A Few Convenience Store Trends in China
- Categories:Retail Insights
- Author: KT Wu
- Origin: Hanshow Retail Academy
A Few Convenience Store Trends in China
In recent year, convenience store in China has maintained a rapid growth, compared to other brick and mortar formats. According to a joint report by KPMG and the China Chain Store and Franchise Association (CCFA), the number of convenience stores reached 132,000 in 2019, up by 8.2% over 2018. However, convenience stores face many challenges, including high cost, low operating efficiency, etc. all adding pressure to profitability. At this stage, three areas are considered key drivers for convenience stores to improve profitability: private label products, digitalization, and omnichannel operation.
Developing private label products
Well positioned and executed private labels can effectively help improve profitability and create unique competitive advantages. What's more, convenience store is a format suitable for developing private brands:
Private label products are easy to be identified/found because of the small number of SKU in convenience stores.
Close proximity to consumers, long business hours, and dense stores distribution are conducive to the promotion of private label products.
Traditionally, Japanese convenience store chains in China have developed a greater number of private brand products, recently their local competitors have also been speeding up on their own private label products.
>> Example: uSmile Youxuan
In 2018, uSmile, a convenience store chain operated by China National Petroleum Corporation, which owns more than 20,000 stores, launched its private brand "uSmile Youxuan". Most products are local specialties of respective provinces. For example, the raw materials of Jilin uSmile’s (Jilin is a province of Northeast China) private label products are local ginseng, honey and mountain products. This year, the sales of blueberry juice and dandelion tea in May reached 200 thousand in Jilin uSmile.
goji berry of uSmile Youxuan
Fook convenience store
>>Example: Fook convenience store’s bakery factory and bento production line
Fook is the largest convenience store chain in Fujian Province, with over 2000 stores. Its private label products are mainly bread and ready to eat prepared food. In Dec. 2020, its own bakery factory for "Meishijia" brand went into operation, supplying bread to 200 stores. In addition, Fook’s bento production line is also on the way, which will produce bento and other ready-to-eat foods.
Digitalization are helping convenience stores improving their operational efficiency. First, companies can use digital membership management system to collect data and achieve precision marketing/promotion. Second, digitization of convenience store’s operation, like employee scheduling and price change can reduce labor costs. Furthermore, differentiation of each store’s assortment, display and promotion can be achieved based on big data analysis. With competition increasing, this area is gaining momentum.
>>Example: Meiyijia digital membership system
Meiyijia (the second largest convenience store chain in China) cooperates with Wechat and Alipay to develop their membership system. There are coupons, promotions and point reward offered via mini programs of WeChat and Alipay. The benefit of mini program is that shoppers do not need to download any app and can directly sign in with their WeChat or Alipay account. More user friendly compared to downloading apps. Moreover, in Alipay, coupon code, membership ID code and payment code are combined into one code, hence, when shoppers use payment code, their coupons and membership are automatically identified.
Meiyijia’s mini program on WeChat
>>Example: Bianlifeng's digital system
With its self-checkout system, Bianlifeng (a convenience store chain based in Beijing, which has more than 1500 stores as of 2020) has achieved the digitalization to all shoppers. Due to the large amount of data available, it is possible to grasp shoppers’ needs and adjust product offering in a short time. For example, according to the sales of various products in each store, the system of Bianlifeng will automatically retain top-selling items and eliminate products with low sales in the same category. 20% items are said to be replaced every week on average.
>>Example: store management digitalization of Hi-24 Convenience Store
Hi-24 Convenience Store Chain, which has 382 stores in Beijing, has developed its own store management system. Every day the system lists all the tasks for a store, which are calculated based on previous data, future expectations and changes in external factors such as festivals and weather.
In addition to the store management system, Hi-24 also introduced remote X system to help busy stores follow up important projects. X system reminds store managers of the projects that they are likely to ignore. The collaboration between X system and store management system has greatly improve the problem of stock shortage during peak hours.
Many convenience stores now offer delivery service through O2O platforms, like Meituan, Eleme. What’s more, some convenience store chains build their own e-commerce platform, and offer service of Order Online Pick Up in Store. By leveraging all sales channels, they are now able to break through business boundaries and product limitation.
>>Example: Suning Food Market of Suning Xiaodian
In October 2019, Suning Xiaodian launched Suning Food Market, selling vegetables, meat and eggs, seafood and fruits. Customers can order on Suning’s APP before 21:00, the goods can then be picked up on-site at Suning Xiaodian near them the next day. Purchase can also be delivered home within one hour if they live within three kilometers of the store.
Pick up area in Suning Xiaodian
>>Example: Bianlifeng's online shopping mall
Bianlifeng has opened its online shopping mall on Pinduoduo, Tmall and WeChat. It also has a number of live-streams every month, aiming to reach more users with the new model.
Heilongjiang, Shanxi and Hubei are among the Top 10 provinces with the most active users of the online store, although Bianlifeng has no store in these provinces. Online shopping mall has helped Bianlifeng reached more customers nationwide, improved its popularity and better prepared before entering new markets.
Bianlifeng’s WeChat store
The convenience store format in mainland China still has huge room for growth. Chinese government also supports the development of convenience stores, as part of the efforts to modernize the retail infrastructure. In August 2020, the Ministry of Commerce issued a notice on a three-year campaign to develop convenience store chains in China. The notice proposes that the number of convenience stores in China should reach 300,000 by 2022, with a cumulative sales growth of more than 50%. Private brand, digital transformation and omni-channel operation will continue to drive the advancement of this format in China retail landscape in the foreseeable future.
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