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the whole family braked and Rosen accelerated.
Rosen plans to have 10000 stores in China by 2025.
According to the list of top 100 convenience stores in China in 2021 released by China chain operation association, as of December 31, 2020, Rosen had 3256 stores, surpassing the family convenience store with 2967 stores for the first time, becoming the Japanese convenience store brand with the largest number in China.
According to Rosen’s assumption, the average annual number of stores in the next four years should reach nearly 1700, so as to achieve the goal of 10000 stores in 2025.
The goal of opening stores is not small. Rosen entered China in 1996 and it took 25 years to break through 3000 stores. Now it is obviously not easy to complete the layout of 1700 stores every year.
However, Rosen’s ambition of horse racing and enclosure has already been put on the table.
According to the list of China’s top 100 convenience stores compiled by China chain operation association, Rosen had 1973 stores in 2018 and 2707 stores in 2019. From 2019 to 2021, Rosen’s annual store growth rate was 37% and 20% respectively, far exceeding the family’s growth rate of 11% and 4% in the same period.
The whole family is braking and Rosen is accelerating.
Convenience store is a recognized industry that is difficult to make money.
In order to meet the immediate needs of young customers, convenience stores are limited in site selection, mainly in commercial areas and young communities, bearing high rent pressure.
In the early days, convenience stores preferred the core business district where white-collar workers gathered. Now, with the rise of near-field business, the community has surpassed the business district and become the preferred scene for convenience stores, but the rent cost can not be underestimated.
According to the survey of 2021 China convenience store development report (hereinafter referred to as the report) issued by China chain operation association, in the cost structure in which the main expenses account for 25.8%, the rent cost accounts for 6.5%. A comparable data is that the rent of sample enterprises accounts for 2.5% in the list of 2020 China’s top 100 supermarkets issued by China chain operation association.
However, this is not the highest cost item, and the employee salary ranks first with 8.2%.
Retailing is usually a labor-intensive industry. The number of workers in convenience stores whose business area is almost the same as that of husband and wife stores is 2-3 times that of husband and wife stores.
A reference data is that in the gold medal stores selected by China chain operation association, 79.2% of the stores have 3-6 formal employees, and 11.7% of the stores have 7-11 formal employees. In addition, it also includes some flexible employment.
Although the area of the convenience store is small, it has all kinds of internal organs, and the consumption frequency is higher than that of the general community store. Employees need to replenish and display at any time. Due to the large number of short warranty (shelf life of 1 day) goods in the store, the workload of timely reporting damage is not small.
The category that needs the most manpower in the store is fresh food, namely rice balls, sandwiches, Kanto cooking, desserts, fast food and other ready to eat goods. Generally speaking, at least one resident employee will be arranged in the fresh food area, and 2-3 employees will go to the fresh food area to help at the same time during the peak period.
Stores with better digital implantation can reduce personnel pressure. For example, it is convenient for bees to introduce functional equipment such as fresh food automatic ordering machine, cold drink automatic replenishment machine and self-service checkout machine to reduce a certain amount of workload. However, manual procedures such as order issuing, taking and heating still need to be supplemented in peak hours.
Rent, labor and commodity losses are visible front-end costs. Another back-end cost that needs long-term investment is the supply chain.
Fresh food is considered to be the core category of convenience stores different from other community stores, and fresh food with a gross profit of 30% – 50% is also the key category of its profit. However, the capital investment of self built fresh food factories should be calculated in ten million yuan, and the brand needs to have at least 150 stores to complete the output consumption.
This is an expensive capital investment, and the supply chain investment is a long-term battle. Although convenience stores are considered to follow the business format of economies of scale, due to the opening form of physical stores, in the process of forming scale, brands also need to run through the single store profit model as soon as possible to improve the overall profitability of stores.
As a heavy asset industry, it is not easy for convenience stores to make profits, and Japanese convenience stores are in a difficult situation in China.
On the one hand, Japanese convenience stores have spent a long time cultivating the habit of exchanging losses for cancellers, while trying to fit in with the consumption habits of Chinese consumers, adjusting category structure and iterating products; on the other hand, Japanese convenience stores have lost two sources of income in China, one is life-style services such as payment, ticket sales, printing, sending and receiving e-mail and express delivery, and the other is foreign retail There is no right to sell cigarettes in China.
For a long time, cigarettes accounted for the highest proportion of the revenue of convenience stores. The above report shows that among the gold medal stores selected, cigarette sales accounted for 24.6%, more than 17.8% of fresh food, accounting for the first in a single category. Japanese convenience stores without the right to sell lost this sweet cake.
Under the influence of multiple factors, although Japanese convenience stores were the first enterprises to seize the consumer market and occupy the minds of customers, they had difficulty in making profits for more than 20 years.
According to public information, at present, only Rosen’s China business has achieved overall profit in fiscal year 2020 (as of February 2021), and 7-Eleven has not announced comprehensive profit so far.
The whole family, which competed with it in terms of scale, only announced that it realized the headquarters profit in 2012. Due to the dispute over the licensing fee between Taiwan Dingxin family and Japan family, it is suspected that the key to the family’s profit comes from this. Whether to renew the contract between Taiwan’s Dingxin family and the Japanese family after the expiration of the contract is still in the game. The resignation of its mainland executive director Lin Jianhong has also cast a haze on the follow-up development of the family in China.
So when the family stalled, Rosen had a reason to accelerate.
Compete for sinking market
Rosen’s confidence in big expansion may come from comprehensive profitability.
Overall profitability is a landmark moment in Rosen’s development process in China, which means that Rosen has broken through the profit bottleneck of foreign convenience stores in China, and achieved phased victory in the localization of goods and operation mode. In addition, the overall profit also shows that Rosen’s single store profit model has been polished and verified successfully, and the preconditions for expansion have been met.
Looking at the industry pattern of convenience stores, the petroleum department convenience stores (Sinopec Yijie and PetroChina Kunlun Hospitality) rank the top with more than 20000 stores, and the regional characteristics of other players are obvious.
There are Meiyijia and Tianfu in Guangdong. The full convenience store in Zhejiang, Jianfu convenience store in Fujian, today convenience in Wuhan, every day convenience in Xi’an, Tangjiu and Jinhu in Shanxi and convenience bee in Beijing all account for the main market share in the local market.
In addition, there are also 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, the scale of convenience stores in China will reach 193000 in 2020. Excluding the two major petroleum convenience stores, the number of traditional convenience stores in the top 10 will be 41000; There are only 8600 Japanese funded convenience stores, which are mainly concentrated in first tier and new first tier cities.
In front of Japanese convenience stores, the sinking market seems to be a fertile land to be excavated.
The market pattern of convenience stores in China also provides a natural opportunity for more qualified convenience store brands.
First, COVID-19 has accelerated the survival of the fittest in the convenience store industry. Mergers and acquisitions will become the norm on this track. Compared with local convenience stores that started at least 30 years later, Japanese convenience stores have absolute advantages in commodity strength grinding, talent training, supply chain forging, store operation and so on.
Second, from the perspective of the distribution of convenience stores, except the two major petroleum department convenience stores, the brands in the head area choose to expand outward on the basis of the base camp. At present, there is no convenience store brand evenly located in the whole country, and China has not formed a national chain convenience store brand in the real sense. For Japanese convenience stores, this is both an opportunity and a challenge.
Rosen has already taken a fancy to this cake, which is also the earliest brand in Japanese convenience stores.
In June 2017, Rosen opened its first local store in Nanjing, with daily sales exceeding 200000 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 low-line market. Later, Rosen successively signed contracts with regional enterprises such as Nanjing Zhongshang, Wuhan Zhongbai, Anhui Zhongshang, Hainan Qingzi, Jiangsu Haina Xingdi and Hebei Jindian, and entrusted local cooperative enterprises to operate Rosen brand by means of brand authorization.
Rosen adopts the regional franchise strategy, establishes a joint venture with the cooperative enterprise, provides brand authorization to the cooperative enterprise, outputs commodity structure, operation mode, management system and talent training mechanism, shares talents and supply chain with the cooperative enterprise, and adopts the form of profit sharing.
Because of this, Rosen can take advantage of the partners to realize asset light expansion and greatly improve the possibility of realizing the goal of opening a store.
Rosen is not the only Japanese owned convenience store that adopts the regional franchise strategy. The franchise model of 7-ELEVEN in China is similar – Shanghai and Zhejiang are operated by Taiwan unified enterprises, and South China belongs to Guangdong Saiyi convenience store. It chooses to cooperate with new hope group in Chongqing and Sanquan food in Henan.
However, there are slight differences in the choice of regional franchisees. 7-Eleven prefers provincial authorization, while Rosen’s franchisee scope is detailed at the municipal level or even the county level.
In the territory of regional franchise, Rosen’s franchise sector is small and many, and its advantage lies in more flexible expansion options; The risk is that the management is more difficult and the brand maintenance cost is greater, which puts forward higher requirements for Rosen’s franchisee management.
Cancellation of mobilization fee
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: Rosen in Jiangsu, Zhejiang and Shanghai will no longer charge suppliers entry fees, account opening fees and other related fees. The reason why we started from Jiangsu, Zhejiang and Shanghai is that this is Rosen’s self operated area, which is more free to explore the model.
Mobilization fee and account opening fee are collectively referred to as channel fee, that is, a series of “invisible” fees that suppliers need to pay when supplying to retailers. There are many categories and large amounts. Public information shows that, according to the size of retail enterprises, the industry channel fee usually accounts for 10% – 20% of enterprise sales. It is not only an important profit source of physical retail, but also an tacit “industry rule”.
This is a persistent disease that has existed in physical retail for a long time. In the short term, the channel fee reduces the operating risk and net profit of retail enterprises, but in the long term, enterprises that rely on the channel fee for profit are equivalent to “chronic suicide”.
With the implementation of channel fee, enterprises are easy to lose their autonomy in the selection of products, only focus on the short-term gross profit brought by channel fee, and ignore the changes of external consumption habits. The most dangerous signal of physical retail is that it gradually lags behind in consumer demand.
Rosen’s cancellation of entry fee is not only a reflection of the changes in the macro environment of physical retail, but also reflects the bottleneck encountered by the convenience store industry.
Although compared with other retail formats, convenience stores still maintain a growth rate of more than 10%, it is an indisputable fact that the growth rate of convenience stores is gradually decreasing.
What is more serious than the lower growth rate is that the daily sales growth of single stores in convenience stores has changed from positive to negative. According to the report, the daily sales of convenience stores will be 5167 yuan in 2020, a decrease of 2% compared with 5297 yuan in 2019. This has affected the decline of store floor efficiency. The floor efficiency of 63 yuan / m2 / day in 2020 is 8.7% lower than that of 69 yuan / m2 / day in 2019.
The objective factor is the influence of COVID-19, and the further decline is the decline of single store passenger flow. There are many factors behind this. The accelerated consumption of online habits, the group purchase in the neighborhood and the blossom everywhere in the community.
However, it is gratifying that the customer unit price, gross profit margin and net profit margin of convenience stores are rising. In 2020, the customer unit price of convenience stores will be 18.1 yuan, an increase of 11% compared with 16.3 yuan in 2019; The gross profit margin is 25.8%, slightly higher than 25.1% in 2019; The net interest rate was 2.4%, significantly higher than 1.6% in 2019.
The era of passenger flow growth in convenience stores has passed. Deeply excavating customer needs and precipitating loyal customers have become the key combat strategy of convenience stores in the second half.
Rosen’s “five new” strategy is based on this trend. After announcing the cancellation of the entry fee in Jiangsu, Zhejiang and Shanghai, Rosen launched the “five new” strategy, namely new goods, new categories, new technologies, new services and new models. This means that Rosen officially began to explore changes in procurement, category structure, business format, sales channels, digitization and so on.
For example, in terms of sales channels, in addition to the existing store to store and takeout modes, the pre-sale mode is opened, which is similar to the self delivery of community group purchase on the next day, which can also be regarded as Rosen’s defensive strategy against the community group purchase platform.
On this basis, Rosen’s category structure can be extended, such as the reservation of flowers and cakes under the pre-sale mode, so as to accelerate the iteration of new and old commodities and launch more combined commodities. Canceling the entry fee mode is actually preparing for the innovation of the selection mode.
In an interview, Zhang Sheng admitted that Rosen was mainly efficiency oriented before realizing overall profitability, and now it needs to change to effect oriented. In short, it is to change from short-term income to long-term income, which is also its original intention to cancel the entry fee.
The focus of the transformation from efficiency orientation to effect orientation is to reduce costs and increase efficiency. Among them, the improvement of floor efficiency, human efficiency and product efficiency is the main direction, in which digitization will play a core role.
In the special report on the digitization of China’s physical retail in 2021 – convenience stores, yiou think tank pointed out that in the next 3-5 years, sustainable development driven by the improvement of operation capacity will be an important development direction for convenience store enterprises. Enterprises pay more and more attention to building their digital ability, customer-centered digital operation and supply chain, so as to reduce costs and increase efficiency as a whole, and improve store performance, member management and operation efficiency.
Digitization is also a part of Rosen’s “five new” plan. Just recently, Rosen tested a new digital store in Dalian to test water innovation in trading links. After the consumer places an order through the mobile phone, the clerk will prepare the goods and put them into the insulated storage cabinet. The consumer can pick up the goods by entering the password.
However, this format is obviously not mature. From the perspective of Rosen standard store, its digital transformation is still in its infancy, and the c-end-oriented digital infrastructure has not been built yet. Taking Rosen in Beijing as an example, the self-service checkout machine has not been introduced in the store, and the whole family has taken the lead.
Digital transformation is also a long-term battle that takes time and money. It is unknown whether Rosen can become the ultimate winner of the convenience store industry.
Family convenience store “left behind”? Spirit beast, ten miles
Rosen cancels the entrance fee and creates a “three-tier space” of convenience store + front warehouse + self pick-up point. The third eye looks at retail, Zhang Si
Author: Wang Yuexia; Source: billion European Network (ID: i-yiou), reprint has been authorized. Reprint authorization and media business cooperation: Amy (wechat: 13701559246);
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