---
title: "Why the Internet Can't Kill Convenience Stores?"
description: "The article argues that convenience stores thrive because they serve young, mobile-native consumers who value convenience and fresh food, and that the internet cannot replace the in-store experience. It proposes strategies like membership programs, virtual stores, and empowering employees to achieve monthly sales of 2 million yuan per store."
author: "卫哲"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2019-05-30"
language: "en"
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# Why the Internet Can't Kill Convenience Stores?

> The article argues that convenience stores thrive because they serve young, mobile-native consumers who value convenience and fresh food, and that the internet cannot replace the in-store experience. It proposes strategies like membership programs, virtual stores, and empowering employees to achieve monthly sales of 2 million yuan per store.

Click 'Read Original' for details.

**Win the Youth, Win the World**
When I was working in the internet industry, I learned a saying: "Win the youth, win the world."
Why do I and capital alike favor the convenience store format? First, look at the age distribution of shoppers across all retail formats today. Convenience stores have the youngest customer base, mainly post-90s, post-95s, or post-85s. Our generation, the post-70s, still doesn't like to walk into convenience stores because convenience comes at a premium, and it should be.

Today, the world's multi-hundred-billion-dollar internet companies all started with seemingly insignificant young people. Tencent started with QQ, but we didn't use QQ back then. QQ initially targeted the post-80s and post-85s, and today they are in their 30s and 40s, still using QQ. If you make a good product, you can serve a generation and fully understand them. Facebook also started with young people on campus, and today's Taobao started with the young people of that time.

In any business format, winning the youth wins the world. This is true for the internet and for the retail industry. There are many retail formats, and I often visit stores to see the age structure of customers. **We also need to know what kind of young people our convenience stores face. New convenience first means new demographics.**

Chinese convenience stores have Chinese characteristics. What is the first major Chinese characteristic? **It is that Chinese convenience stores truly have the opportunity to serve the new generation of post-90s and post-95s.** This demographic has the biggest Chinese characteristic: they are natives of the mobile internet. Today, no matter what gap exists between Chinese convenience stores and the world's best, there is one thing that convenience stores in other countries don't have: the mobile internet. Whether it's mobile payment or the use of mobile terminals, Chinese convenience stores are already ahead. It's not that our convenience stores are so great, but because this batch of post-90s and post-95s are natives of the mobile internet.

What does "native" mean? We all know what immigrants are. If a Chinese person immigrates to the U.S., their English will have a Chinese accent, and they will crave Chinese food. Similarly, our generation is immigrants of the internet. We grew up going to supermarkets and watching TV. The post-80s and post-85s are natives of the internet and immigrants of the mobile internet. The post-90s and post-95s are born as natives of the mobile internet; the smartphone has almost become a new organ.

Furthermore, the post-90s and post-95s have no memory of poverty. They won't think like us that a can of Coca-Cola is more expensive in a convenience store than in a supermarket. We are the generation of "subsistence 1.0," and we calculate the cost. They are the generation of "moderate prosperity 1.0," and they don't calculate or need to calculate.

We often say that convenience stores are not only a symbol of urban civilization but also a symbol of whether a region has entered moderate prosperity. To enter moderate prosperity, you first need a moderately prosperous population. This population has nothing to do with all of us today. I am certainly moderately prosperous today, but I didn't grow up in the era of moderate prosperity. We are the "moderate prosperity 2.0" generation, while the post-90s and post-95s are the "moderate prosperity 1.0" generation.

Third, they are "only-child 2.0." What is "only-child 2.0"? The post-85s are only children, but their parents are generally not. The phenomenon of "only-child 2.0" is particularly Chinese, unprecedented globally, and likely never to be repeated. For "only-child 1.0," the post-85s' dictionary has no words for older brother, older sister, younger brother, or younger sister. For the post-90s and post-95s, their dictionary not only lacks these terms but also lacks uncle and aunt, because their parents also have no siblings. What does this mean? How many people took care of the post-90s and post-95s when they were young? The convenience they had in family life is unimaginable to us. We used to criticize children with the phrase, "Clothes to hand, food to mouth." The post-90s and post-95s truly had that at home. What does this phrase describe? Family convenience. They didn't cook or do chores themselves. When they leave home and enter society, they need a convenient environment—what we call a convenience solution—around them.

So why do Chinese convenience stores have a bright future? Because of this new demographic, and it's an expanding one. To do well in convenience stores, we must understand the differences between this demographic and others.

**Why the Internet Can't Kill Convenience Stores?**
Capital favors this format for another reason, a scary one: Why can't the internet kill convenience stores?

The internet isn't unwilling to kill convenience stores; they've been eager and have tried several times, but ultimately failed. Many retail formats have been shattered by the internet, but convenience stores are still here, still opening new stores, not just surviving but growing well, with annual growth of 15% to 20%. That's one reason capital favors them.

We say user experience is simple: only four words: more, faster, better, cheaper.

As a convenience store, if you compare product variety, you're picking the wrong opponent. What did Taobao rely on for its rise? First, it relied on variety—it had everything. When I was in retail, a department store with 10,000 to 20,000 SKUs was impressive. But when I joined Alibaba, Taobao already had 100 million SKUs. So don't compete on variety. Of course, you can't compete on price either. **What we need to compete on is speed and quality.**

What is speed? Earlier, I heard President Song mention that we can reduce a transaction from 15 seconds to 5 seconds. Does the internet want to compete on speed? They tried, focusing on the last 500 meters, leading to a wave of O2O. The most extreme O2O was on campuses, where diligent students delivered instant noodles to the bedsides of the laziest students. You didn't even need to get out of bed; a hot bowl of noodles was brought to your bedside. That model ended within a year.

There were also many micro-fulfillment centers, using O2O to deliver goods in 30 minutes or 15 minutes, but they all failed. If people are so lazy that they need capital to solve the last 500 meters, that violates business principles. If you're unwilling to walk, and you ask the supplier to walk, that's not in line with business principles. **The last 500 meters must be walked by the consumer, not the merchant.**

The second time the internet tried to kill convenience stores was with unmanned shelves. They also raised a lot of capital but faded within a year. When they first appeared, we were firmly opposed to unmanned convenience and unmanned shelves. So far, our opposition has been effective; most unmanned convenience stores disappeared after a year.

Why did they fail? Unmanned shelves had limited product selection, couldn't match a vending machine, and restocking costs were huge, as were losses. These also violate business principles. So the internet can't kill convenience stores; it can't save consumers the 500-meter walk. Later, I'll discuss how to make consumers walk that 500 meters and whether it's worth it.

Delivering goods to the consumer's door is convenient, but it carries huge costs and violates business principles.

Now, the word "better." For standard products other than fresh food, convenience stores can't create much differentiation. **So our "better" must be in convenience, or more simply, in the in-store experience.** Product quality isn't differentiated—Coca-Cola is Coca-Cola. The "better" lies in the on-site experience.

**How to Make More Money?**
Convenience stores are great: the internet can't kill them, capital favors them, and they can attract the post-90s and post-95s—the moderate prosperity 1.0, only-child 2.0 generation. So why aren't they profitable? Many convenience stores may not yet achieve daily sales of 5,000 yuan, with low sales per square meter and low labor productivity. Despite high foot traffic, it doesn't matter because you can't retain customers. Foot traffic doesn't equal retention; they come and go. Convenience stores naturally want customers to come and go, but if you always have high traffic and never convert it to retention, you have a problem.

Three years ago, when we started seriously serving the convenience store industry, I had a conversation with Chairman Wei of FamilyMart. At that time, we proposed whether we could increase monthly sales from 200,000 to 300,000 yuan. I said if it's just from 200,000 to 300,000, you don't need me. With refined operations and just doing fresh food well, a store can reach 300,000. Daily sales of 10,000 per store is not new retail; it's still a very tough industry.

What is new retail? What is the future of convenience stores? At least you have to dare to dream. Dreams are necessary. Imagine a single store increasing monthly sales from 200,000 to 2 million. If it's 2 million a year, you don't need me either; refined operations would suffice. **In new convenience, our goal is at least 2 million per store per month.** Many say it's impossible. With this sales per square meter—over 20,000 yuan per square meter per month in a 100-square-meter store—it's impossible.

How many unique customers does an excellent convenience store have in a month? Our statistics show it's not hard to exceed 10,000, meaning 300 unique customers a day. If you count repeat visits, it's more than 10,000.

**Managing products is important, but not enough. The core is managing people.** Is it possible for a store to develop 1,000 or 2,000 members? No problem. It's not hard for a convenience store to develop 1,000 to 2,000 members from 10,000 active people. Is it possible for each member to spend 1,000 to 2,000 yuan a month on food and daily necessities? Absolutely possible.

Let me do a simple calculation: if you have 2,000 members and each contributes 1,000 yuan a month, that's 2 million. Or if you have 1,000 members and each contributes 2,000 yuan, that's also 2 million. We need to aim for this goal. First, do we have 1,000 to 2,000 members? Second, how do we satisfy their 1,000 to 2,000 yuan consumption? In urban life, spending 1,000 to 2,000 is normal. This is called managing people.

I also come from traditional retail, where sales were built by stacking bricks. The internet taught me: stacking people is enough. If a member spends 1,000 yuan a month, relying solely on in-store purchases is possible but challenging; they'd need to spend 30 yuan a day in the store. But spending 2,000 yuan a month in a convenience store is nearly impossible, as it means 70 yuan a day per consumer. That forces us to think: can we encourage off-premise consumption, where consumers make purchases without visiting the store?

It's not hard to imagine. We have two key goals:

**1. Convert foot traffic into retained customers, with a target of 1,000 to 2,000 per customer;
**2. Set a target for average spending per customer.**

If we achieve both, the monthly sales per store should reach 1 to 2 million.

So this isn't a wild guess. Monthly sales of over 2 million per store is not a dream; it's achievable.

Once monthly sales reach 2 million, the question of profitability is answered—it will definitely be profitable. However, we've looked at many convenience stores nationwide, and a single store can't make big money.

After thinking this through, **we need to classify demographics: residential communities, office communities, transient populations**—like near "rail, road, airport" (railways, highways, airports)—and bustling street types. Previously, we used these four types to create different product mixes, which is important but not enough. We need to understand these four groups because they differ, so the nature of memberships to develop differs. Some stores are only for developing members, while others are for managing members. For example, "rail, road, airport" locations have huge foot traffic, but they aren't local residents. They might be good for developing members but not for managing them.

Office and residential communities might be good for managing members but not necessarily for developing a large number, because the total number of members in an office building or community is limited.

Of course, if a convenience store hasn't even done regional segmentation well, it should first do that. Previously, product structure was adjusted based on regional segmentation. Now, after adjusting the product structure, you also need to ask: how do we manage people by region?

**Four "Ups" and Four "Onlines"**
The first "up" is to get consumers to walk the last 500 meters to the store. The in-store user experience is most important.

Consumers should walk 500 meters, but whether they walk into your store is not guaranteed. I want to thank Chairman Wei of FamilyMart for telling me, **What is the most important in-store experience? The proportion of hot food.** We Chinese are a hot-food nation; we prefer hot meals. The heating process is crucial, and it's something e-commerce and the internet can't do anything about.

So I often say we are firmly opposed to unmanned convenience and unmanned retail, but I encourage unmanned checkout. If a store clerk is just a cashier, their value is low. With mobile payment and many other checkout methods, can our clerks become service staff? First, convenience store staff aren't salespeople; it's not right for them to be salespeople. Restocking has some value, but the best is to be on-site food processors.

On-site processing is a high-value task for clerks, providing essential, high-frequency services. So first, consider whether we can improve the user experience. I mentioned quick convenience—checkout in five seconds—which is good but not enough. What about the proportion of hot food? Do you have on-site processing? Why sell coffee? Because it involves on-site processing.

Second, the most important tool for "managing people" and converting foot traffic to retention is the electronic membership system. As I said, every store must have 1,000 to 2,000 electronic members. What is an electronic membership system? It means you must abolish the old system where just giving a phone number made you a member. That's not electronic membership; if they don't come to the store, you lose contact. **Your customers may not come to the store, but you can still communicate and connect with them—that's electronic membership.** Only with electronic members can you attempt off-premise consumption; otherwise, you can only rely on in-store visits.

**A very important part of the membership system: do you dare to try a paid membership?** Jack Ma said, "Free is the hardest." We often talk about consumer value and user value. If you charge 99 yuan, you really have to think about whether you can create more than 99 yuan of value for them. FamilyMart's system has been running for over two years, with over 5 million 99-yuan members, and they're aiming for 7 million paid members by year-end. With 7 million 99-yuan members, membership fees alone bring in 700 million yuan a year. With that, we can understand what member value and customer value really mean.

How to expand? The core is the motivation to open a card. You need to design why consumers would open a card, why your employees would help you open cards, and whether the incentive for renewal in the second year is strong enough.

Third, build a virtual big store. Our physical stores are so small that it's impossible to achieve 2 million in monthly sales with just the physical space. You can't move goods in and out fast enough, so you need a virtual store.

**In simple terms, convenience stores compete on speed and quality, while the virtual store aims for savings.** In one sentence: is it possible to add an online Costco on top of each offline convenience store? Its characteristic is low gross margin. If we can achieve 8%-10% gross margin and still be profitable, we can compete with e-commerce. Because if e-commerce adds 20%-30% gross margin, it can't survive, but we might.

Finally, reduce supply chain costs. We have a possibility: "small items to store, large items to home." Whether it's in-store samples or ordering, we can achieve small items to store and large items to home. To store means consumers pick up; large items to home have high order values, so logistics costs are affordable.

Let me share the "Four Onlines": **employee online, product online, management online, and customer online.**

Why do many companies fail? They haven't found the breakthrough point, which is empowering store managers and employees. Employee online is the first step in internet transformation. Today's post-95s and post-90s employees come to work with their phones. Apple stores have already eliminated POS machines. Apple stores have achieved employee online: everything is on a phone—payment, products, services, management, and CRM.

So empowering employees simply means starting with the app on the phone for your store managers and sales guides. It's unlikely to create an app for convenience store customers. But every employee is a high-frequency, essential user. We need to ensure every employee has our own app. What's in the app? Your products online, your customers online, and your management online.

I believe the biggest characteristic of Chinese convenience stores is that we have a group of post-90s and post-95s new humans, backed by the prevalence of mobile internet and smartphones. The core of Chinese convenience stores is our hot food station, our on-site food processing capability, and the proportion of freshly prepared food in the store. If we achieve these, not only can e-commerce not kill us, but we can also survive with high profits.

Today, I give you a goal: the implementation of new retail in new convenience depends on which companies first exceed 1 million per store per month, and 2 million per store per month. I especially hope to continue working with retail partners who persist in the convenience store industry. The implementation of new retail in new convenience will surely be the first sub-sector to blossom and bear fruit. Thank you.

Source: China Chain Store & Franchise Association


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