Preface: ****Currently, in the retail sector, apart from convenience stores, almost no other format has reached 10,000 outlets. In March this year, Snacks Busy held a partner conference, aiming for the 10,000-store goal. As single-category retail stores, why can bulk snack stores achieve 10,000 outlets? In investment, we often say, 'Category determines the ceiling.' Entrepreneurs' abilities, talents, and diligence are often similar, but what determines their fate is the track they choose. Some categories are destined to become 10,000-store chains, while others, no matter how hard the founder tries, may go against their wishes. For a chain enterprise to build a 10,000-store brand, there are common characteristics in the Chinese market environment. 1. High standardization: That is, standardized backend supply chain and standardized front-end operations. 2. Mostly based on a 'pure franchise' chain model, with small management radius for franchisees: Another core element for forming a 10,000-store brand is helping franchisees reduce management burden. Only when franchisees are relieved of burden and can profit can they open more stores. Once a super-franchisee system forms within the brand, 10,000 stores are within reach. Also note that the chain model I refer to is the 'pure franchise' model, where headquarters only provides brand and supply chain, and franchisees manage stores, excluding managed and joint venture models. 3. Ability to fully penetrate lower-tier markets: The foundation of Chinese society is the county economy, composed of 1,472 counties and 394 county-level cities. According to the latest census, these 1,800+ county regions have a resident population of about 750 million, over half of the national population. All chain brands that can become 10,000-store chains must have a store model that can survive in the county economy to challenge 10,000 stores. 4. Likely need a community store model: The most typical is the hypermarket in retail, whose store area and format determine that it can only open in county centers. Therefore, even if it covers all county regions, the ceiling is 2,000 stores. So, looking back, which food and beverage chain enterprises have broken through 10,000 stores today: Mixue Ice City, Luckin Coffee, Zhengxin Chicken Steak, Juewei Duck Neck, Wallace, KFC, Guoquan Shihui, Meiyijia, etc. These can be roughly divided into three categories:

  1. Catering (beverages): Mixue Ice City, Luckin Coffee. 2. Catering (food): Zhengxin Chicken Steak, Juewei Duck Neck, Wallace, KFC. 3. Pure retail: Guoquan Shihui, Meiyijia. You will find that regardless of the category, the above 8 brands can meet the four common standards. Why these specific companies in each category? First, in the catering (beverages) field, beverages are relatively special. Whether tea drinks or coffee, they can achieve high standardization of backend (supply chain) and frontend (in-store preparation). So in the freshly made beverage store field, there will not only be Mixue and Luckin in the future. Beverages are the easiest category in catering to give birth to 10,000-store chains. Second, in the catering (food) field, achieving 10,000 stores is far more difficult than beverages, especially Chinese cuisine. You will find that in catering (food), Western fast food is relatively easy to become a 10,000-store brand. Whether Wallace, KFC, or Zhengxin Chicken Steak, the reason is also high standardization of backend (supply chain) and frontend (in-store preparation). And Juewei Duck Neck is relatively special in Chinese cuisine because its frontend has almost no processing, fully realizing retailization of catering, making it the only brand in Chinese cuisine to reach 10,000 stores. Chinese cuisine, due to the complexity of its supply chain and frontend store operations, almost cannot rely entirely on the pure franchise model for expansion. Of course, in recent years, many emerging catering brands have explored management models like joint ventures and managed stores to reduce franchisees' burden while achieving standardization. But the essence is still transferring the difficulty of standardization to the catering brand headquarters, with the core pain point being organizational output capability, especially key store managers. Finally, the two pure retail companies, Meiyijia and Guoquan Shihui, have different stories for becoming 10,000-store brands. Why can Meiyijia become a 10,000-store chain? First, convenience stores are definitely a format that can produce 10,000 stores, even 100,000 stores. Due to China's vast geographical depth and concentrated community formats, before convenience stores appeared, there were already millions of mom-and-pop shops, which essentially served the function of community convenience stores. Meiyijia's greatest success lies in that when Japanese convenience stores were still studying refined operations and how to convert direct-operated to franchise in first-tier cities, Meiyijia boldly entered lower-tier markets, using the franchise model and supply chain advantages to convert mom-and-pop shops. After reaching a certain scale, it further optimized its competitive barriers and transformed towards Japanese-style convenience stores. Guoquan Shihui and future Snacks Busy/Wanchen belong to another story. In the retail industry, there is a concept called 'category killer,' which refers to taking a single category out of traditional supermarkets and operating it, with an area between standard supermarkets and convenience stores. Before Snacks Busy/Wanchen and Guoquan emerged, the industry's more 'killer' attempts were in fruits and fresh produce, such as Qian Dama, Fresh Legend, and Pagoda. Of course, the reason fruits and fresh produce are hard to become 10,000-store chains is simple: as we said, both frontend and backend are too difficult to standardize. So why Snacks Busy/Wanchen and Guoquan? Snacks and frozen foods are relatively easy categories to take out of standard supermarkets as independent store formats. First, although Snacks Busy is called a snack store, its product assortment can be understood as all food categories in standard supermarkets except fresh produce, rice, flour, and seasonings (leisure snacks, convenience foods, dairy products, beverages, ice cream, frozen foods). Second, although Guoquan Shihui operates frozen foods, if you look further, frozen foods can include frozen prepared ingredients (prepared foods and pre-made dishes), so it has certain category expansion space. So these two categories are relatively easy to take out of standard supermarkets for standardized replication, with both frontend and backend easily standardized. Of course, the success of these categories also has luck. Without the economic cycle caused by the pandemic, Snacks Busy and Wanchen would not have developed at such speed; without the pandemic, consumers would not have paid for the concept of 'hotpot at home.' So what direction will snack stores take next? The success of bulk snacks is due to two key factors. Horizontally, they selected a store format from supermarkets that is relatively easy to take out as an independent category; vertically, they compressed the traditional FMCG distribution method, having the basic prototype of a hard discount model. So the first phase of bulk snacks has been successful. With current store density and regional penetration, breaking through 10,000 stores is within reach. But after breaking 10,000 stores? Whether bulk snack stores can truly replace convenience stores as new community retail infrastructure depends on whether they can continuously evolve their model. We always say that the only constant in the retail industry is change. The retail industry has no secrets; changes always unfold in three dimensions:
  1. Bigger or smaller (store area) 2. Wider or narrower (product categories) 3. More expensive or cheaper (product prices) Sun Tzu's 'The Art of War' says, 'Just as water retains no constant shape, so in warfare there are no constant conditions.' This is the best description of the retail industry. The retail industry has no fixed store model; its changes depend on market changes and competitors' moves. What may surprise many friends is that some retail enterprises can survive competitive cycles by selling 'more expensive goods,' but that is a digression. The future changes of bulk snacks will obviously unfold along bigger or smaller, wider or narrower. Today, the category width of bulk snacks is already very close to convenience stores, lacking only cigarettes and cooked food, the two core profit categories. If bulk snacks continue to expand into wider categories in the future, it will unprecedentedly compress the space of existing Chinese community retail convenience systems. The core reason is that convenience stores have longer distribution paths and lower efficiency. If bulk snacks align with the convenience system in the future, the space for traditional convenience stores below third-tier cities will become very small. Because convenience stores have longer distribution paths and lower efficiency, their differentiated business approach must return to differentiated category management thinking—constantly researching consumer demand changes to ensure 'newness' and 'competitiveness' in 'goods.' Compared to the bulk snack system, the 'goods' logic focuses more on whether we can build an omnichannel with better prices. So the space for traditional convenience stores below third-tier cities will be compressed. Overall, we believe that consumers in first- and second-tier cities care more about whether they can buy 'newer' and 'higher-quality' goods; community consumers below third-tier cities care more about price. Finally, to summarize and answer the question: Why can bulk snack stores open 10,000 stores? First, in the retail industry, those that can open 10,000 stores are definitely not traditional supermarkets or hypermarkets. As mentioned, without a community model, store numbers have a ceiling. Therefore, 10,000-store retail chains in China can only be based on community convenience models, i.e., community supermarkets, community category stores, and convenience stores. Today, the category width of bulk snacks and convenience stores is very close. Theoretically, if convenience stores can open 10,000 stores, bulk snacks can definitely open 10,000 stores. Because in the current stage of China's social retail development, convenience stores can take over the function of millions of mom-and-pop shops, and bulk snacks can also take over that function. At the same time, bulk snacks can have higher efficiency than convenience stores. Therefore, if bulk snacks further expand categories in the future, they will be a devastating force in lower-tier markets below third-tier cities. The better survival space for convenience store systems is to move towards higher-tier cities and further transform into Japanese-style convenience stores. So, is bulk snacks replacing traditional snack stores or convenience stores? Recommended Reading