Lawson entered South China and took over the Tianhong Weiwo convenience store for 310 million yuan

Reporter | Lu Yibei

Edit | Zan Huifang

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Lawson Convenience Store officially took over the Shenzhen local convenience store brand "Tianhong Wei Oh".

On December 29, Tianhong Co., Ltd. (SZ002419), a department store listed company, issued an announcement disclosing the progress of the listing and transfer of 100% of the equity of Tianhong Weiwo Convenience Store (Shenzhen) Co., Ltd. According to the "Letter of Opinion on Confirmation of Qualification for Transfer" issued by the Beijing Equity Exchange, Lawson (Guangdong) Facilitation Co., Ltd. was finally determined to be the transferee of 100% of the equity of Rainbow WeOoh, and the transaction price was RMB310 million. On December 29, 2021, Tianhong signed the Property Rights Transaction Contract with Guangdong Lawson.

At this point, the three major convenience store giants of 7-Eleven, FamilyMart and Lawson have finally gathered in the South China market.

Founded in 1984, Tianhong Co., Ltd. is a state-controlled veteran department store listed on the Shenzhen Stock Exchange in 2010. In the list of "2020 China's Top 100 Chain Stores" released by the China Chain Store and Franchise Association in 2021, Tianhong ranked 18th. Tianhong co., Ltd. is involved in platform-based businesses such as department stores and shopping malls, as well as vertical businesses of supermarkets and convenience stores, and has four major brands: "Tianhong", "Junshang", "sp@ce" and "Wei Oh".

According to the financial report of Tianhong Shares, as of September 30, 2021, Tianhong Wei Oh has a total of 214 stores, mainly distributed in South China. However, Tianhong shares, which started as a department store, did not expand the convenience store business smoothly.

In 2014, Tianhong co., Ltd. established a convenience store division, and in the same year opened its first store in Shenzhen, the company's base camp. In order to quickly achieve economies of scale, in December 2014, Tianhong Acquired Shenzhen's local chain convenience store brand "Wantiantong" for 29.09 million yuan, absorbing the latter's stores, skilled employees, logistics system and other resources.

After several years of business adjustment, Rainbow Micro Oh has identified three types of store models: convenience stores, community stores and unmanned stores, and tried to make differentiated features from the operational level, such as aligning with Japanese convenience stores in terms of operating standards and service details, and introducing fresh categories such as fruits, vegetables and Chinese fast food in the commodity structure that meet the consumption habits of Chinese.

Image source: Tianhong official website

However, these measures have not allowed Rainbow Weiwo to find enough foothold in the fierce market competition in South China, and it is more like a shrinking supermarket than a convenience store.

There are already too many convenience store giants in South China. According to the "2021 China City Convenience Store Index" released by the China Chain Store and Franchise Association, the top ten cities include Dongguan, Guangzhou, Shenzhen, Zhongshan and so on. Among them, the number of convenience stores in Shenzhen exceeds 5,000, ranking second in the country and second only to Shanghai.

According to the third quarterly report of Tianhong Shares, as of September 30, 2021, Tianhong Weiwo had total assets of 105 million yuan, liabilities of 106 million yuan, and net assets of -1.5267 million yuan. From January to September 2021, Tianhong Weiwo's operating income was 211 million yuan and net profit was -7.748 million yuan. In addition to the unsatisfactory performance, for the entire group, Tianhong Micro Oh is also a chicken rib existence, its operating income accounts for only 1.3% of the total tianhong shares, and the profit accounts for 0.4%. Regarding the transfer of Rainbow Micro Oh, the reason given by Rainbow shares is to optimize the allocation of resources and focus on the development of key strategies.

For Rosen, taking over Tianhong Micro Oh at this time is a way to quickly open the South China market.

With about 19,000 stores worldwide, Rosen was the first Japanese-owned convenience store chain to enter China, opening its first store in Shanghai in 1996. In the 25 years since entering China, Lawson has opened about 4,100 stores, covering Beijing, Shanghai, Nanjing, Chongqing, Hangzhou, Wuhan, Changsha and other first- and second-tier cities, mainly focusing on the East China market.

When the convenience store brand enters the new city, it needs to quickly establish a local supply chain and logistics system, and then open stores according to the distribution scope of the supply chain, and acquire Tianhong Wei Oh, which can help Rosen to achieve large-scale rapid expansion in a short period of time with the former's original stores, logistics, supply chain, employees and other resources. Previously, Lawson opened the southwest market with the acquisition of the Sichuan convenience store brand "WOWO Convenience".

For entering the South China market, Lawson showed an inevitable will. According to the news of Guangzhou Municipal Bureau of Commerce on November 24, Lawson has launched an investment layout in Guangzhou Guangdong-Hong Kong-Macao Greater Bay Area headquarters project, with regional headquarters located in Huangpu, Guangzhou. By 2028, Lawson is expected to open 1,500 stores in the Guangdong-Hong Kong-Macao Greater Bay Area.

However, entering the South China market also means that in addition to old rivals such as 7-Eleven and FamilyMart, Rosen will also face fierce competition from local convenience store giants.

According to the figures disclosed in the report of the China Chain Store & Franchise Association, the top three brands in the number of convenience store stores in Shenzhen are Meiyijia, Yizhan and Tianfu, rather than the three giants of foreign convenience stores.

In addition, South China has also attracted young brands like Convenience Bee. Convenience Bee entered Shenzhen and Guangzhou in 2020, and at the end of October 2021, it began to successively lay out Cities such as Dongguan, Zhongshan, Foshan and Huizhou. Up to now, the total number of convenience bees stores in South China has reached nearly 100, and the intention to accelerate the layout of the Guangdong-Hong Kong-Macao Greater Bay Area is very obvious.

As a "latecomer" in the convenience store industry, local convenience store enterprises have shown strong learning ability, not only absorbing the business philosophy of foreign capital, but also deeper understanding of the preferences of local customers, and stepping out of their own characteristic business road.