---
title: "Why I Got into the Convenience Store Business"
description: "Convenience stores were once the retail industry's brightest dark horse, favored by capital and seen as a lifeline for traditional enterprises. However, the challenges behind the scenes are rarely known. 308 days after the wave of convenience store closures, AI Finance and Economics interviewed four convenience store operators to review the difficulties of entrepreneurship and provide a guide for future entrants."
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published: "2019-06-06"
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# Why I Got into the Convenience Store Business

> Convenience stores were once the retail industry's brightest dark horse, favored by capital and seen as a lifeline for traditional enterprises. However, the challenges behind the scenes are rarely known. 308 days after the wave of convenience store closures, AI Finance and Economics interviewed four convenience store operators to review the difficulties of entrepreneurship and provide a guide for future entrants.

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Source: AI Finance and Economics (ID: aicjnews)
Convenience stores were once the most dazzling dark horse in the retail industry, the guest of honor for capital, and a lifeline for traditional enterprises in transformation. However, the mess behind the scenes is rarely known. 308 days after the wave of convenience store closures, AI Finance and Economics interviewed four convenience store operators—Haoneighbor, Xinjiayi, Ledoujia & Make, and Anda—to comprehensively review the many difficulties encountered in convenience store entrepreneurship, hoping that the experience of predecessors can serve as a guide for later entrants to avoid pitfalls.
308 days ago, Linjia Convenience Store, which had 168 stores, collapsed overnight, with all stores closing at once. The wave of closures swept through the convenience store industry, followed by 131 Convenience Store and Quanshi reporting supply chain disruptions. The trigger for their predicament was the explosion of the P2P platform of their capital backers, but the core reason was their lack of self-sustaining profitability.
This is something outsiders cannot imagine. **As hypermarkets declined and community commerce rose, convenience stores became the retail industry's most dazzling dark horse, with scale rapidly exceeding 200 billion yuan at an annual growth rate of nearly 20%. Over two years, more than 8 billion yuan in capital poured in, and 120,000 stores opened across streets and alleys.**
Behind the glamour lies unknown hardship. The convenience store industry is asset-heavy, detail-oriented, and cannot make quick money. It's a business of bending down to pick up coins—simple to look at, but full of pitfalls. That's why street convenience store signs change repeatedly, with brands rising and falling in waves.
Photo/VCG
308 days after the closure wave, AI Finance and Economics interviewed four convenience store leaders, covering a wide range of cases: some focused on first-tier markets, some on lower-tier markets, some with a few years of experience, others with decades, some from the south, some from the north. They reviewed their pitfalls in product management, franchisee management, talent development, and learning from foreign experience, hoping to provide a mirror for practitioners and potential entrants.
**Ten Years, One Small Step; the Future Is a Long Battle**
**Narrated by Wu Minyi, Founder and CEO of Xinjiayi Convenience Store**
Compared to foreign-funded and state-owned convenience stores, local convenience stores face the most difficulties: lack of money, talent, resources, and technology. Xinjiayi is a grassroots local convenience store. From 2007 to now, nearly 12 years, it has grown from 0 to over 1,100 stores, with the model evolving from direct operation to weak franchising to strong franchising, encountering the most pitfalls in store expansion.
We started very smoothly. The first store opened in July 2007, and after half a year, daily sales exceeded 10,000 yuan, with the 100,000 yuan startup capital recouped in six months. In two years, we opened 6 direct-operated stores, with annual sales of over 20 million yuan and annual profits of over 2 million yuan.
But it was also very exhausting. Apart from the store manager, I was responsible for site selection, design, decoration, equipment, and recruitment. I lost at least 3 jin (1.5 kg) for each store opened, and by the sixth store, I weighed only 82.5 jin (41.25 kg). At that time, I thought, I can't go on like this; what path should I take in the future?
While recovering, I noticed that employees, seeing good profits, also wanted to be their own bosses. So we opened internal franchising, allowing employees to join for free, with the headquarters subsidizing procurement, warehousing, and transportation costs. In the two years after 2010, we opened over a dozen internal franchise stores, with daily sales ranging from 5,000 to 10,000 yuan, basically recouping investment in one year, but the headquarters lost hundreds of thousands of yuan each year.
By 2012, more and more people came to inquire about franchising, so we opened external franchising. In the first year, we added dozens of stores; the second year, over 100; the third year, over 200. We also started charging franchise fees, which rose from a few thousand yuan to 30,000 yuan, and the headquarters returned to profitability after 2012.
As the number of stores grew, problems emerged. New stores varied in image and sales, with many having poor sales and supply issues. At that time, our supply chain could only handle regular product distribution, not refrigerated or frozen items, which were delivered directly by suppliers, leading to inconsistent external procurement management.
I reflected on why we had drifted into weak franchising. I believed the main cause was the lack of a supply chain and incomplete basic capabilities, such as training and operations, which were indeed too weak at the time.
But when I decided to upgrade in 2014, many disagreed. Our net profit was relatively high, with franchise fees alone bringing in several million yuan a year. Some asked why we should bother with old businesses, as renovations were costly and tiring, and some people's abilities couldn't keep up. But I told the shareholders that this had to change. If store sales didn't improve, there would be no future, and we would become the lowest-tier convenience stores.
Fate also played a joke on us. We learned from standardized brand convenience stores, changing our brand from Jiayi to Xinjiayi, switching to the then-impressive Haiding system, upgrading store images, and introducing convenience services. But sales didn't change at all.
At that time, we were under a lot of pressure and felt a bit lost, and my health also suffered. Previously, relying on youth, I worked 20 hours a day and often forgot to eat. Later, I found I couldn't concentrate, and even driving for half an hour was unbearable. A physical exam revealed health problems—fulminant hepatocyte rupture that could cause shock at any time, leading to hospitalization for one to two months.
Later, we analyzed the reasons and found that customers still came from the original community business districts, products were mainly room-temperature items, logistics still lacked dedicated cold chain technology, and the team was still the first-generation team with old concepts, lacking professional convenience store talent. So even though we put in so much effort to upgrade, we didn't create value for customers, so how could sales increase?
Photo/VCG
In 2015, we decided to upgrade again, learning from professionals. We found a team from Taiwan Laifu. Initially, things didn't go smoothly; they said their services were expensive, costing several thousand yuan a day, and thought our small company couldn't afford it or lacked determination. We gritted our teeth and signed for half a year, then renewed for another year after seeing the concepts were good, providing systematic upgrade guidance in cold chain logistics and fresh food development.
The approach was to split the company into two parts: the Taiwan consultants brought in professional managers from coastal convenience stores to build a new team for fourth-generation direct-operated stores, while the old team handled third-generation franchise stores.
The fourth-generation direct-operated stores mainly covered commercial areas and office buildings, targeting young customers. The first store had daily sales of only 5,000 yuan, but the third reached 10,000 yuan, with net profit per store equivalent to two or three old stores. So in 2017, we began large-scale replication of fourth-generation stores. Currently, our fourth-generation direct-operated stores have daily sales of 10,000 yuan, with over 100 stores, and 1,000 franchise stores, mainly in Changsha, with stores also in Zhuzhou, Xiangtan, and Yiyang. We want to dig deeper into different markets before expanding beyond Hunan.
Ten years, one city, a thousand stores, from weak to strong franchising—the price paid has been cruel, especially the debt to parents and children. It's been much harder and more challenging than I imagined. The convenience store business is a ten-year small step, and the future is a long battle. We're just a teenager now.
**Blindly Financing and Stepping on the Gas to Expand Equals Selling Your Future**
**Narrated by Yang Xiang, Founder and CEO of Ledoujia & Make Convenience Store**
We were founded in Nanchang, Jiangxi, in 2014. Currently, we cover four cities: Nanchang, Jiujiang, Shangrao, and Yingtan, with some explorations in fresh food, talent, and franchisee management.
For fresh food, one of the standard features of convenience stores, we treat it as a traffic product. Initially, we took a detour, differentiating for the sake of differentiation, selling performance-type products like rabbit-shaped buns. Later, we used fresh food to increase average transaction value and gross margin, introducing mixed noodles, boxed meals, sushi, fruit, and braised dishes.
It wasn't until we saw community fresh food stores like Yipin Fresh and Fresh Legend, which put 1-yuan sugarcane at the door to attract customers, that we realized this was something our industry lacked. We always waited passively for customers, indifferent to whether they came in. After this cognitive shift, our tactics changed. The original 3-yuan meat bun was changed to an 80g one at 1.8 yuan, aiming to make it a hit product so you'd want to come to us for buns at breakfast.
Last winter, we also launched roasted sweet potatoes, dumplings, and wontons, but later stopped them all. Because these fresh foods are complex to operate, increasing the workload in stores, and we already have 150-200 fresh food SKUs, which is sufficient. The next focus is product iteration, making each product high-traffic rather than piling up ineffective categories.
The core of product management is people. Second- and third-tier cities lack professional convenience store talent, which is a headache for us. In the early rough-and-tumble days, we copied blindly, only knowing that if others sold something, we had to too. To quickly build industry knowledge, from 2015 we hired executives from domestic and foreign convenience stores as consultants to guide product, HR, operations, and logistics, with one or two hundred plane tickets a year for three years.
After 2017, we started bringing in external talent and encountered some problems. The person in charge of the talent development system came from FamilyMart. We hoped the training would convey practical cases rather than copy FamilyMart's system, but after a year or two of checks, he was still the same, inherently proud, thinking that coming from FamilyMart made him the standard. So I fired him, which delayed our training for a year or two.
Why was it urgent to establish a talent development system? I was also frustrated, thinking that some team members had such low awareness and vision—how could they fight with me? Later, I reflected: if their awareness were the same as yours, would they still work under you? High awareness is a basic capability for bosses and senior management. Middle management needs to understand your intentions and break them down for the team, while frontline staff just need to execute. The root cause is that the underlying training system wasn't established. We started a reserve cadre and management trainee plan at the end of last year, and it will probably take two to three years to see results.
Besides internal management, we also have to handle external franchisee losses. We opened franchising in 2016. Some franchisees lacked experience and could lose 10,000 to 20,000 yuan a month, coming to us to slam tables and lose their temper—anything exaggerated happened; not cursing was already good.
One store owner was the leader of several loss-making owners, with daily sales of only 2,000-3,000 yuan for over half a year. To appease him, we waived management and delivery fees, gave discounts on promotional items and display fees, and even sent staff to work overnight shifts. After a year, we stabilized daily sales at 8,000-9,000 yuan, with rent at 5,000 yuan. Last month, he called to say monthly net profit was 40,000 yuan.
Enterprise empowerment is not as simple as Alibaba or JD's million convenience stores just hanging a sign and supplying goods. It's easy to ignore franchisees' fate, just collect the store-opening fee. But if you want them to make money, there are many challenges.
Why are convenience stores in China generally loss-making? Because everyone uses the same approach: eating the dividend of blank markets without convenience stores. But after eating it, no one has figured out where to go. For example, I think Shanghai's consumption level is not lower than Taiwan's, but based on Shanghai's population, FamilyMart should have 12,000 stores there, yet in 15 years it only opened 1,400. There's a reason for that.
Photo/VCG
I still haven't fully figured it out, but I have some thoughts. We need to build different channel models to adapt more broadly to customers, rather than making customers adapt to you. So we need to differentiate store models; otherwise, it's hard to achieve high density in one area, and you won't solve the predecessors' difficulties. The current leaders of local convenience stores in various regions are your endgame.
In January 2019, we incubated a new brand, "Make Convenience Store," opening 100 stores in 5 months, with a target of 300 this year. Make sells basins, quilts, etc., similar to an upgraded small supermarket, differentiated from the original brand Ledoujia, hoping to go more down-market and complete the channel layout. For example, open 100 Ledoujia stores in a city, then fill with 200-300 Make stores, combining light and heavy, high and low, to cover the city with high density.
Currently, besides Nanchang, we've entered Jiujiang, Shangrao, and Yingtan in Jiangxi. The number of stores there is small, but purchasing power is strong, with average daily sales exceeding 7,000 yuan, surpassing Nanchang's 6,000-plus. In the second half of the year, we'll enter Jingdezhen, Ganzhou, and Xinyu. We now have over 220 stores, with average daily sales of over 6,000 yuan, store gross margin of 25%-26%, franchises accounting for 70%, and over 80% of franchise stores profitable.
Unlike many players burning money to expand, we still rely on our own funds. Last year, we even rejected capital investment because we hadn't figured out the model. Financing and stepping on the gas to expand equals selling your future. This industry is a long track; ten or twenty years is uncertain. Who laughs last is still unknown, so there's no need to rush.
I estimate that in another half year, the model will mature, and we're considering capital engagement. The most urgent thing now is to continue exploring. While everyone is eating the dividend, we need to move out quickly, not stay too long, and prepare for the industry's deep-water phase.
**Don't Come to Beijing; If You Do, You'll Be Fertilizer**
**Narrated by Tao Ye, CEO of Haoneighbor Convenience Store**
Looking back at Haoneighbor's nearly 20 years of development, I believe that copying blindly is the most dangerous path for convenience stores. Many people don't understand the reasons behind things and over-mechanically imitate others, bringing great risk to operations.
We also took such detours at the beginning. The first time was in the early stage, in 2001, when the American 7-ELEVEn team was leading Haoneighbor's operations, imitating European convenience stores by launching many processed foods for business people and nearby small families. But the problem was that this store type only works when the economy reaches a certain level. At that time, customers were mostly born in the 50s and 60s, price-sensitive, preferred to buy groceries and cook at home, and had low demand for processed foods.
That was also when hypermarkets began to rise, with Wumart and Meilianmei growing quickly. Customers preferred going there, making it very difficult for convenience stores. Gross margins couldn't rise, sales were low, and we burned 20-30 million yuan in that era.
In 2003, the foreign team withdrew, and Gangjia Group took over, introducing some snack foods, refrigerated foods, and daily distribution items, similar to most urban convenience stores like today's KuaiKe. Development improved significantly, with many stores exceeding 100.
But around 2008, the problem of copying appeared again. We imitated the Taiwanese model, introducing a large number of refrigerated and low-temperature fresh foods. At that time, fresh food wasn't mainstream; many consumers preferred small restaurants, so sales were low, but losses and costs were high, making it unsustainable.
At that time, fresh food had a survival niche. Around the 2008 Olympics, Beijing underwent major renovations, and many business districts emerged. 7-ELEVEn's boxed lunch was popular among white-collar workers. But the problem was that they could get catering licenses through special policies, while we were even restricted from selling tea eggs. More importantly, 7-ELEVEn mainly opened in high-end office business districts, while we were in commercial and community areas, targeting completely different people.
The companies that failed last year and the year before made the same mistakes we did. They seemed highly dependent on fresh food, but sales were actually poor. Because the limited office buildings were mostly occupied by 7-ELEVEn. They either had to enter despite competition, driving up rents, or move to low-traffic locations.
By 2010, the whole company was in danger. Over 150 Haoneighbor stores were losing nearly 20 million yuan a year, whereas before we could roughly break even. If things went wrong, over a thousand people could lose their jobs, and we owed suppliers a pile of debt, almost cutting off supply.
Reluctantly, the group asked me to also serve as Haoneighbor's general manager. My first task was to repay suppliers. The 20 million yuan I brought was used up in a week. Then I rallied people, finding over 30 grassroots store managers to drink and talk with over one or two months, stabilizing the company in three to four months. But the next step was a challenge.
The difficulties of opening stores in the north are obvious: less nightlife, unlike the south where socializing is frequent and people naturally accept small shops. Northern cities often have industrial foundations, wide roads, and a courtyard culture in various departments and units, which fragments business districts, making convenience store development very difficult. This special urban and social structure has no model in other countries. The former Soviet Union was somewhat similar, but there's no successful example to reference.
At that time, since we couldn't beat 7-ELEVEn with boxed lunches, we decided to do breakfast. So we proposed the concept of a 6-yuan breakfast, adding refrigerated drinks, cooked food, bread, etc., raising the proportion of low-temperature short-shelf-life products to 30%. From 2016, we gradually became profitable, and by the end of 2017, the number of stores doubled to over 300.
Photo/Provided by interviewee
That year was the explosion period for the convenience store industry. Beijing added 400-500 stores in one year, and even more in 2018, with competition intensifying.
Why are convenience stores harder to run in first-tier cities? Because competition is too fierce, and participants have high expectations, throwing money at the market, adopting aggressive strategies, and irrationally grabbing storefronts. Beijing's supply of small shops is inherently scarce, possibly only 1/3 to 1/2 of Shanghai's. The cause of death for last year's wave of convenience stores may not be the capital side, but their irrational strategies, leading investors to be unable or unwilling to continue funding.
But at the time, it still put great pressure on us. Many competitors, regardless of right or wrong, rushed into community commercial areas with 7-ELEVEn's model. Our store in Beijing's Xihongmen Jiayue Plaza saw three or four competitors enter the vicinity, and daily turnover plummeted from 7,000-8,000 yuan to 4,000 yuan. Unable to profit, we withdrew.
Reality forced us to upgrade again, noticing the consumption potential of communities. Generally, ten communities support one business district, so communities have more long-term space. Moreover, the post-80s generation started having children, and we thought about how to meet the needs of these small families, helping them get a meal done quickly after work.
We divided the 24 hours of a day into 20-30 demand scenarios, testing products one by one, and finally added a large number of processed foods and cooked foods like dumplings, zhajiang noodles, cold dishes, and braised dishes, plus some vegetables and fruits. This was the community-oriented green-label store launched at the end of 2017. Among the over 40 upgraded stores, the highest daily turnover is 20,000 yuan, and the smallest store type also reaches 8,000-9,000 yuan.
Currently, among Haoneighbor's over 340 stores, besides green-label stores, there are over 200 red-label stores for business districts, with average daily turnover of 8,000-9,000 yuan. Upgraded store types average 14,000 yuan, while old red-label stores are 7,000-8,000 yuan. Additionally, there are a few innovative store types in Hangzhou. We're still in the upgrading and nurturing stage, with a considerable portion losing money, and we're still observing external expansion.
Photo/Provided by interviewee
Looking back over the years, if I were to give advice to industry insiders, it would be that enterprises must find their own path and characteristics, not be lazy, and not copy 7-ELEVEn or FamilyMart. The Japanese approach is rice balls; it's useless if you make them well because Chinese people don't eat them. Even if you make them well, people will go to 7-ELEVEn to eat them. We need to find Chinese people's own combination of ready-to-eat foods.
Speaking only of the Beijing market, too many brands have accompanied me over the years; I've even forgotten many names. On average, every three years someone competes for your storefront, then closes within half a year or a year, impacting your performance. This makes it even more important to find a path with your own characteristics. We plan to create a convenience store with old Beijing flavor next.
**Every Year on the First Day of Work, I Talk About Closure Cases**
**Narrated by Ren Guanglin, Founder and CEO of Anda Convenience Store**
Convenience stores are hard to run in both the north and lower-tier markets, and we have both. In June 2015, we opened our first store in Hohhot. At that time, the market was already a red ocean. Hohhot had a permanent population of over 3 million, but there were already 500-600 24-hour convenience stores.
At this point, the biggest problem facing us was differentiation. We saw the demand for consumption upgrades in third- and fourth-tier cities, especially from young people returning from first- and second-tier cities and small-town youth. So we tried low-temperature short-shelf-life products and imported goods, with an average transaction value of 21 yuan. The 24-yuan yogurt sold well, but we also made many mistakes.
For example, fresh produce. At the end of 2016, to build more stickiness with consumers, we decided to meet daily fresh produce needs. The first store was completed from property acquisition to opening in 21 days, and we even planned to open 30 more the next year. We launched a second-item-half-price promotion, but it attracted mostly elderly people. They swarmed in during promotions, but when there were no promotions, the store was deserted, and daily sales dropped from 30,000 to 10,000 yuan.
Once, I went to the store for over ten minutes and found that the checkout line was mostly gray-haired elderly people, while our target user group—young people buying imported goods and low-temperature short-shelf-life products—was squeezed to the back of the line. Half a year after opening, I decided to close the store. The new project deviated from our target user group. The post-80s and post-90s hadn't reached the stage of having children and cooking, and we didn't have a fresh produce supply chain. Long-term subsidies weren't the solution.
Photo/Provided by interviewee
We also followed the trend of fresh food and bakery factories. Almost everyone said that the core differentiation of convenience stores lies in fresh food. In 2016, we spent three months researching domestic, international, and surrounding areas. The results were frustrating: local resources were scarce, and we couldn't find a suitable fresh food factory. Moreover, young people's work pace wasn't fast; they got off at noon, returned to the office at 2:30 pm, and went home for lunch in between. Whether there was demand was a question. Additionally, our capabilities at the time were insufficient; we were still perfecting low-temperature short-shelf-life products with a 21-day shelf life and 7-day Taoli bread. How could we sell boxed meals with a one- or two-day shelf life? So we immediately dropped the idea.
Furthermore, the convenience store industry also emphasizes private-label products. The team once proposed designing a rainbow umbrella in red, blue, and yellow for external promotion, but I felt that with total sales under 300 million yuan and fewer than 200 stores, we shouldn't consider anything other than hit products. Moreover, such products couldn't achieve scale, so we wouldn't have pricing power, and it would waste extra energy.
So what is true differentiation? At the end of 2015, I contacted Benlai Life and felt that products like Chu Orange, which carry their own IP traffic, were helpful. In the first year, we ordered 1,000 boxes, but 500 boxes rotted due to lack of full cold chain transportation. However, the remaining customers responded well.
The second year, some team members opposed it, saying convenience stores need to make money and such products aren't suitable. I thought that since we made consumers aware of our difference in the first year, we should continue. We communicated with Benlai Life to solve the transportation problem, and all 4,400 boxes were pre-sold. In the third year, 20,000 boxes were sold out, also driving sales of 10,000 boxes of Aksu apples and 10,000 boxes of Korla pears.
In lower-tier markets, the team's vision can be limited, as seen in the introduction of wine. I saw that 7-ELEVEn in Beijing had a liquor section with good sales, high gross margin, and long shelf life, and wanted to introduce it. But the procurement team said locals had never seen it, so there couldn't be sales, and cash procurement would cause problems. They gave me no feedback or action for half a year.
Reluctantly, in 2018, I researched the market again and found that the only places to buy foreign liquor locally were nightclubs, where it was either very expensive or fake, but young people had demand. So I told the procurement team, "You have one month; if you don't procure it, you're all fired." A month later, they cash-purchased 320,000 yuan worth of foreign liquor, and recouped the investment in one and a half months. Now, the 38-yuan red wine sells very well. Customers who don't recognize English boast that a friend brought it back from France. Inner Mongolians drink for quantity and face, not taste.
Additionally, we work with local suppliers to develop distinctive local products, such as Inner Mongolian beef jerky and dairy products. For non-food differentiation, we cooperated with NetEase Yanxuan to open two flagship stores, and home and lifestyle products sell well. Now, we have opened over 200 direct-operated stores in Hohhot, Baotou, and Ordos in Inner Mongolia, with average daily sales of 4,000-5,000 yuan, and total sales in 2018 exceeded 200 million yuan.
Starting a business in the northernmost lower-tier market is still stressful. Every year on the first day after the Spring Festival, I tell the team about national closure cases. The process is very painful for me, but I must do it, reviewing lessons one by one and checking whether we've made similar mistakes.
Looking back at the pitfalls we've encountered, I don't know what the closed loop of new retail is, but I know we must do the right things at the right time, pay attention to trends without blindly entering, and gradually solve the incomplete aspects of convenience stores. This is an industry that requires meticulous polishing. As a young company, there must be a way out of the maze.


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