Accelerate the layout of small and medium-sized cities and county towns in China, as well as Japanese brand convenience stores such as Lawson Family Store | Market | Brand
There are more and more convenience stores in the cities of the Yangtze River Delta recently. On May 19th, well-known convenience store brand Lawson entered Taizhou, Zhejiang, and the first batch of five stores were opened together. At this point, Rosen has reached 550 stores in Zhejiang, becoming the foreign-funded convenience store brand with the highest number of stores in the province.
In the previous three months, the 1000th store of Anhui Linji Convenience Store Co., Ltd. - Hefei Swan Lake Wanda Jinjie Store opened. Liu Zhongjian, founder and chairman of Lingji Convenience Store, stated that he plans to have a total of over 3000 stores in the next five years. Prior to this, local convenience store brands from Zhejiang were full, opening 10 new stores in Wuhu, Anhui in November last year. After entering the Jiangsu market in 2018, full once again expanded its cross provincial presence in the Yangtze River Delta.
The development of China's convenience store industry began in the 1990s. In 1992, 7-11 opened a store in Shenzhen, beginning the exploration of foreign convenience stores in the mainland Chinese market. In the following year, in 1993, Hong Kong funded convenience stores "Baishi Convenience" entered the Shanghai market and became the "enlightenment" for a considerable number of Shanghai citizens. This 24-hour retail format not only sells food and daily necessities, but also provides fresh food heating and various lifestyle services, making consumers feel fresh at that time. At the same time, local convenience stores in Shanghai were also accompanied by the initial trial of the reform of the grain and oil distribution system. In 1993, the grain department of Huangpu District in Shanghai first opened four chain convenience stores, and subsequently transformed a number of grain and oil stores and food stores into convenience stores.
In recent years, with the continuous acceleration of urbanization in China, the convenience store industry has entered a golden period of development. In July 2021, the Ministry of Commerce and 11 other departments jointly issued the "Guidelines for the Construction of Convenient Living Circles in Cities". Convenience stores are positioned as basic guarantee businesses and public welfare commercial facilities. In terms of business configuration requirements, it is mentioned to focus on developing brand chain stores and improving brand chain coverage. Once seen as a brand chain convenience store only found in first tier cities, it has now blossomed everywhere and become one of the few physical retail formats in China that has maintained growth in recent years.
According to data released by the China Chain Store Association, as of the end of 2022, the number of domestic chain brand convenience stores has reached nearly 300000. As a comparison, the number in 2013 was only 62147. Meanwhile, the total number of convenience store enterprises ranked among the top 100 in the domestic market in 2022 was 171340, an increase of 6.59% from 160744 in 2021.
Small businesses can drive big consumption, and behind small businesses lies a big market. The densely populated and economically developed Yangtze River Delta region is a major hub in the domestic convenience store industry. Although the convenience store market in the Yangtze River Delta is still in continuous development and has a considerable market capacity, with the gradual recovery of the consumer market, local brands and foreign established brands are accelerating their race to capture territory, which has vaguely revealed the explosive flavor of the convenience store industry in the Yangtze River Delta.
Rosen Convenience Store in Shanghai. Visual China Image Supply
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In 1996, Lawson first entered markets outside of Japan and opened its first store in Shanghai. The blue and white striped uniform of the Rosen salesperson and the milk bottle logo on the front door once became symbols of westernization and fashion. Although it entered the market early, it was not until 2012 that Rosen took the first step into other cities in the Yangtze River Delta and opened its first store in Hangzhou, Zhejiang. Afterwards, in 2014, it entered Jiangyin and made its first foray into the Jiangsu market. In recent years, Rosen's expansion in the Yangtze River Delta has suddenly accelerated, with explosive growth in the number of stores. As of now, Lawson has approximately 1221 stores in Shanghai, 758 in Jiangsu, 539 in Zhejiang, and 217 in Anhui. In July 2021, the head of Rosen China stated that the number of stores would reach 10000 by 2025.
In the view of He Yunmin, Deputy General Manager of Shanghai Rosen Convenience Co., Ltd., Rosen's expansion has its own pace, and "scale for scale, speed for speed" is unnecessary. "Whether one can make money is always the core essence of the retail industry, and the growth of convenience store size requires a suitable timing." He believes that the current is a key node in the development of the domestic convenience store industry. He said that based on past experience in mature international markets, when the per capita GDP of the target market reaches $2000 to $3000, the convenience store industry has a preliminary survival soil and is usually seen as the introduction period of convenience stores; When the per capita GDP reaches $10000, the convenience store industry will enter a period of rapid development.
"The time has come now," He Yunmin said.
In 2019, China's per capita GDP exceeded the threshold of $10000. If we take into account the industry experience mentioned above, it is not difficult to understand Lawson's acceleration in recent years: facing the upcoming industry development and possible fierce competition in the future, more stores may be the most direct and effective way to demonstrate a sense of presence in the market. Moreover, potential opponents have already shown their sharpness at an equally astonishing pace of expansion.
In 2018, Lawson opened a store in Hefei and entered the Anhui market. And a year ago, a convenience store with a yellow smiling face logo on its doorstep had already appeared on the streets of Hefei, giving birth to the "Neighborhood" brand. Headquartered in Hefei, Linji is one of the fastest growing brand chain convenience stores in China, with nearly 1200 stores. It has achieved full coverage in 16 cities in Anhui Province and has expanded to Xiamen, Zhangzhou, Quanzhou, and other places in Fujian Province.
Behind the young neighboring brands are actually a group of retail industry veterans. The startup team of neighboring countries, including founder Liu Zhongjian, has over 10 years of practical experience in brand chain convenience stores. Previously, almost all of them worked for another chain convenience store brand located in the Yangtze River Delta.
Zhu Fangsheng, the person in charge of Anhui Linji Trading Co., Ltd., said that when choosing Hefei as the starting point for entrepreneurship, in addition to the relatively low start-up cost compared to first tier cities, the team valued Hefei's development potential and superior business environment more. At the beginning of its development, well-known foreign convenience store brands had not yet entered the Hefei market, and at that time, there was no large-scale brand for local convenience stores in Hefei. The 24-hour convenience store model was still being cultivated. More importantly, the strong development momentum of the city of Hefei has brought strong consumer power, and the journey of neighboring countries has caught up with the dividend period of Hefei's rapid development.
In 2017, when neighboring countries were born, Hefei's GDP exceeded 700 billion yuan, and in 2022, Hefei's GDP reached 1.2 trillion yuan, ranking among the "trillion yuan club". Starting from Hefei, Neighborhood has also joined the "Thousand Store Club" in the domestic convenience store industry within just five years.
space
The 2022 China Urban Convenience Store Index report released by the China Chain Store Association points out that currently, convenience stores in various cities in China are still mainly regional brands. Due to various factors such as supply chain capability, store operation capability, and digitalization level, there are still relatively few cross regional national chain brands in various cities. The development of convenience stores in various cities is influenced by various factors such as economic level, consumption habits, climate conditions, and business environment. The regional differences are significant, which poses significant challenges to the development of national chain brands.
Even though Lawson has been struggling in the domestic market for more than 20 years and has landed in over a hundred cities, He Yunmin still believes that the huge size and differences between different markets make it almost impossible for one or several convenience store brands to have enough appetite to "eat all" the entire Chinese convenience store market.
In the convenience store market of the Yangtze River Delta, the trend of local top brands competing with foreign brands is very clear. Apart from foreign brands, local brands represented by Anhui's Neighborhood, Zhejiang's Decadent, and Jiangsu's Suguo are all at the level of local tyrants in their respective markets; In the Shanghai market, local brands such as Haode and Kuaike, which are well-known to Shanghai citizens, have been deeply cultivated for many years.
The convenience store market space in the Yangtze River Delta is large enough to accommodate both local and foreign brands. The data can visually demonstrate the potential of the convenience store market in the Yangtze River Delta. Among Shanghai and the provincial capital cities of Jiangsu, Zhejiang, and Anhui, Nanjing in Jiangsu has the highest saturation of convenience stores, with an average of one convenience store per 3802 people. Shanghai has 3886 people, Hangzhou in Zhejiang has 4774 people, and Hefei in Anhui has 14415 people. In contrast, Dongguan, the "number one convenience store city" in China, has an average of one convenience store for every 2073 people, compared to 1059 people in South Korea. Even with the mature market standard of having one convenience store for every 2500 people recognized within the industry, there is still a considerable gap in major cities in the Yangtze River Delta such as Shanghai, Nanjing, Hangzhou, and Hefei. He Yunmin said that the market in the Yangtze River Delta is still far from saturated, and the development potential is still enormous. More convenience store brands can generate agglomeration effects after entering, thereby further expanding the market size.
Since entering Hefei in 2018, Lawson has continuously expanded its presence in the Anhui market and has since entered cities such as Ma'anshan, Tongling, Chuzhou, Bengbu, Lu'an, Huainan, and Xuancheng. Last year, Dangdang used 10 stores in Wuhu as a stepping stone to enter Anhui from Zhejiang. At the "home ground" of Anhui, neighboring countries have been in close contact with foreign brands and domestic peers in some cities. However, Zhu Fangsheng believes that it is still too early to discuss competition at the moment. These future competitors are still partners in jointly making a big cake.
As for the neighboring countries themselves, Zhu Fangsheng stated that they have not yet fully understood the Anhui market as a base and need to further seek a sense of existence: currently, they can only be said to have formed a partial moat and occupied some of the commanding heights. According to the population and urban size of Anhui, the number of stores for a single convenience store brand should reach around 3000. Even in Hefei now, our number of stores is not enough.
sink
Sinking has become a common main measure for various brands in exploring market potential and enhancing their presence. Unlike in the past when convenience stores went from Beijing, Shanghai, Guangzhou, and Shenzhen to "new first tier" cities, today's convenience stores clearly plan to sink deeper. Second -, third -, and fourth tier cities, as well as county towns and some economically strong towns, have become a stage for major brands to compete on. Entering small county towns from urban CBD and abandoning the previous "high cold" attitude, convenience stores have quickly found new development opportunities in the sinking market. He Yunmin said that the consumption capacity of the sinking market should not be underestimated. The changes in lifestyle and consumption habits, as well as the demographic dividend brought back by the return to home craze, have provided opportunities for convenience stores. Through social media and short video platforms, young consumers in small and medium-sized cities have a natural high acceptance and favorability towards the convenience store industry, becoming the main contributor to consumption growth. Sales in some third and fourth tier cities are better than those in first and second tier cities. Zhu Fangsheng believes that the sinking market requires more support from brand convenience stores. The branding and diversification of the sinking market is the trend of future industry integration and development.
However, the process of sinking is not always smooth sailing. Zhu Fangsheng mentioned one thing, for example, convenience stores in big cities have various instant hot boxed lunches, and white-collar workers pick them up at noon, which everyone takes for granted. In second - and third tier cities, many employees of enterprises and institutions are accustomed to eating in cafeterias, going home for meals, or bringing their own meals, so boxed meals cannot be sold at all. Every day, a large number of unopened products have to be reported as damaged and discarded. Rosen has also experienced a similar situation. Although the boxed lunch and fresh food products in convenience stores have been validated in the Shanghai market and widely accepted by consumers, white-collar workers in some small and medium-sized cities prefer to go to local small restaurants in groups of three to five at noon, and have little interest in standardized production of boxed lunch bentos; In cities like Jiangyin, many local enterprises and institutions have a 2-hour lunch break, and due to the small size of the city itself, employees are often accustomed to going home for lunch. Therefore, the sales of convenience store boxed lunch boxes are definitely not good.
Zhu Fangsheng stated that with persistent promotional activities and control over product quality, neighboring countries have gradually opened up new opportunities for fresh food in cities such as Hefei; Rosen has shifted its focus on fresh food products to light and sweet foods in the Jiangsu and Zhejiang markets, attracting young consumers. He Yunmin said, "We cannot expect to apply the same model and tactics in different regions. In the lower tier market, it is necessary to lead the business according to the local market demand, and achieve one policy per location through localized production and procurement."
Victory or defeat
There is a special presence in the retail market of the Yangtze River Delta. Small supermarkets and retail stores scattered throughout the Yangtze River Delta, such as mom and pop stores and grocery cigarette paper stores, have always firmly held their own ecological niche in small areas, to some extent occupying the survival space of brand convenience stores in advance. Many of the small owners behind these small supermarkets come from Lishui Liandu or Wenzhou Yongjia. Industry insiders believe that Jiangsu has never been able to produce a local convenience store brand with certain market dominance, largely due to the fact that these small supermarkets owned by Zhejiang entrepreneurs were mainly concentrated in the Jiangsu province region from the beginning.
He Yunmin believes that existence is reasonable. Couple shops have a small size and flexible physique, which cannot be ignored. However, the differentiation of business formats determines that convenience stores may not necessarily have a positive confrontation with them in the process of sinking. Zhu Fangsheng also stated that diversified services such as fresh food, coffee, and proxy payment of water, electricity, and coal are currently not available in the couple's store.
For example, behind the sales of fresh food, a strong supply chain system is needed to support it. The proportion of fresh food sales in neighboring countries has exceeded 50%. At present, two self owned fresh food factories in Hefei have started construction, with a total investment of 800 million yuan. After the factory is completed, it can cover fresh food supply to 3000 stores in the future.
The practice of building a self built fresh food factory is an old skill of Japanese convenience stores. Rosen currently has 45 fresh food factories nationwide and 4 supply chain bases in the Yangtze River Delta region. He Yunmin revealed that Rosen's new supply chain in Zhuji, Shaoxing is currently being planned and is expected to be put into use in October. Through this new link, Lawson's supply chain radius in the Zhejiang market will be further extended, thereby reaching more offline markets and achieving coverage in southern Zhejiang markets such as Quzhou, Lishui, and Wenzhou.
However, online instant retail such as takeout has had an impact on the convenience store business model that focuses on fresh food. In the words of He Yunmin, the impact in the morning is not significant, and the impact at noon is not small: "The proximity advantage of convenience stores still exists, and the habit of solving breakfast problems at convenience stores on the way to work has taken shape. However, during lunchtime, many consumers have indeed switched from convenience store boxed meals to takeout apps." Faced with various competitions, convenience stores should embrace and adapt to changes with a more proactive attitude. Rosen has reached a cooperation with third-party takeout platforms and opened a 24-hour takeout service.
"The core of retail is goods and services. No matter how turbulent the market is, this is always an irrefutable truth," said He Yunmin.
