Convenience stores optimistic on future prospects

Convenience store operator Shanghai Lawson Inc opened six new stores on Aug 8 in Wuhu, Anhui province－the first city the brand entered other than the provincial capital Hefei since its debut in the province in 2018.

Over the past two years, the brand has opened 64 stores in Hefei. Thanks to its expansion model based on franchising, Lawson aims to open an additional 100 stores in Hefei and Wuhu as well as Maanshan, also in Anhui, by the end of this year.

Lawson's new stores were in line with the 4,746 new store openings for all convenience store brands across China seen in the first half, the China Chain Store & Franchise Association (CCFA) and KPMG said in a report on Wednesday.

The report also said total revenue for all convenience stores in China last year rose 13 percent to 255.6 billion yuan ($37.0 billion).

Convenience stores in China continue to penetrate into smaller cities, said another CCFA report－China Urban Convenience Store Index.

The index surveyed convenience stores in 36 cities around the country and determined saturation levels, expansion rates, ratio of 24-hour stores and business environments. The top five cities ranked by their index level in terms of business friendliness toward the convenience store sector were Xiamen, Fujian province; Taiyuan, Shanxi province; Dongguan, Guangdong province; Changsha, Hunan province; and Beijing.

Meanwhile, the report found that the development of convenience stores in various cities showed a vast disparity due to geography, climate, economic and consumption factors. Convenience stores are expected to gain more momentum in second and third-tier cities, boosted by rising consumption levels in these urban areas. Soaring rents and labor costs in first-tier cities have further raised operating pressure.

CCFA's top 100 list of convenience stores in China 2020 based on store numbers was released in June this year. Sinopec's Easy Joy, MYJ and CNPC-operated uSmile stores are the top three players, with each having more than 20,000 stores. Tianfu, Family Mart and Lawson comprise the next three.

The Ministry of Commerce issued a circular in July to stimulate the development of convenience stores to boost domestic consumption.

The circular, released by the Ministry of Commerce, said the three-year action plan encourages developing branding and expanding store networks, and pushes for the total number of convenience stores in China to reach 300,000 outlets by 2022 from 132,000 at the end of last year. The circular has urged the sector to focus on expanding store numbers, accelerating digitalization and building a smart supply chain.

CCFA found that the majority of convenience stores (about 70 key convenience store brands they sampled since the beginning of the year) have prioritized digital operations this year by pumping more investment into this area. About 85.2 percent of stores have plans to launch online orders, about 67.4 percent are test-phasing delivery services while 88.6 percent are developing methods to divert online traffic to in-store traffic, where customers typically purchase more.

In addition to Lawson's strengths as an established Japanese operator of convenience stores, the store said they also have an advantage in merchandise, particularly in perishable foods and desserts. Perishable foods make up 40 percent of sales.

Their merchandise is updated based on popularity among consumers, with 12-15 percent of items sold in stores regularly replaced to maintain competitiveness. For example, Lawson has joined hands with Yurun Group Ltd to customize products among its fresh food selections, such as smaller-sized packaging of merchandise.

In addition to East China, Lawson plans to add more than 60 convenience stores in the Beijing-Tianjin-Hebei region in the second half of this year to reach a total of over 200 stores in the region. Currently, there are more than 2,700 Lawson convenience stores across China.