24-Hour Convenience

By Zhang Shasha

Twenty years ago， convenience stores were a newly sprouted phenomenon in China. Baishi Bianli， a Hong Kong invested brand， opened the fi rst Western-style convenience store in Shanghai in 1993 with great fanfare.

A Shanghai-based newspaper reported，“Snacks are displayed on an array of shelves， along with daily necessities from soups to nuts. There is a table with a microwave oven and coffee machine where white collar workers can enjoy hot fast food. The cashier area is also a magic place where medicines and cigarettes can be found.”

As the fi rst 24-hour convenience store in Shanghai， Baishi Bianli had a small window opened during the wee hours of the night to serve its customers because security systems were not yet well-developed. Since then， convenience stores， both local and foreign-funded， have popped up and permeated the streets and alleyways of the metropolis.

Although a permanent fi xture in mega cities like Shanghai， convenience stores are scarcely seen in smaller cities. “Chinas convenience stores are at their fledgling stage of development，” Ouyang Jianyu， an analyst with Chuancai Securities， said. “They are mainly established in big cities， local brands are yet to be exploited and the scale of value-added services is relatively small.”

There are only 130，000 chain convenience stores in China， which is far from enough to satisfy peoples needs， Minister of Commerce Zhong Shan said at a press conference on May 18. “As a next step， we will emphasize optimizing the industry and promoting the development of convenience store chains，” he said.

According to the Qianzhan Industry Research Institute， a consulting service provider， it is expected that Chinas convenience store industry will see its annual growth rate increase by more than 10 percent and sales reach 405.6 billion yuan（$56.9 billion） in 2020， which suggests great investment opportunities.

Uneven development

On May 25， Bianlifeng， a Chinese convenience store brand， announced it had raised 1.5 billion yuan （$209.6 million） to invest in the Chinese convenience store market.

Opened in 2018， the brands Beijingbased stores have posted profits these past two years and it is expected to bring in national profi ts by the end of 2020. The achievement went far beyond industrial insiders expectation as the well-known Japanese 7-Eleven brand took 11 years to gain profitability after entering the Beijing market.

To date， there are more than 1，500 convenience stores under the brand. In February， it established Chinas largestscale fresh food factory in Tianjin， next to Beijing， with a production capacity to supply 5，000 stores. Moreover， the fund allows for opening another 10，000 new stores， according to Bianlifengs public information.

“This sent a signal to the industry， speaking volumes about its prospects and value for investors. But it also indicates a new model for competition， which means the survival of the fittest is inevitable， old-fashioned convenience stores will face being sifted out by the market. Competition will be fi ercer，” a retail specialist told Sina Finance， a Beijing-based news website.

According to the China Chain Store and Franchise Association， during the coronavirus epidemic period， while some convenience stores registered rapid growth， others saw dramatic sales downturns. In the fi rst quarter of 2020， sales in the convenience store industry dropped by 15-20 percent year on year. Along with operational problems， some brands were faced with a crisis of survival.

For instance， while Bianlifeng is vigorously growing， OurHours， another Chinese brand， had to close all its Beijing stores early in May. On some streets in Beijing， people were queueing up in front of OurHours to buy goods at a clearance sale at 60 percent discount.

Expansion of capital

In China， statistics show that one convenience store may serve up to 10，000 people， whereas in Japan， it serves about 2，300 people. In the Republic of Korea， there is one convenience store for every 1，000 people. Thus， compared to neighboring countries， Chinas market has a huge potential for growth. In addition， Zhong noted that the quality of Chinas convenience stores in general is relatively low.

To change the status quo， measures have been rolled out since last year. The Ministry of Commerce （MOFCOM） highlighted the promotion of convenience store chains， encouraged these enterprises to expand their businesses from big cities to neighboring cities， towns and villages to stimulate consumption and suggested they adopt an online-to-offl ine model and all-channel operation.

On April 30， a guideline was issued by MOFCOM to guide convenience stores all over China to reopen while strictly adhering to the rules of epidemic prevention and control. These policies have strengthened investors confidence to seize the opportunities.

The U.S.-origin Lawson， now a Japanese brand， announced on April 15 it will enter Hebei Province， next door to Beijing， and establish more stores in the Beijing-TianjinHebei region. In 2019， the number of newly-open Lawson stores in Beijing hit a record high， with 60-100 more stores expected in 2020.

Both local and foreign brands are eyeing third- and fourth-tier cities. For example， Bianlifeng， whose business was mainly concentrated in big cities in the past two years， has entered the markets in Guangdong Province in south China， Shandong and Anhui provinces in the east and Henan Province in central China， while also increasing stores in the remaining regions.

E-commerce giants such as Alibaba， JD.com and Suning are also implementing offline convenience stores， bringing new ideas to the industry such as unmanned operation， self checkout and mobile phone charging services.

“In the future， the industry will expand to smaller cities while achieving differentiation among brands in terms of their products and services and those with less competitiveness will ultimately be weeded out by the market，” Ouyang said.