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Article/Wang Yuexia
Editor/Gu Yan
Title photo/unsplash
Rosen plans to fill up 10,000 stores in China by 2025.
The "2021 China Convenience Store TOP 100" list released by the China Chain Store Association shows that as of December 31, 2020, Rosen had 3,256 stores, for the first time surpassing Family Convenience Stores, which had 2,967 stores, to become the Japanese convenience store brand with the largest number of stores in China.
According to Rosen's vision, the average annual number of stores to be opened in the next four years will have to reach nearly 1,700, in order to reach the goal of 10,000 stores in 2025.
This store opening target is not small. Rosen entered China in 1996, it took 25 years for the number of stores to exceed 3,000, and now want to complete the layout of 1,700 stores per year, obviously not an easy task.
However, Rosen's ambition to run the horse has long been on the table.
According to the China Association of Chain Store Management statistics, "China's convenience store TOP 100" series list, Rosen's 2018, 2019, the number of stores were 1973, 2707. 2019-2021, Rosen's annual growth rate of 37%, 20%, far more than the growth rate of the same period of 11%, 4% of the whole family.
Whole Family is braking, Rosen is accelerating.
Convenience stores are an admittedly difficult industry to make money in.
Because of the need to meet the immediate needs of young customers, convenience stores are more restricted in terms of location, mainly in business districts with a portrait of young communities, bearing a high pressure on rent.
In the early days, convenience stores preferred the core business district where white-collar workers congregate, and now with the rise of the near-field business, the community has surpassed the business district to become the preferred scenario for convenience stores, but the cost of rent is still not to be underestimated.
According to the China Chain Store Association's 2021 China Convenience Store Development Report (the Report), In the cost structure of 25.8% of the main expenses, rent costs account for 6.5%. A comparable data is that the same China Chain Store Association released the list of "2020 China's Top 100 Supermarkets", the rent of the sample enterprises accounted for 2.5%.
But that's not the highest cost item, employee compensation tops the list at 8.2%.
The retail industry is often labor-intensive, and convenience stores, which are similar in size to wife-and-husband stores, employ two to three times as many people as wife-and-husband stores.
A reference to the data is that 79.2% of the stores selected by the China Chain Store Association for the Gold Medal are concentrated in the number of 3-6 employees, and 11.7% of the stores have 7-11 employees, including a portion of the flexible labor.
Convenience stores are small in size but have all the essentials, and the frequency of consumption is higher than that of a general community store, so employees need to replenish and display goods at any time. Due to the store's short-term guarantee (shelf life of 1 day) more goods, the workload of timely damage reporting is not small.
The category that requires the most manpower in the store is fresh food, i.e. rice balls, sandwiches, Kanto boiled, desserts, fast food and other ready-to-eat goods. Generally speaking, at least one permanent staff will be assigned to the fresh food area, and during peak periods, 2-3 staff will go to the fresh food area to help at the same time.
Stores with better digital implantation can reduce the pressure on staff, such as convenience bees to introduce fresh food automatic ordering machines, cold drinks automatic replenishment machines, self-checkout machines and other functional equipment to reduce the workload to a certain extent, but the procedures of ordering, picking up, heating and other procedures still require manual labor, and additional manpower is still needed during peak periods.
Rent, labor, and product loss are visible front-end costs, and there is also a long-term investment in the back-end costs of the supply chain.
Fresh food is considered to be the core category that distinguishes convenience stores from other community stores, and fresh food with a gross profit of 30%-50% is also a key category for its profitability. However, the capital investment to build a fresh food factory is calculated in tens of millions of RMB, and the brand needs to have at least 150 stores to complete the production consumption.
That's a lot of capital investment, and supply chain investment is a long-term battle. Although the convenience store is considered to follow the economy of scale of the industry, but due to the opening of the form of physical stores, the formation of the scale of the process also need to brand as soon as possible to run through the single-store profitability model, to enhance the overall profitability of the store.
Convenience stores as a heavy asset industry profit is not easy, Japanese convenience stores in China is a difficult situation.
On the one hand, the Japanese convenience stores have spent a long time in exchange for losses to cultivate consumer habits, while trying to fit the consumption habits of Chinese consumers, adjusting the category structure, and iterative products; on the other hand, the Japanese convenience stores have lost two sources of income in China, one is the payment of bills, ticket sales, printing, receiving and dispatching of mail and courier and other lifestyle services, and the other is the foreign retailers in China, which is the most important source of income. On the other hand, Japanese convenience stores have lost two sources of revenue in China, one being lifestyle services such as bill payment, ticket sales, printing, mail delivery and courier, and the other being the lack of cigarette sales rights for foreign retailers in China.
For a long time, cigarettes were the category that accounted for the largest share of convenience store revenue. According to the report, cigarette sales accounted for 24.6% of the gold medal stores selected, surpassing fresh food at 17.8% and taking the first place in a single category. There is no right to sell Japanese convenience stores, it lost this meat and potatoes.
Multiple factors play a role, Japanese-owned convenience stores, despite being the first to seize the consumer market, the occupation of the customer's mind of the enterprise, but up to more than 20 years of difficult to make a profit.
According to public information, only Rosen in the 2020 fiscal year (as of February 2021) China business to achieve overall profitability, 7-ELEVEN has not yet announced a full profit.
And in the scale of its race with the whole family, only in 2012 announced the realization of headquarters profitability. Because of the dispute between Taiwan's Tingxin Family and Japan's Family, over licensing fees, it is suspected that the key to Family's profitability comes from this. Taiwan's Tingxin Family and Japan's family contract expires whether the contract is renewed in the game, the mainland executive Lin Jianhong's departure also for the family's subsequent development in China has put a layer of haze.
So when Family stalled, Rosen had a reason to accelerate.
The reason Rosen chose to go for the big expansion may have come from being fully profitable.
Full profitability is a landmark moment in the history of Rosen's development in China, which means that Rosen has broken through the bottleneck of profitability of foreign convenience stores in China, and has achieved a milestone victory in the localization of commodities and operational models. In addition, full profitability also indicates that Rosen's single-store profitability model has been polished and validated successfully, and the prerequisites for expansion have been met.
Looking at the pattern of the convenience store industry, the petroleum-based convenience stores (Sinopec EasyJet, PetroChina Kunlun Haoke) are in the top position with more than 20,000 stores, and the rest of the headline players have obvious regional characteristics.
Guangdong has Meiyijia and Tianfu in the lineup, while Zhejiang's Totally Convenience Stores, Fujian's Seefu Convenience Stores, Wuhan's Today Convenience, Xi'an's Everyday Convenience, Shanxi's Tangjiu and Jinhu, and Beijing's Convenience Bee all have a major market share in their local markets.
In addition to this, there are a large number of small and micro local brands at the waist and tail, and convenience stores transformed by internet giants. According to the Report, in 2020, China's convenience store store store size of 193,000, excluding the two major oil-based convenience stores, the number of traditional convenience stores ranked in the top 10 is 41,000; Japanese convenience stores only 0.86 million, and mainly concentrated in first-tier and new first-tier cities.
In front of the Japanese convenience stores, the sinking market is still a piece of fertile ground to be tapped.
The market landscape for convenience stores in China also provides a natural opportunity for more senior convenience store brands.
One is that the new crown epidemic has accelerated the survival of the convenience store industry, and mergers and acquisitions will become the norm on this track. Compared to the local convenience stores that started at least 30 years later, Japanese convenience stores have an absolute advantage in all aspects of merchandise force polishing, talent training, supply chain forging, and store operations.
The second is the distribution of convenience stores, in addition to the two major petroleum-based convenience stores, the head of the regional brands to choose to coexist in the base camp on the basis of outward expansion, currently there is no one in the country evenly distributed convenience store brands, China has not yet formed the true meaning of the national chain of convenience store brands. For Japanese convenience stores, this is both an opportunity and a challenge.
Rosen has long been eyeing this piece of cake, but also the Japanese convenience stores in the earliest out of the brand.
In June 2017, Rosen opened its first local store in Nanjing, with daily sales exceeding 200,000 yuan, breaking Rosen's single-store sales record in China.
The success of the Nanjing pilot made Rosen re-examine the value and potential of the lower-tier market, and then successively signed contracts with regional enterprises such as Nanjing Zhongshang, Wuhan Zhongbai, Anhui Zhongshang, Hainan Qingzi, Jiangsu Haina Xingdi, Hebei Jindian, etc., to entrust the operation of the Rosen brand to the local partner enterprises using brand authorization.
Rosen adopted a regional franchise strategy, and the establishment of joint ventures with partner companies, to provide brand authorization to partner companies, the output of the commodity structure, mode of operation, management system, talent training mechanism, and partner companies **** enjoy the talent, supply chain, profits in the form of a share.
Because of this, Rosen can leverage the partner to achieve asset-light expansion, the possibility of opening stores to achieve the goal significantly increased.
Rosen is not the only Japanese convenience store to adopt a regional franchise strategy, 7-ELEVEN franchise model in China is similar to its - Shanghai, Zhejiang region by the Taiwan Unified Enterprises operations, South China belongs to the Guangdong Sai One convenience stores, in Chongqing, choose to work with the new In Chongqing, it has chosen to cooperate with New Hope Group, and in Henan, it has teamed up with Sanquan Foods.
However, in the regional franchisee selection, the two are slightly different. 7-ELEVEN is more inclined to the provincial authorization, Rosen's franchisee scope is refined to the municipal and even county level.
Put to the regional franchise map, Rosen's franchise plate is small and more, the advantage is that the expansion options are more flexible; the risk is that the management is more difficult, the brand maintenance costs are greater, the franchisee management of Rosen puts forward higher requirements.
In addition to external expansion, another focus of Rosen's work this year is internal iteration.
In late August, Zhang Sheng, vice president of Rosen China, announced a major decision: Jiangsu, Zhejiang and Shanghai region Rosen will no longer charge suppliers entrance fees, account opening fees and other related costs. The reason why the region from Jiangsu, Zhejiang and Shanghai to start, because it is Rosen's self-managed area, in the mode of exploration more free.
Fees, account opening fees are collectively referred to as channel costs, that is, suppliers to retailers need to pay a series of "invisible" fees, a variety of categories, the amount is not small. Public information shows that, according to the different sizes of retail enterprises, the industry channel fees usually account for 10% -20% of corporate sales, is an important source of profit for the entity retail, but also an unspoken "rules of the road".
This is a persistent problem in brick-and-mortar retail. In the short term, the channel fee allows retailers to reduce business risk, net net profit, but in the long term, relying on the enterprise channel fee profit business is equivalent to "chronic suicide".
The implementation of the channel fee, the enterprise is prone to the loss of autonomy in the selection of products, only focusing on the channel fee to bring the short-term gross profit, ignoring the external changes in consumer habits. The most dangerous signal for brick-and-mortar retailers is that they are falling behind in consumer demand.
Rosen canceled the entrance fee, not only is the entity retail macro-environmental changes in the reflection, but also reflects the convenience store industry is currently encountering bottlenecks.
Although compared to other retail formats, convenience stores still maintain a growth rate of more than 10%, but an indisputable fact is that the convenience store growth rate in the gradual decline.
More serious than the lower growth rate is that convenience store single-store daily sales growth rate has changed from positive to negative. The Report shows that the single-store daily sales of convenience stores in 2020 is 5167 yuan, compared with 5297 yuan in 2019, a decrease of 2%. This leads to a decline in store ping efficiency, with a ping efficiency of 63 yuan/square meter/day in 2020 compared to 69 yuan/square meter/day in 2019, a decrease of 8.7%.
The objective factor is the impact of the new crown epidemic, and then one step deeper is the decline in single-store traffic, which is behind a number of impact factors - the accelerated formation of online consumption habits, the community near-field business is emerging, and the community group purchasing blossomed.
However, the good news is that convenience store unit price, gross margin and net interest rate is rising. In 2020, the customer unit price of convenience stores will be 18.1 yuan, up 11% compared to 16.3 yuan in 2019; the gross profit margin will be 25.8%, slightly higher than 25.1% in 2019; and the net profit margin will be 2.4%, significantly higher than 1.6% in 2019.
The era of convenience store traffic scale growth has passed, and in-depth excavation of customer demand, precipitation of loyal customer base has become the focus of the second half of the convenience store combat strategy.
Rosen's "five new" strategy is based on this trend. After announcing the abolition of the entry fee in Jiangsu, Zhejiang and Shanghai, Rosen launched the "five new" strategy, that is, new commodities, new categories, new technologies, new services, new models. This means that Rosen formally from the procurement, category structure, format, sales channels, digitalization and other aspects to start exploring change.
Specific measures such as sales channels, in addition to the existing store and takeaway mode to open the pre-sale mode, similar to the community group purchase of the same day order the next day pickup, which can also be seen as a community group purchase platform Rosen defense strategy.
On this basis, Rosen's category structure can be extended, such as pre-sale mode of flowers, cake booking, so as to accelerate the iteration of old and new goods, the introduction of more combinations of goods. The abolition of the entry fee model is actually preparing for the innovation of the selection model.
Zhang Sheng confessed in an interview, realize the overall profitability of Rosen before the efficiency-oriented, and now to the effect-oriented change. In short, it is a shift from short-term gains to long-term gains, which is also the original intent of its abolition of the entrance fee.
The center of gravity of the efficiency-oriented to effect-oriented change is to reduce costs and increase efficiency. Among them, ping efficiency, people efficiency, product efficiency improvement is the main direction, digitalization will play a central role in it.
Everyone Think Tank's 2021 China Entity Retail Digitalization Report - Convenience Store Chapter points out that in the next 3-5 years, the sustainable development driven by the improvement of operational capacity is an important development direction for convenience store enterprises to focus on. Enterprises are increasingly focusing on building their digital capabilities, customer-centric digital operations, supply chain, etc., to achieve overall corporate cost reduction and efficiency, and to improve store performance, member management and operational efficiency.
Digitalization is also part of Rosen's "Five New" plan. Just recently, Rosen piloted a new digital store in Dalian to test the waters of innovation in the transaction process. Consumers through the cell phone order, the clerk will be ready to put the goods into the insulation storage cabinet, consumers can enter the password to pick up the goods.
However, it is clear that this business is not yet mature. From the point of view of the Rosen standard store, its digital transformation is still in its infancy, and the digital infrastructure for the C-suite has not yet been built. In the case of Rosen in Beijing, for example, the store has not yet introduced self-checkout machines, while the whole family has already taken a step ahead.
Digital transformation is also a time-consuming and costly long-term battle, and it is not yet known whether Rosen can become the ultimate winner of the convenience store industry.
Reference:
Family Convenience Stores: "Falling Behind"?