Late at night, the city has not yet fallen asleep.
At the 24-hour convenience store in front of your home, eating an oden to fully satisfy your taste buds is the daily life of many young people in first-tier cities.
Rural young people outside the fifth ring road, only have small shops and supermarkets that close early in front of their homes, and it is difficult to have this experience. However, the situation is changing.
On May 5, Sichuan Province released a plan proposing that by 2025, each administrative village should in principle have 1 rural convenience store. Other provinces, such as Jiangsu, have also proposed to build convenience stores in rural areas this year.
Many provinces have begun to vigorously develop rural convenience stores, one of the reasons is that in the offline retail market affected by the epidemic, convenience stores are particularly tough.
According to the Bain report, the overall growth rate of FMCG in China in the third quarter of last year fell by 0.8% year-on-year. Except for convenience stores, sales from all offline channels showed a downward trend.
Action is also being taken at the national level. Previously, the Ministry of Commerce issued the "Notice on Promoting the Branding and Chaining of Convenience Stores for Three Years", proposing to strive to reach 300,000 stores of brand chain convenience stores nationwide by 2022, and this figure will only be 193,000 in 2020.
In addition to policy guidance, in the main body of the market, many convenience store brands have actually taken the initiative to open the road of sinking. Convenience store brands such as Lawson, 7-11, FamilyMart, and Convenience Bee have stepped out of the fifth ring road and moved towards third- and fourth-tier cities and even counties to find new increments.
Policies superimpose the market, two big hands waving, convenience stores "up the mountain to the countryside" footsteps began to become hurried.
What kind of path would this be?
Convenience stores sink the tide
In the domestic convenience store market, there are roughly three factions: Japanese, local and Internet.
According to the "2021 China Convenience Store TOP100 List" (hereinafter referred to as the "2021 China Convenience Store Top 100") released by the China Chain Store & Franchise Association, in terms of the number of stores, easyJet (27,600), Meiyijia (22,400) and Kunlun Hospitality (20,300) are in the top three respectively.
Relying on petrol stations at PetroChina and Sinopec, EasyJet and Kunlun hospitality are found in cities large and small in China. You can see them both in the gas stations in downtown Shanghai and the mountains of Guizhou, and the sinking means little to both.
However, Japanese and some local convenience store brands, the pace of moving to lower-tier cities is particularly urgent.
According to the "List", the number of stores of the "Japanese Big Three" - Lawson, FamilyMart, and 7-11 is 3256, 2967 and 2387 stores, respectively. Since entering China, the three companies have basically landed around first- or second-tier cities.
In the past two years, they have intensively blown the trumpet of the sinking market.
Rosen surpassed the family in 2020 in the number of stores in China for the first time. It plans to lay out 6,000 stores this year and reach more than 10,000 by 2025. New stores began to appear frequently in the sinking market. For example, in March this year, Zhongshang Lawson opened the first five stores in the fourth-tier city of Huainan.
The effect of the sinking market is also very obvious. Zhang Sheng, vice president of Lawson China, once said: "During the epidemic period, the performance of Lawson's stores in East China achieved a 30% month-on-month growth, of which the growth rate of third- and fourth-tier cities was much greater than that of first- and second-tier cities. ”
Take Zhangjiagang, a county-level city under the jurisdiction of Suzhou, as an example. Sales of Rosen community convenience stores increased by nearly 80% year-on-year, while the year-on-year growth rate of Shanghai stores was only 10% to 20%.
Family and 7-11, like Rosen, have entered the sinking market one after another. 7-11 has opened its first store in Dezhou, Shandong and other places, and the whole family has settled in Jiangyin and other places in Zhejiang.
For Japanese convenience stores stationed in first-tier cities all year round, going to lower-tier cities is not only to tap new increments, but also to be forced by the situation.
First of all, they face profit pressure.
Rosen achieved full profitability in 2020 after 25 years of entering China, while FamilyMart and 7-11 were only profitable in some areas, and other regions were still in a state of loss.
Profit pressure is high, and operating pressure is also increasing day by day.
In first- and second-tier cities, rents and labor costs are rising, and the performance ceiling is constantly being depressed. According to the data of the Prospective Industry Research Institute, the salaries and rents of convenience stores account for more than 60% of the total cost, and the net profit of the enterprise is only 2.4%.
Even if it resists the pressure of profitability and operation, under the fierce competition, the incremental space of the market is constantly compressed.
In first-tier cities, the convenience store markets in Shanghai, Guangzhou and Shenzhen have basically matured, and the competition between convenience store brands has become increasingly fierce. According to the "2020 China Convenience Store Development Report", there are 6430 convenience stores in Shanghai alone.
In the program "Talk Show Conference", the actor Doudou once said a paragraph:
Every time I called and asked where my girlfriend was, she said I was at home, with a Starbucks next to it and a subway station in the back. In Shanghai, these three sentences, you said the same as did not say.
Under the situation of market saturation, intensified competition and rising costs, downward expansion to find new increments has become an inevitable choice for Japanese convenience stores.
Among the native families, the convenience bee and Meiyijia are also opening a large "sinking step".
Five years ago, the convenience bee broke out of the "convenience store desert" Beijing area and became a dark horse. Its official revealed that tens of thousands of stores will be opened in 2023, and the increase will be concentrated in second- and third-tier cities.
Throughout the year last year, convenience bees have made a move in the sinking market. Judging from the public information of the convenient bee App, Langfang, Taizhou, Zhenjiang, Huai'an, Suqian and other third-tier cities. In general, convenience bees prefer lower-tier cities in North China, East China and South China.
Meiyijia started in the new first-tier city of Dongguan, which is the city with the largest number of convenience stores per capita in the country. According to the China Chain Store & Franchise Association (CCFA), as early as 2019, every 1242 Dongguan people had a convenience store, and the number of people in Beijing, Shanghai, Guangzhou, and Shenzhen was 8889, 3769, 2803 and 1731 respectively.
Based in Dongguan, Meiyijia has already started the footsteps of nationalization, both to the first-tier cities and to the lower-tier cities. Its chairman Zhang Guoheng mentioned that one of the development strategies of Meiyijia in 2022 is the development of the whole market from the first line to the fifth line.
Some other local convenience bag brands are also moving to lower-tier cities. For example, Taiyuan's local brands Tangjiu and Jinhu no longer only land in Taiyuan City, but also sink to 7 other cities such as Datong and Shuozhou in Shanxi Province, and more than 30 county markets.
Wuhan's local brand Today has entered 37 cities in Hunan, Henan, Guangxi and Hainan provinces in recent years. At the end of January this year, Today entered Xiantao, a county-level city directly under the jurisdiction of Hubei Province, opened its first store and began to go to the county market.
Those convenience store brands that have been stationed in first- and second-tier cities for many years are moving to lower-tier cities and opening up the road of "going up the mountain and going to the countryside".
In front of us is a vast world.
Sinking increments with convenience store advantages
This vast world is imaginative enough for major convenience store brands.
According to Alibaba Retail and Aowei analysis data, there are currently about 6.3 million small stores in the offline traditional commodity retail channels, more than 75% of which are concentrated in third-tier cities and below, contributing nearly 40% of the shipments of the domestic FMCG industry.
In this huge market, consumption power is still increasing, and the gap with first-tier cities is narrowing.
According to the "2021 China City Convenience Store Index" released by the China Chain Store and Franchise Association, corresponding to first-tier cities, young consumers in second-tier cities and below account for 25%, but the contribution of consumption growth has reached 60%. In addition, the ratio of per capita disposable income of urban and rural residents in the first quarter of this year was 2.62, a year-on-year decrease of 0.05, and the income gap between urban and rural residents was decreasing.
In other words, the consumption increment that convenience stores can tap in low-tier cities will not be less than that in high-tier cities.
More importantly, consumers in lower-tier cities are welcoming convenience stores and have strong consumer demand.
In a survey conducted by the Social Survey Center of China Youth Daily, 51.0% of respondents expected chain convenience stores to enter the countryside. Now more and more young people, who are difficult to accept the high-pressure life in first- and second-tier cities, have chosen to return to their hometowns. At the same time, they also want to enjoy the same convenient life as first- and second-tier cities.
Of course, the large market space in lower-tier cities does not mean that convenience stores can rush into arbitrary staking, and what they face is a common "enemy":
Mom-and-pop shop.
According to the new distribution "2020-2021 FMCG retail small shop B2B2C research report", the husband and wife shops in the sinking market account for 75% of the total number of husband and wife stores in the country.
Mom-and-pop shops generally refer to small retail stores near the street and in the community. The area is not large, there are not many goods, and the employees are generally two people. You may not have been to Lawson, 7-11, but you must have bought tobacco, alcohol, snacks and sodas in such a mom-and-pop store.
If convenience stores want to enter the sinking market, they must compete with mom-and-pop stores. "A Little Finance" believes that convenience stores have a triple advantage in this competition:
Brand power, digitalization, supply chain.
On August 8, 2020, Lawson opened in wuhu six stores. This is the first time that the Japanese big three have entered the third-tier cities.
At that time, there were red carpets outside the store, flower balloons, and customers excitedly lined up to enter them, like a wedding scene. On the first day of the store, the container was swept away early, so the hot couple shop next door was hungry.
In some lower-tier cities, Japanese convenience stores, like McDonald's and Starbucks, are still a fresh species. With its brand appeal, it can attract many consumers, which is beyond the reach of mom-and-pop shops.
Moreover, in the franchise process of Rosen, Family And 7-11, the headquarters will support franchisees in terms of product operation, store construction, and development angle, which weakens the impact of the franchise model on the brand image.
The second advantage of convenience stores over mom-and-pop stores is digital, typically such as convenience bees.
The Convenience Bee built a complete digital system in-house. This system can understand the needs of customers in a specific time space, adjust the goods on the shelves in time, and supply the most correct products to consumers.
This intelligent and convenient experience is attractive to many young people, and this is not what the mom-and-pop shop can provide.
In addition, digitalization can hand over daily operational decisions to the system, and employees only need to follow the system prompts, which greatly shortens the staff training cycle, improves operational efficiency, and can support their rapid replication in the sinking market.
The supply chain is also a point where convenience stores are stronger than mom-and-pop stores.
Compared with many mom-and-pop stores, convenience stores with economies of scale have bargaining power for high-quality goods. In the end, there will be certain quality differences in the two goods, such as high-quality fresh foods and desserts, selected imported goods, and so on.
In addition, the supply chain of convenience stores is relatively complete and developed, and it can provide fresh goods with high requirements for the delivery cycle. In contrast, the supply chain of mom-and-pop shops is weak, and it is difficult to make the goods fully equipped.
At a large level, convenience stores have an absolute advantage over mom-and-pop stores. However, from a detailed perspective, mom-and-pop shops also have their own strengths.
Localization conundrum
"A Little Finance" has a conversation with the owner of a county mom-and-pop shop, there is no convenience store there for the time being, and the boss is not worried that the convenience store will impact his business after entering.
According to him, "I'm not afraid that customers will be taken away by convenience stores because I know them and know what they want to eat and what they want."
The boss's confident words actually reflect that in the sinking market, the retail store is a format with strong regional attributes, and it is also more dependent on the business of acquaintances.
From this point of view, in terms of products and services, mom-and-pop stores have more grounded "hospitality" than convenience stores.
In first-tier cities, many people mention convenience stores, and the first thing that comes to mind is fresh food such as bento and Oden. Because of the fast pace of the city, many young people who go to work in the morning or leave work late at night will choose to solve a meal at a convenience store. Zhang Sheng, vice president of Lawson (China), once revealed that fresh food is lawson's best-selling commodity, accounting for about 40% of stores.
However, for most young people in small towns outside the fifth ring road, the pace of life is relatively slow, and it is common to go home to eat, so the fresh food in convenience stores naturally lacks attraction. They prefer to eat foods that are local or familiar to the taste buds, such as buns that have been sold in the mom-and-pop shop for many years, brine and so on.
Soon after entering the Hunan market, Today convenience stores experienced a large number of withdrawals, one of the reasons is because there are too many small shops specializing in specialty snacks in Hunan. These snack shops are extremely competitive, and the turnover of four or five convenience stores cannot match that of one.
Convenience store brands can only compete with mom-and-pop stores in different cities if they are tailored to local conditions in their products.
Zhang Sheng, vice president of the board of directors of Lawson China, once said, "After the 60s and 70s have achieved the store, the post-80s have achieved the Taobao network, and the post-90s have achieved Ele.me, Meituan, and Jingdong to go home." What kind of business formats will be achieved after the next 00s requires the efforts of those of us here. Every generation is different, and our products certainly don't do well if they are not subdivided. ”
Convenience bees are more prominent in "localization". Since starting out in Beijing, convenience bees have successively launched many regional specialties such as superheated dry noodles and noodles in stores in other cities.
In addition to hard products, mom-and-pop shops also have unique advantages in soft service.
From the perspective of site selection, the difference between mom-and-pop stores and convenience stores is large. The former is usually located next to pyrotechnic residential areas and relies on the flow of acquaintances, while the latter is usually located in densely populated, young-fashioned places such as commercial districts and subway stations.
In order to attract neighbors to consume, the mom-and-pop shop has expanded more convenient services, including express delivery, printing faxes, and opening a mahjong hall on a larger scale to gather popularity. This is more similar to the convenience stores in Japan, which provide various services such as ATMs, toilets, printing, courier delivery, and payment of utilities and gas bills.
In other words, mom-and-pop shops are sinking in the market, not only selling goods, but sometimes undertaking a wider range of needs such as local social networking and convenience services.
Using these services, mom-and-pop shops have read the spending habits of surrounding customers and integrated into their lifestyles. Acquaintances will help each other with business, and this solid relationship network is difficult for foreign convenience stores to break.
So you will see that many chain convenience stores, even if open in the community, are mostly patronized by young people, and rarely attract middle-aged and elderly people. In addition to the price factor, there is also a considerable part of the love side.
To take an inappropriate analogy, if the convenience store is compared to a "strong dragon", then the mom-and-pop store is a "ground snake". Whether the strong dragon can overpower the ground snake depends on whether it integrates into local life with products and services.
epilogue
In 1968, China's first 24-hour "convenience store", Xinghuo Day and Night Store, opened in Shanghai. Since then, this small retail format has spread like a spark in the country.
Over the past fifty years, convenience stores have almost always blossomed in high-tier cities, rarely setting foot in lower-tier cities. Nowadays, going down to the market has become the consensus of most convenience store brands, where there is new incremental space.
The world is vast and promising, but they face a huge number of competition from mom-and-pop shops, as well as competition from their peers. How to go smoothly on the road of "going up the mountain and going to the countryside", "A Little Finance" believes that a remark by Toshifumi Suzuki, the founder of 7-11, can be used as an answer:
The real competitors are not convenience stores of other brands, but the changing needs of customers.