Text | Value Institute
At the critical juncture of the epidemic, the development of the offline retail industry is heart-wrenching.
Last week, it was reported that the convenience store chain giant Convenience Bee was closing stores in a large area, involving nearly a thousand stores. As soon as the relevant news came out, it immediately triggered heated discussions in the industry.
On Friday, convenience bees responded to some authoritative media that because of the quarantine of the epidemic and the impact of commodity transportation, a small number of stores will be temporarily closed:
"Due to the difficulties in logistics and transportation caused by the new round of the epidemic, the convenience bee had to temporarily close a small number of stores. However, at present, most stores are still sticking to the front line of the fight against the epidemic and providing goods and services for everyone. We are still full of confidence in the future and believe that the haze of the epidemic will definitely dissipate. ”
Although the convenience bee responded in a timely manner, it did not answer a key question head-on: the size of the store closure. The legend of closing thousands of stores is exaggerated by the media or whether it is true, we are still difficult to determine for the time being.
However, looking at the business dynamics of convenience bees in the past two years, the Value Institute believes that hidden dangers have long been lurking: unsmooth listing plans, overly aggressive store expansion strategies and deteriorating market competition environment have brought severe tests to convenience bees.
A sudden epidemic has caused many problems accumulated in the past to erupt en masse, and the rumors of store closures may not be empty.
The epidemic has hit offline retail hard, and the goal of "ten thousand stores" has crushed the convenience bee.
Behind the rumors of thousands of stores, we can't ignore the fact that the expansion of convenience bees in the past few years has been too fast.
In the second half of 2020, due to the gradual stabilization of the domestic epidemic and the full recovery of the retail industry, the convenience bee also proposed its own "3-year ten thousand stores" expansion plan at this time. Xue Enyuan, executive director of convenience bee, said at the "2021 convenience bee supplier conference" that the plan of convenience bee is to increase the number of stores to 4,000 by the end of 2021 and break through the scale of 10,000 stores in 2023.
Compared with its peers who have been established for decades, convenience bees are quite young and enterprising on the track of chain convenience stores.
In 2017, Convenience Bee opened the first 24-hour chain convenience store in Beijing, and the number of stores reached 60 at the end of that year. The following year, the number of its stores swelled sharply to 570, reaching nearly 2,000 by the end of 2020. According to the information leaked by Xue Enyuan, 2021 is the "high-speed expansion period" of convenience bees, and the average number of new stores opened per day is 5.5, and the rapid expansion is eye-catching.
In terms of store distribution areas, first- and second-tier cities, North China and East China are the main forces of expansion. According to the statistics of third-party institutions, the core cities of Beijing and Tianjin in the Beijing-Tianjin-Hebei Economic Zone, as well as the key cities of Shanghai and Nanjing in the Yangtze River Delta, the number of stores has exceeded 100. In Beijing, the base camp of convenience bees, the number of stores at the peak of the year was close to 700, and the grid layout has been perfected.
The reason why the convenience bee can quickly complete the expansion in a short period of time is that there are two key successful experiences: it has selected the untapped market with a large stock space in North China, and has a set of highly standardized and Internet-based expansion rules and operating models.
On the one hand, the convenience store industry in North China has a certain gap compared with South China and East China, with a huge market capacity and a lack of head players, and the convenience bee has accurately seized the opportunity.
As we all know, Beijing, the base camp of convenience bees, has always been known as a "convenience store desert". In 2017, when the first 24-hour convenience store opened in Beijing, the local convenience store per capita saturation ranked 30 in the country, and every 7185 people had a convenience store.
This number is not only the last place in the first-tier cities, but even the second-tier cities such as Dongguan, Wuxi and Nantong. At the same time, chain convenience stores such as full-time and neighboring convenience stores that have been deeply cultivating the Beijing market have entered a period of strategic contraction, and the convenience bee can be described as occupying a favorable position at this time.
On the other hand, convenience bees are also at the forefront of the industry in terms of digitalization.
In 2018, while convenient bees opened stores on a large scale, they also invested heavily in self-developed digital systems, and switched all the underlying ERP systems to algorithm-driven automation systems. Looking back now, this decision was perfectly correct; but in those days, the convenience bee executives also experienced a struggle.
Zhuang Chenchao, the founder of Convenience Bee, who once worked at Qunar, is well versed in the business rules of Internet enterprises and the importance of algorithms and digitalization. When he later recalled the reform of the convenience bee, he also revealed his entanglement:
"I've been wrestling with whether to hand over the company to a fledgling system for a whole year (referring to 2018). But now if we do it again, we hope the decision can be made earlier. ”
However, as mentioned earlier, the severity and duration of the outbreak exceeded everyone's expectations, adding more uncertainty to the expansion plans of the convenience bee.
The Value Institute believes that looking back now, the expansion of the convenience bee has been blocked, mainly due to two points: one is to prematurely go out of the first and second tier cities to expand into the sinking market, and the other is that there is no progress in financing and listing, resulting in a tightening of the capital chain.
Since last year, the expansion strategy of convenience bees has been "off the rails": taking the initiative to go out of North China and march into Shandong, Henan, and the most competitive Jiangsu, Zhejiang, and Shanghai regions. Taking Shandong as an example, in June last year alone, Convenience Bee set up 15 branches in Shandong to expand its business. By the end of the second quarter, convenience bees had opened 103 stores in Shandong, mainly concentrated in Qingdao and Jinan.
It should be noted that convenience bees adopt a fully direct operation model, which is the operating model with the highest cost and heaviest assets in the retail industry. Intensive store opening, especially the outward expansion of leaving the North China base area that they are familiar with, from local promotion to publicity, to supply chain and manpower recruitment, all require high capital investment.
Unfortunately, convenience bees have not performed as well in capital markets over the past two years.
According to Tianyancha data, the convenience bee has only completed three rounds of financing since its establishment, and the latest round is the 100 million US dollar C round financing in 2020. In other words, the convenience bee, which has been expanding, has not received a capital transfusion for two years.
At the same time, its listing plan is not smooth. In June last year, a number of media broke the news that convenience bees had hired Goldman Sachs, Morgan Stanley and CITIC Securities to go public in the United States, planning to raise $5-1 billion. Just a month later, it was reported that Convenience Bee had filed an IPO application with the SEC. But until now, convenience bees have not materially marketed operations.
(Image from Sky Eye)
Due to the repeated epidemics, the plan of convenience bees to achieve full store profitability in 2020 has been very difficult to implement, and we do not know the final result. However, from the recent news of the closure of the store, it can be seen that its profitability may not be 100% satisfactory.
Convenience Bee officially confirmed the news of the store closure, perhaps indicating that the top management has realized that it is time to calm down and rethink the future strategy. After all, in addition to the epidemic, convenience bees should also be aware of another major obstacle in their way forward - an increasingly saturated market and an increasingly volume of competitors.
The market is saturated and homogenized, and convenience stores are rolled into a red sea
If the plan to break through 10,000 stores by 2023 is successfully implemented, the store size of convenience bee is enough to rank among the top 5 in China's chain convenience store industry, leaving Japanese convenience store giants such as 7-11, Rosen and Family Home far behind.
However, the size of the store is not enough to constitute a solid moat for the convenience bee. After all, from the local traditional convenience stores to the Japanese convenience store giants that have crossed the ocean, and then to the Internet giants with cross-border addictions, they are all expanding wildly, and the industry has become more and more serious.
According to the statistics of the Prospective Industry Research Institute, EasyJet, Meiyijia and Kunlun Hospitality are currently the top three brands in the number of stores in the domestic chain convenience store industry. However, their business models and target groups are different from those of convenience bees, and they are not strictly speaking a positive competitive relationship.
EasyJet is a subsidiary of Sinopec, and Kunlun Hospitality is a sub-brand of PetroChina, both of which are mainly laid out around gas stations, with accurate target customer groups and different business models from urban convenience stores. Meiyijia, which ranks second in the country with more than 20,000 stores, takes the franchise model and asset-light operation route, and the fourth-ranked Tianfu convenience store is also the same.
As for the Internet giants that have frequently crossed borders in recent years, JD.com is the most concerned about the convenience store business, but unfortunately the development is not satisfactory.
Liu Qiangdong released the "five-year million store" rhetoric in 2017, but the current store opening speed is far from this goal, and there is basically no chance to achieve it. In addition, the Jingxi convenience store that settled in Jinan in May last year was once highly expected by JD.com. However, in the large layoffs some time ago, the Kyoki Business Department was the hardest hit area, and related business may also be shelved.
In the final analysis, it is the "Japanese Big Three" that really competes head-on with the convenience bee: 7-11, Rosen and the whole family.
According to the data compiled by the Prospective Industry Research Institute, Lawson, FamilyMart and 7-11 currently rank 6-8 in China. Among them, the total number of Rosen and FamilyMart stores is around 3,000, and they are inseparable from each other, and 7-11 is slightly inferior.
From the perspective of regional layout, the "Japanese three giants" and convenience bees are not exactly the same, but at least 50% of the collision type: they are mainly first-tier and new first-tier large cities, but the former has risen in the South China and East China markets, and the latter has made its fortune in the North China market.
However, as the dispute between convenience stores in first- and second-tier cities has become white-hot and the market has gradually become saturated, when the convenience bee insists on going south, Lawson, Family And 7-11 also choose to expand to the sinking market in central China and southwest China.
In this round of convenience store expansion, the Value Institute has noticed a phenomenon that is unfavorable to convenience bees: whether in first- and second-tier cities or in the sinking market, the brand appeal and popularity of the "Japanese-funded big three" are far better than the homegrown convenience bees.
Take 7-11 as an example. In November last year, the first store in Yunnan on July-11 opened in Tongde Kunming Square, and there was a long queue outside the door. Flipping through the reports of social platforms such as Xiaohongshu and Weibo and local media, posting the 7-11 rush list and the exclusive lucky bag sent on the first day of opening became the hottest activity for Kunming citizens at that time.
Kunming, Yunnan is not an exception. Since last year, the 7-11 Xiamen first store, Jinan first store, And Shijiazhuang first store have opened one after another, all of which have triggered a wave of queuing among local citizens.
This grand occasion is familiar: when the two top Internet celebrities shake Shack and the first store of Blue Bottle Coffee in Shanghai opened, and when the number one red person in the new tea drinking industry entered Wuhan, it also caused a sensation.
In the final analysis, there is still a generational gap between the sinking market and the consumption environment of first- and second-tier cities, and the former is still far behind in the new consumption field. Therefore, when consumer brands that have been in China for many years and have been integrated into daily life in first- and second-tier cities settle in, they can still cause a sensation. This phenomenon has been proved when KFC and McDonald's have vigorously entered the sinking market in the early years.
However, in the process of crazy expansion, 7-11, the whole family and Rosen have encountered many troubles - high costs, sudden increase in supply chain pressure, and the increasing homogenization of products and services between each other are the main problems.
According to the statistics of Interface News, the gross profit margin of chain convenience stores is mostly below 30%, and the three cost mountains of rent, manpower and supply make it difficult for them to breathe. The only people who can kill a bloody path are the head players who find a gap between these three mountains.
For example, Lawson plays the supply chain system to the extreme, greatly reducing costs by incubating supply chain partners in batches and integrating upstream production resources. Convenience bees start from the aspect of labor costs, reduce the number of employees and reduce manpower expenditure through intelligent sales and unmanned sales.
But no matter how strong the supply chain, it can't fully withstand the pressure of crazy expansion. In the view of the Value Research Institute, the dilemma encountered by convenience bees today is very similar to that of the catering and new tea industry, which also relies on offline formats: after the outbreak of the epidemic, the situation was misjudged, and the expansion strategy was too aggressive.
In the current situation, the normalization policy of epidemic prevention will not change in the short term, whether it is the "Japanese-funded three giants" or convenience bees, the business prospects of almost all offline convenience stores have also been cast a shadow. If they want to survive the retail winter under the epidemic, they must continue to upgrade themselves.
The new retail road of convenience stores: to "cultivate internal skills" and to "develop moves"
Although convenience bees have always emphasized their Internet attributes and digital level, like other peers, in the process of the transformation of traditional convenience stores to new retail, they have still exposed various sequelae of water and soil.
The new retailing of convenience bees and the "Japanese-funded big three" mainly focuses on the upgrading of the digital system of store operations and supply chain management, which is the embodiment of its "internal strength".
Taking convenience bee as an example, its full-link digital system has been running very maturely, including intelligent ordering, algorithm-led intelligent selection, self-service cashier and dynamic pricing systems. At present, more than 60% of the company's employees are technical personnel, and the investment in research and development is second to none in the industry. Although the "Japanese-funded big three" did not start early, they have also actively promoted digital upgrading plans in recent years.
However, new retail is not limited to the "internal force" behind it, and the "move" of the front desk is also very important - especially for the ancient retail format of convenience stores, we should think about how to make our products and services closer to the preferences of young people and create differentiated advantages.
As for the specific approach, the Value Institute believes that it can focus on three links: strengthening the online business layout, focusing on private domain operations, and incubating private brands.
The first two links are quite relevant, and achieving coordinated development is the key. According to KPMG data, 73% of convenience store chains in mainland China have introduced membership systems by 2020, nearly doubling from 2016. At the same time, more than 70% of convenience stores have opened online business, which is also a significant increase from five years ago.
But that's not enough. Similar to the problems mentioned above, their online business and membership system homogenization is also very serious, and most convenience stores are difficult to establish a solid private domain traffic pool.
In the operation of private domain traffic, convenience bees and the "Japanese big three" even need to learn from the most traditional easyJet.
After the outbreak of the epidemic, Sinopec gathered hundreds of gas station managers in Guangdong to act as the vanguard of private domain operations. In just half a year, these more than 300 webmasters have added nearly one million car owners and created more than 1,000 communities through enterprise WeChat, expanding their own traffic pool. The integration of refueling and convenience store businesses is very attractive to car owners, and excellent community services and revenue means have successfully released their spending power.
Among them, means such as refueling and sending easyJet convenience store coupons and paying attention to the welfare of the automatic field of mini programs are quite popular with users.
Although convenience bees and Rosen and 7-11 do not have the natural flow pool of gas stations, they can still tap the target group based on the community ecology. The retail business of community stores such as Baiguoyuan and Aunt Qian has already explored its own private domain operation rules.
As for private labels, it is the common weakness of major convenience store chains now. At last year's CCFA New Consumption Forum, Yu Jian, general manager of Kantar Consumer Index Greater China, shared a set of data: As of the beginning of last year, the proportion of private label SKUs of domestic convenience store chains was less than 5% on average, and they were basically concentrated in cooked foods, such as 7-11 signature oden and udon noodles.
In the view of the Value Research Institute, the lack of its own brand is also one of the important reasons for the increasingly prominent homogenization of goods in major convenience store chains.
Fortunately, major convenience store chains have long realized the importance of their own brands and are actively reinforcing shortcomings. And the power point they choose is also very similar - everything starts with the coffee that young people love the most.
As early as 2019, Rosen cooperated with the specialty coffee brand Quality Pavilion Coffee to open a community-based convenience competitive café in Shanghai; convenience bees and the whole family respectively worked out their own coffee brands Sleepless Sea and Panker, and built a complete supply chain from coffee beans, creamer, syrup procurement to coffee machine supply.
It is worth noting that after gaining a foothold through its own coffee brand, Rosen has also begun to launch its own dairy brand in the past two years to consolidate its own differentiated advantages. The bee quality selection series that facilitates the independent incubation of bees has covered many categories such as snack food, personal care, dairy products, etc., with more than 400 SKUs.
It can be expected that in the future, the competition between several major chain convenience stores around their own brands will enter a new stage.
Write at the end
For a long time in the past, companies have been well-deserved leaders in the chain convenience store industry. But it's easy to overlook that it's been a full half century since the first 7-11 store opened.
In the past 50 years, chain convenience stores have swept the world, and 7-11, FamilyMart, Rosen, etc. have grown into industry giants that dominate one side, which is the golden age of convenience stores. But now, with the rise of e-commerce and new retail formats, the popular chain convenience stores have been difficult to hide their decline, and gradually bid farewell to rapid growth.
7-11 founder Toshifumi Suzuki once said that if the convenience store business is to succeed, management thinking must keep up - from everything "for customers" to "standing in the customer's position to think more", is the secret of 7-11's long-term prosperity in the past half century.
"Under the traditional 'for the customer' thinking, merchants are easy to pass on their responsibilities and pressures to customers, and only by thinking from the perspective of customers can you truly understand the needs of customers."
To this day, Suzuki Toshifumi's business philosophy still has a strong reference significance and learning value for peers.
In the new era, new users, and the requirements for convenience stores have also been completely subverted. Whether it is for the above several established giants, or for the convenience bee and other catch-ups, upgrading to the new retail direction and comprehensively innovating their product services and business strategies is an inevitable choice.