Passing Ali 500 million yuan into the stock market, the competition in the convenience store industry is fierce

On November 10th, in the new retail era, E-Commerce giants have laid out offline retail sales, and convenience stores have become one of the hottest retail formats. A few days ago, it was reported that Alibaba had completed the strategic shareholding of the convenience store, Shishido, and invested 20 million yuan to hold 20%-25% of the shares of Christopher. In response, Ali responded that he did not comment on market rumors.

According to the “Electronic Business Daily”, the convenience store chain was established in April 2001. It is more common in Shanghai and radiates to East China and South China. Up to now, it has opened nearly 1,000 direct and franchised stores nationwide. It is worth noting that at the end of last month, there was news that Ali bought the Xi’an convenience store chain, Edbury, and completed the delivery at the end of the month. After the completion of the acquisition, the convenience door will be replaced by the WOWO convenience brand, and WOWO convenience is the Sichuan convenience chain brand that Baishi acquired a year ago. The relevant person in charge of Xi’an Aidebao and Baishi responded that they would not comment. If these news are live, Ali’s convenience store layout will be further expanded.

In recent months, news about the closure and closure of convenience stores has continued to spread, and the entire industry has stood on the cusp of public opinion. Despite this, the enthusiasm of capital for convenience store tracks seems to have not diminished. In the middle of last month, Convenience Bee was exposed to a large investment in Tencent and Gaochun Capital, with a valuation of US$1.6 billion, and Tencent and Gaochun held 8% respectively. Earlier this month, the Innovation Workshop announced that it would invest 60 million yuan in Anhui Zhongshang Convenience Store, with a 20% stake in the investment. In addition, neighbors of chain convenience store companies in Beijing also announced a new round of financing. With the help of capital, the staking race in the convenience store will intensify.

According to the “2018 China Convenience Store Development Report”, the convenience store market in 2017 exceeded 180 billion yuan, both the number of stores and the same store sales increased. At the same time, the report indicates that the current convenience store regional pattern is obvious, the national layout has not yet appeared, and there is still a large blue ocean to be developed. In terms of the more developed Japanese convenience store market, the 127 million people have a total of 60,000 convenience stores. According to this figure, China with a population of 1.3 billion can accommodate 600,000 convenience stores. The market is big enough, but the problem of high convenience store costs and high profitability is still difficult to solve.

Convenience stores are not an industry that makes quick money, and the industry has always shown a lower overall net profit. Even for traditional convenience stores that have been solidly developed in China for many years, profitability is a problem. The whole family China began to make profits in 2012, and 7-11 is still in a loss stage in China so far. Rosen is expected to achieve breakeven in 2019. Last month, Suning Tesco also issued an announcement to separate the loss-making Suning store from the listed company to ease the company’s performance pressure. Convenience stores require high-cost investment in the early stage. Once the capital chain breaks, it will disappear like a convenience store next door.

In addition, domestic convenience stores face rising rents in addition to high operating costs. Especially in the past two years, with the expansion of some convenience stores, the store rent has been promoted, and the franchisees have taken certain risks, and the profits are not guaranteed. Franchisees face rising rents and labor costs at a rate of 5% to 10% per year. Coupled with insufficient chain management experience and difficult product quality management, they are factors that hinder the development of convenience stores.

With the Internet giants moving to the next line, fresh and new community stores, unmanned convenience stores, smart containers and other new things emerge one after another, the convenience store market war is intensifying. The intensive entry of this capital may give more room for development in the convenience store industry, but the convenience store is not a fast-profit industry. It requires high cost investment in the early stage, and it is cyclical. How to develop in the future remains to be seen.