May 20 (NBD) – In the morning, people are seen queuing up in front of Today, a Chinese convenience store chain, to buy home-made "hot dry noodles", which is known as one of most iconic dishes of Wuhan.

National Business Daily (NBD) noticed that Today is the first convenience store to offer hot dry noodles in Wuhan. Starting from sales of 2-3 servings at one store, Today sold over 3.8 million servings of noodles last year.

The popularity of the special breakfast miniatures the two major directions tied to the competitiveness of convenience stores nowadays: fresh food selling and localization.

Photo/Chen Keyuan (NBD)

Fresh food, ace for local convenience stores?

Currently, Today's food factory produces up to 100,000 servings of fresh products every day. Its SKU (Stock Keeping Unit) for fresh food accounts for 10 percent of the total, but over 30 percent of sales and 37 percent of gross profits are generated by the fresh products. 

It's noticed that the convenience store sells different traditional food in different cities.

Today is not the only one that starts offering fresh dishes tailored to the tastes of local consumers. More than 80 percent of the convenience stores emphasized on the local market, showed the latest statistics from China Chain Store and Franchise Association. Local fresh food has become the key to the differentiation strategy of local convenience stores. 

A convenience store brand needs to constantly explore local consumption habits and culture of every city it enters and develop localized fresh food products, Song Yingchun, founder of Today said, adding that the core competitiveness of the convenience store is the ability to forge a fresh food industry chain.

Last year, the market size of China's top 100 convenience stores exceeded 226.4 billion yuan (32.8 billion U.S. dollars), representing a growth rate of 19 percent, lower than the 23 percent in 2017 and the 31 percent in 2016.

Despite the slowdown in growth, the country's convenience store industry still has a promising development space, as local store chains in second-, third- and fourth-tier cities continue expanding, fueling the increase of new store openings, Willi Sun, Director SHW STR at KPMG Advisory (China) Limited, told National Business Daily.

In addition, as more brands are aware of the contribution private-label fresh food could make to their revenues, stores can improve sales performance by building fresh food production chain and providing private-label food products, Sun noted.

Foreign players seeking localization to remain competitive

Faced with challenges from China's local convenience brands, the top three international convenience store brands, Lawson, 7-Eleven Inc., Family Mart, are also groping for methods of localization in the country.

Motonobu Miyake, president of Lawson (China) Holdings, Inc., held that China as a large market has regions with different economic development and diverse consumption habits, and Lawson's stores can't be operated in the same way in all cities of the country.

As part of its localization strategy, Lawson signed separate area licence agreement with local commodities retailing giant Zhongbai Holdings Group in Wuhan, Nanjing Central Emporium, and supermarket chain Beijing CSF Market.

Under those agreements, local retailers will develop Lawson convenience stores that catering to the needs of local consumers, capitalizing on Lawson's experience of store management and product development and those local retailers' strong customer base.

Lawson's counterpart 7-Eleven tends to give more say to directors of franchised stores to achieve localization of shops. Yan Qian, deputy general manager at Seven-Eleven (China) Investment Co Ltd, said it is the director or franchisee of a store who fully understands the surrounding business circles and who can decide the price and the quantity of products the shop sells.

Email: gaohan@nbd.com.cn