chain, FamilyMart, Tangjiu, Jinhu & Zaozhao, and 36524, which have remained on the list after ten years of development. Among them, Tianfu Convenience Store has ranked NO.4 among national convenience store enterprises for 9 of the past 10 years (except for the sudden emergence of Suning Xiaodian, which in 2018 led with 4,508 stores over Tianfu's 4,212 stores, securing the NO.4 position). In addition to the above "regular guests," there are also some "flash in the pan" players on the TOP20 convenience store list. In 2018, Suning Xiaodian, established only a year earlier, expanded aggressively through acquisitions, jumping to become the fourth-largest convenience store enterprise in China with 4,508 stores. Six months later, Suning Xiaodian's store count grew to 5,368. However, the rapid growth in store numbers did not lead Suning Xiaodian onto the right track. Public data shows that in 2018, Suning Xiaodian lost 296 million yuan; in the first half of 2019, its losses reached 2.213 billion yuan. Subsequently, Suning Xiaodian was removed from Suning Group's financial reports. As stores continued to close, Suning Xiaodian not only gradually fell out of the TOP20 convenience store list but also disappeared from the top 100 convenience store enterprise list after 2020. From listing to exit, it took only 3 years. Bianlifeng had a similar experience. After making a surprise entry into the convenience store track, in 2022, Bianlifeng closed a net 795 stores, and its development stalled. Now, with fewer stores, Bianlifeng has fallen out of the TOP20 convenience store list. In 2023, Bianlifeng announced it would abandon its previously adhered-to direct operation model and regard franchising as its next "lifeline." Weak Cross-Regional Development Capability It is worth noting that over the past 10 years, although convenience store enterprises have achieved significant growth in store numbers, most still focus on deepening regional markets. Zhou Yong stated that most local convenience stores are regional enterprises, with low industry concentration. More than a hundred convenience store brands operate independently, lacking integration. Limited by multiple factors such as supply chains and management efficiency, chain convenience store brands with cross-regional development capabilities are still a minority, and tapping existing regional markets remains the main intention of convenience store enterprises. The "2023 Convenience Store Format Development Overview" shows that in 2024, over 70% of convenience store sample enterprises chose an expansion strategy. However, in terms of geographical selection, only 24% of enterprises have intentions for cross-regional development, while up to 74% of convenience store sample enterprises chose to deepen existing regions. However, even if horizontal expansion is not possible in the short term, convenience store enterprises are still extending their tentacles in existing territories, making the downward trend of convenience store enterprises increasingly evident. The China Chain Store & Franchise Association pointed out that currently, foreign convenience stores are mainly expanding from first-tier cities to new first-tier cities and provincial capitals, while local convenience stores are moving towards third- and fourth-tier cities and even county towns. The trend of convenience stores sinking into lower-tier markets continues, and they have now reached fourth- and fifth-tier cities and county-level markets. Business Innovation and New Product Development Are Top Priorities However, as chain convenience store brands deepen their attack on lower-tier markets, they inevitably face more direct competition with mom-and-pop stores. Although more and more branded chain convenience stores are consciously offering differentiated products such as fresh food and coffee, there is still significant overlap with mom-and-pop stores in terms of product categories. According to Kantar Retail data from 2017, there are nearly 7 million small store formats in China, of which about 6.8 million are mom-and-pop stores, with about 76% located in third-tier cities, county-level cities, towns, and rural areas, contributing 40% of the total shipment volume of the entire retail channel. In terms of sales by category, over 40% of mom-and-pop store sales come from tobacco, which, along with beverages, alcohol, snacks, daily necessities, and other small consumer goods, constitutes the main source of income for mom-and-pop stores. According to data from branded chain convenience store sample enterprises monitored by the China Chain Store & Franchise Association, from 2019 to 2022, cigarettes and other categories including beverages, alcohol, daily necessities, etc., together accounted for 75%-90% of total sales. In addition, compared to branded chain convenience stores, mom-and-pop stores have penetrated the lives of surrounding residents earlier, forming stable customer traffic. This also means that it is still very difficult for branded chain convenience stores to directly "compete for food" with mom-and-pop stores. In response, Zhou Yong stated that the traditional business of convenience stores is being continuously eroded. For local convenience stores, based on the characteristics of Chinese consumers, business innovation and new product development are the top priorities. However, as the core of differentiated competition, the fresh food path for branded convenience stores remains fraught with difficulties. Data shows that from 2019 to 2022, the fresh food sales proportion of convenience store sample enterprises in China was 7.8%, 9.8%, 16.9%, and 12.0%, respectively, showing an overall improvement but still not high. In comparison, Japanese-style convenience stores still hold a leading position in the innovation and operation of fresh food products. The latest financial reports of Lawson, 7-ELEVEn, and FamilyMart show that their fresh food sales proportions are all above 30%. This is not only due to their systematic capabilities in product development, logistics, and warehousing, but also closely related to their forward-thinking operational planning, which considers market factors comprehensively to build supply chains based on product positioning and demand. When local convenience stores introduce fresh food categories, most copy formulas, lacking both the hardware conditions for building supply chains and the systematic operational capabilities from R&D to management, so the results of fresh food operations have not met expectations. Furthermore, Zhou Yong pointed out that China's retail market structure, dietary structure, and consumption trends are vastly different from Japan's. In fresh food operations, blindly learning from Japanese convenience stores has a bleak future. Whether in terms of time cost or capital cost, fresh food operations require long-term investment, and local convenience stores still have a long way to go. Recommended Reading