China convenience store business booming

China’s overall retail market growth may be slowing – but the convenience store sector is a standout performer.

According to a report published by the China Chain Store & Franchise Association and the Nomura Research Institute, the nation’s 15 major convenience store chains posted 18.2 per cent growth in sales in 2013 – far higher than department stores’ 9.6 per cent and the 7.8 per cent posted by hypermarkets and supermarkets.

While department store chain growth is now virtually stagnant, with stores closing and their owners’ profits declining, the 15 major convenience store chains opened a combined 4484 new stores in 2013, representing a 3.4 per cent increase.

The report says much of the growth in the China Convenience store sector is in second- and third-tier cities.

But significant market opportunities remain for the sector: China has just 54 convenience stores per 1 million people compared to 425 in Taiwan, and 388 in Japan.

“The potential for the business is still largely untapped,” the report concluded.

Despite the rapid growth, the report says the industry still faces several challenges:

  • Many new c-stores are being opened in sites which used to house supermarkets, so the footprint is too large for an efficient c-store business model. Other new stores are too small.

  • C-store operators need to consider broadening the range of services they offer, given the success of chains in Japan and Taiwan which have diversified into such categories as bill payment services, ticketing and ATMs.
  • Regulatory issues relating to what c-stores are allowed to sell and procedures for launching new business initiatives.
  • Inefficient supply chains affecting the quality and safety of fresh foods, particularly.

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