Market report the leading convenience stores in China
Despite the fact that the traditional retail business got negative influence by the rise of e-mail business, the foreign and domestic convenience stores still formulated large expansion plans, hoping to get benefit from the growth of consumption power in China. Here is a market report on the leading convenience stores in China.
First-tier cities: Market gets tougher for convenience stores in China
Within one year, 7-11, the biggest convenience store chain worldwide, has closed more than ten stores in Shanghai. Lawson and Family Mart, the second and the third largest convenience store chain in Japan did the same, with overall more than 100 stores closed in the year of 2013 in Shanghai. Kedi and Alldays, two convenience store brands owned by NGS Group, the Shanghai-based supermarket operator, are experiencing the same situation. They have decided to close stores unable to make 5,000 yuan per day unless one is strategically significant because of the increasing rent and labor costs.
In Beijing or Shanghai, convenience stores stand just 100 meters apart, and two to three stores at a downtown crossroad are not unusual. Facing a situation of saturation, any newcomer would face fierce competition and thus has to shut down to avoid a further deficit.
However others argue that the total revenue of convenience store make only 10 percent of the entire retail industry, and with the same population, Taiwan has 9800 convenience stores versus 6400 in Shanghai. Therefore market reports in China assume the market has not shown its full potentiality.
Meanwhile, complaints are heard concerning the unreasonably high price of foods and daily necessaries in the convenience store, especially foreign ones, in Beijing or Shanghai. For example, the cost of the ready-to-serve snacks and meals in those stores are usually 3 to 4 times higher than that of a street hawker’s and those immigrants labor forces which count as 5 million population definitely won’t choose these stores for daily shopping.
Expect the over-expansion and the over-charged prices; the law also restricted the foreign convenience store from selling tobacco to the public since 2007. The untouching area, of which its tax revenue counts 7,6% of national tax revenue, actually keeps them alienated from a large type of clients.
Convenience stores in China second, third tiers cities: Big expansion with proper strategy
Family Mart, Lawson do not have many branches in second and third tiers cities in China. As a result, local retailers and foreign ones such as Carrefour or Walmart have emerged rapidly in this region. For example, in Jiangsu province, SUGUO has the largest market share among all its competitors. With its long-time presence of more than 18 years and the different forms of the supermarket (China Ressources SUGUO 华润苏果 for the large multifunctional store. Howdy 好的 for professional, fashion-oriented young people, SG CVS苏果便利 for a small-sized convenience store in communities) SUGUO gained an image of a leader in the market of a convenience store in this region.
In Guangdong province, Mannings and Watson’s are the major players, followed by OK (Also known as “Circle K”), Family Mart and C-Store, with over 500 outlets in Guangdong Province.
Chinese convenience store chains suffer from inadequate service, a lack of innovation and small profits in general. While as for Carrefour’s strategy in China, the biggest foreign convenience store in China has a penetration rate of 55% in 15 major cities in China. Its strategy can be concluded as:
- decentralization and localization
- seek profits from upstream suppliers to lower the cost
- sublet the store and be the sublandlord
In the next five years, the market report shows that convenience stores in China will continue to grow by doubling the number of outlets, especially in second, third tiers cities. The tendency of the value-added-24 hour services will be seen in more supermarkets, with the service of charging the card, the phone, copy, scan, etc.