(The following article comes from Retail Business Finance, author Ping Mengfei)
The departure of Lin Jianhong, CEO of FamilyMart, at the end of June is a small industry node event. The reason for his departure, most of the outside world speculated that it was related to the stall in the development of the whole family. The advantages of the FamilyMart brand are gradually weakening, the competition in the industry is becoming increasingly fierce, the expansion of stores is slowing down, and the convenience store format itself is facing a re-upgrade.
For comprehensive reasons, Lin Jianhong's departure is more like a choice to accept and withdraw when he sees good.
Familymart belongs to the representative of Japanese convenience stores, with scale and business quality, and has always been a giant in the convenience store industry. The situation of the whole family is still like this, and most of the other families actually have more or less situations. In addition to the target of 10,000 stores shouted by Convenience Bee and Lawson China, the expansion of regional convenience stores is also slowing down, and established convenience stores are generally seeking transformation. Convenience stores in Shanxi, Hunan, Guangdong and other places, general and similar community group buying services, and related large platforms have strengthened business connectivity.
It is difficult to link these changes to changes in the external industry or macro environment. However, most of this change has occurred after the epidemic, and we have to ask, is the convenience store industry still a good industry to make money?
-01-
"An industry that doesn't make money"
We are seeing more and more people in convenience stores to solve their own three meals a day (breakfast, lunch, dinner), or even five meals a day (breakfast, lunch, dinner, afternoon tea, supper). But the industry seems to give people the feeling of "not making money".
1, small steps on the scale of the fast walk.
The current market penetration rate of the domestic convenience store industry (10,407 people/store) is far less than that of Japan (2,208 people/store) and South Korea (1,034 people/store), but the number of stores has continued to grow in recent years. In 2020, there will be a total of 193,000 traditional convenience stores, platform-enabled convenience stores, and quasi-convenience stores, which can be said to be catching up with the pace of "convenience store countries" step by step.
According to the experience of the international convenience store industry, when the per capita GDP reaches 10,000 US dollars, it enters the fierce competition period of the industry, and China's per capita GDP has crossed the threshold of 10,000 US dollars in 2019. In the next stage, as major brands compete to implement the sinking strategy and develop new areas, the domestic convenience store industry will also usher in several waves of "small peaks" of opening stores, and achieve economic benefits with higher store density.
Source: China Convenience Store Development Report 2021 jointly released by the China Chain Store & Franchise Association and KPMG China
2. Counter-trend growth under the epidemic.
Due to the impact of the epidemic, the chain operation industry has generally been affected to varying degrees in 2020. However, as the "last stop" to ensure supply, stabilize prices and promote people's livelihood, convenience stores have always been at the forefront. In order to reduce the spread of the virus caused by human contact, people can choose the nearest convenience store to buy some daily necessities; when the catering store is closed, the CBD office workers who have resumed work can also solve the problem of dining here...
This kind of reachable and long-term "standby" format has shown amazing service capabilities during the epidemic and achieved unexpected growth. According to the "McKinsey China Consumer Report 2021", the daily sales of convenience stores in domestic first-tier cities increased by 67% compared with before the epidemic during the epidemic, and the data during the recovery period of the epidemic was still as high as 21%.
However, sitting on the "time and place", the convenience store industry has not been able to conquer the wallets of customers. The "2021 China Shopper Report" jointly released by Bain and Kantar Consumer Index pointed out that in the proportion of sales of various channels in the urban FMCG market, the proportion of convenience stores is much lower than that of supermarkets/small supermarkets, hypermarkets, e-commerce, grocery stores, etc., and it has successfully bottomed out with an extremely inconspicuous share.
Even the three giants of Japanese convenience stores did not deliver very satisfactory answers, Rosen achieved full profitability after 25 years of entering China, and FamilyMart and 7-ELEVEn only made money in some parts of The country, and there are not a few in the loss stage in the industry.
Source: Bain & Kantar Consumer Index's 2021 China Shopper Report
To put it simply, the high fixed operating costs such as rent and manpower, as well as poor management, have frequently sung down this business that should be "booming". At the same time, in the post-epidemic era, customers have gradually completed the transformation from being forced to make online consumption to actively seeking online consumption, and the proportion of e-commerce has increased significantly. Under the "internal and external troubles", the convenience store format is becoming more and more difficult to overcome.
However, some players have explored a set of refined operation methods and differentiated service capabilities based on digital means by adapting to the development of the times and changes in the market, so that the entire industry has seen a new way to "make money".
-02-
Data, the new "means of production"
In the digital age, all walks of life are holding high the banner of digital transformation, and retail can be said to be at the forefront of this team. It is reported that from 2020 to 2026, the global smart retail market is expected to grow from $2.7 billion to $14.7 billion, with a compound annual growth rate of 32.7%, and behind this exponential growth momentum, it is largely driven by key factors such as operating data and user portraits.
Source: Network
1. The digitization of "goods" helps stores create a flexible supply chain and promote product optimization and even reverse customization.
In the ordering, selection and other links, traditional stores usually make decisions based on historical sales experience and external market trends, but this management method that relies on the subjective judgment of operators will inevitably lead to inventory backlog due to excessive orders, or slow sales of goods due to mismatch of demand. Losses such as these continue to compress the already small profit space, forcing convenience stores to accelerate the digital transformation of "goods".
For example, in terms of sales forecasting, Hunan Xinjiayi uses the algorithm of single-store single products to ensure the efficiency of commodity circulation with a flexible supply chain and improve the freshness and sales of short-term goods; another example is wepick super convenience store, which has insight into the customer preferences of the business district based on consumer information precipitation, and responds to changing consumer demands with selected SKUs; and for example, convenience bees quickly complete market research and use them for follow-up new product development with a list of consumers eating out of their mouths...
Image source: Xinjiayi
7-ELEVEn China President Shinji Uchida also mentioned in a speech that convenience stores are not business places that sell cheap goods, but in today's dazzling number of goods, through rigorous selection and innovative spirit, to provide consumers with better products, with closed eyes can be done with confidence. Therefore, the consideration of the future commodity dimension will not only include the quality of good or bad, but also depend on how to use digital means to achieve efficient product management and differentiated product creation, while satisfying consumers and winning better revenue for stores.
2. Digitization of "people", build multi-dimensional user portraits, and increase customer unit price and repurchase rate with precision marketing.
According to the convenience store report released by the China Chain Store & Franchise Association, under the influence of the epidemic, the unit price of sample enterprise customers still rose slightly, from 16.3 yuan / person / single in 2019 to 18.1 yuan / person / single in 2020, which also makes the store able to protect revenue in the face of the pressure brought about by the decline in the number of customers in a single day.
This also confirms that the work involved in the unit price of customers and the operation of users behind the unit price of customers may become a core ability of convenience stores to resist various risks in the future, especially for stores in closed scenarios such as CBD, parks, schools, etc. Tracking and maintaining good old customers will achieve the effect of "four or two thousand pounds".
At present, there are more and more convenience store brands, aware of the importance of user operations, more than 70% of enterprises continue to expand their private domain traffic pool through the establishment of a membership system, and thus increase the unit price of member customers by about 50% compared with non-members. Let's take a look at how Rosen, who is already fully profitable in China, answers this question.
At present, Rosen has 14.6 million members in China, through a large number of consumer data analysis, it can get fine-grained user portraits for marketing planning, such as the age and gender of members as the horizontal and vertical axis, so that people with different quadrants and IP form a mapping, with the help of "IP combination fist" efficiently and widely reach more interest circles, becoming a major grasp of pulling new, promoting vitality and monetization.
Of course, user operation is a complex and open science, in addition to inferring all kinds of static tags from consumption data for customer group management, there are also many companies using AI technology solutions such as computer vision to help them learn about customer shopping trajectories, stay areas, regional stay duration, etc., further enrich dynamic tags, and make marketing "shoot the bullseye" with a comprehensive understanding.
Image credit: Rosen
Whether it is the digitization of "goods" or the digitization of "people", the essence is to make more scientific decisions from the perspective of demand, let computing power cooperate with manpower, let rationality support sensibility, and achieve efficiency improvement and sales growth.
-03-
Experience, the contemporary "consumer code"
The 2021 China Convenience Store Development Report also mentions that 59% of consumers believe that it is not only a product that is purchased, but also a service and experience. With the change of consumption concept, people will not only pay attention to the product itself, but also begin to pay attention to the emotional identity brought by the product, the sensory experience under the purchase scene, etc., and firmly grasp the attention of customers with novelty, warmth, or interesting feelings, and become a new fulcrum for leveraging potential consumption behavior.
1. The original intention of convenience stores and the ultimate meaning: convenience.
When they see a long queue in front of the cash register, many people will choose to turn around and leave directly, thinking that maybe there is a convenience store around the corner, why waste time here? In response to the resulting loss of orders, customer experience decline and other issues, FamilyMart, Lawson, 7-ELEVEn and other convenience store companies began to introduce self-service settlement solutions, consumers can scan the product barcode and payment code to complete the purchase, no longer have to wait for the only one or two store clerks to rush to settle for each customer.
If this is Convenience 1.0, then the automation store opened by the German retail company WÜRTH represents Convenience 2.0. After the selection is completed, the customer only needs to put the goods on the conveyor belt, generate the order through machine recognition instead of scanning itself, and then pay online.
Image credit: WÜRTH
In contrast, Amazon Go, Yunna Technology and other sensorless payments created by computer vision and deep learning technologies define convenience 3.0 on the basis of liberating consumers and store staff at the same time. Different from the above scheme, customers scan the code or brush their faces into the store, and after the selection is completed, they can complete the deduction without other operations.
This shopping model of taking and leaving has also received widespread attention and recognition from the society during the epidemic with the advantages of no queue, no crowding, and no contact. Especially after the introduction of policies such as the Implementation Plan for Accelerating the Cultivation of New Consumption and the Opinions on Promoting the Construction of a Convenient Living Circle in the City for a Quarter of an Hour, unmanned and automated smart retail will also accelerate its popularization and serve the people with convenient and friendly formats.
Image source: Yunna Technology
It is worth mentioning that in recent years, the convenience store industry has gradually shown a point: the development pattern of offline store efficient operation as the main body and online and offline operation promoting each other, which also provides consumers with the convenience of scene dimension. Online, in addition to the takeaway function to expand the service radius, the post-epidemic era "online order, offline pick-up" is also more common, according to the American Convenience Store Association data, 21% of convenience stores began to implement self-pick-up services, 14% of the special set up drive-thrus shopping lanes to further enhance convenience. Offline, (unmanned) vending trucks, vending machines, etc. are also gradually infiltrating the last 100 meters and even the last 10 meters, people can buy the required goods in a few steps away, better meet the near-field, high-frequency consumer demand.
2. An irreplaceable unique advantage online - sensory touch.
When all goods can be purchased on the online platform, a more intuitive offline experience becomes an irreplaceable unique advantage.
First of all, e-commerce has "vision", offline can be more friendly. Based on the natural digital attributes, e-commerce can analyze category preferences, brand preferences, etc. according to consumers' historical shopping situation, and let accurate advertising content penetrate into all corners of browsing. Relatively speaking, although offline marketing does not have its own aura of "thousands of faces", thanks to the blessing of AI and other technologies, it can also allow customers to get more personalized services without being disturbed.
During this year's World Artificial Intelligence Conference, the Yunna AI intelligent unmanned pop-up store located in the Expo Source Wisdom Shopping Street caused reporters to report that when customers pick up a certain product, the smart screen on the shelf can trigger commodity introduction and commodity evaluation, in the scenario of less people and automation, with "one-on-one" exclusive shopping guide to ensure that customer appeals are not ignored, to create a better than the online algorithm recommended humane care.
Secondly, the immersive experience that e-commerce does not have may become the killer of offline retail. In April this year, The Singaporean convenience store chain Pick & GO opened an unmanned convenience store that "mobilizes the five senses" at the National University of Singapore. In terms of smell, it accompanies customers throughout the shopping process with a soft jasmine scent, feeling quiet and relaxed after shopping; in terms of hearing, it cleverly awakens the sense of taste by setting up different sound effects on different shelves, such as when customers walk through the puffed food area, they can hear the crisp chewing sound, or when they walk through the drink area, they hear the opening sound of carbonated drinks...
Perhaps at this time, the customer is just wandering aimlessly, but under the influence of customized sound effects, it has an association with a certain product, and transforms the potential consumption desire into a real consumption behavior. It is not difficult to understand that by building offline stores into novel and highly technological experience centers, consumers can not only get more comfortable and pleasant enjoyment in the shopping process, but also help convenience store brands enhance customer favorability, indirectly bringing higher repurchase rates and sales.
Image source: marketinginasia
epilogue
In addition to providing the most basic goods and services, in the next stage, convenience stores will continue to innovate around category refinement, shopping convenience, and experience scenarios, and create multiple "slash identities" such as "refrigerator at the doorstep", "continuous life of workers", "foodie gathering place", "immersive experience center" and so on. And by becoming the first choice for people's daily consumption, it is presumably only a matter of time before the label of "no money" is taken off.