The Convenience Store Has Exceeded The Growth Rate Of 20%.

At the 2015 China chain industry conference, convenience stores became the most beautiful one.

In the case of slow growth or even negative growth, the convenience store has exceeded the growth rate of 20%.

Since the introduction of China in the mid 90s of last century, there has been an expansion climax of modern chain stores. However, with the rapid development of shopping malls and the rapid rise of rents after the commercialization and urbanization of the housing industry, a large number of convenience stores began to shrink, and even a few cases of closing and closing down.

Since then, it has been faced with a trend of being neither warm nor cold.

In particular, the most symbolic convenience stores in the first tier cities have been faced with long-term losses.

What is the reason for the growth of the convenience store? Is it the promotion of capital or the bubble brought by O2O?

As practitioners, we observed that although the mobile Internet and O2O attracted some capital concerns this year, in essence, capital participation did not affect the growth of convenience stores. Instead, the improvement of sales and the market selection of enterprises were the key factors to ensure the growth of convenience stores.

It should be said that we believe that the convenience store will soon usher in its era.

The two problems of the convenience store industry exist at the same time: on the one hand, they are faced with huge historical opportunities and need capital investment; on the other hand, their own historical profit status is not good enough, so it is difficult to get the recognition and investment of market capital.

Convenience store is a service industry, rather than a simple circulation industry.

The existence of convenience stores is to obtain customers and passengers, while providing customers with basic convenience shopping while satisfying their peripheral life needs, thus obtaining a higher service premium.

For example, in Taiwan, not only drinks, cigarettes, snacks and other commodities, such as lunch box lunch, life payment and so on have also been monopolized by convenience stores, and now grinding coffee is occupying the largest share of convenience stores, and even the express business has been occupying a considerable share.

Even Japan's Rosen is even the third largest ticketing agency in Japan, while Japan's 7-11 7-bank occupies the largest share of ATM, thus occupying the first domestic seats in small and convenient financial services.

That is to say, in Taiwan, Japan, Hongkong and other similar urban ecosystems, convenience stores rely on high-frequency customer contacts and rigid demand to obtain users, then gradually introduce various local life services, and rely on very low promotional cost and marginal cost to squeeze out or even replace the original formats in many services, and eventually become the most influential retail and service industries.

So we think that the valuation of convenience stores is not based on the valuation of stores and sales, but based on the valuation of user value, similar to that of the telecommunications industry, the Internet industry, the retail finance industry, etc.

With the maturity of mobile Internet technology and the wide application of O2O platform, this value can be reflected faster.

In contrast to the history of modern economic development and retail formats in the United States, Japan and Taiwan, we can see that in the pformation stage of industrialization and post industrialization, the starting point for the rapid development of convenience stores is just like the current China.

In the age of industrialization, rapid establishment is needed.

The efficient sale of large quantities of goods, and the need for cross regional market channels for cross regional or even national competition and integration. Customers also need one-stop retail formats to meet all kinds of basic consumer goods that have not been tried before. Therefore, the efficient shopping mall and comprehensive supermarket format are the best choice, so the hypermarket and comprehensive supermarkets have ushered in the golden age of development in the past 15 years.

At present, the demand for functional shopping is weakening after residents have basically purchased consumer goods, so the market has been in a doldrums in recent years.

At the same time, consumers are more affluent and begin to care more about leisure and entertainment. Their sensitivity to price is also declining, and the quality of service is higher. Therefore, the consumption of small convenience stores and catering enterprises is increasing significantly.

But from the profit situation, the convenience store is still in a relatively difficult period of operation.

The first is the pressure of rent.

Since 2005, along with the commercialization of cities (requiring a large number of supporting services), the rapid growth of housing prices brought by the commercialization of housing and the growth of retail trade, the rental cost of convenience stores has risen rapidly (our data in Beijing is basically doubled in 3 to 5 years), but the volume of passenger traffic has not increased. The price of commodities has not changed much, and the pressure of operation is very great.

That's the reason for the labour force.

Since the reform of state-owned enterprises, retired workers are facing the problem of retirement, and 80 percent usually have higher expectations for the nature of work and quality of life, so the convenience store industry appears as a whole.

A state of gradual scarcity.

At the same time, the social security system has been gradually implemented since 2005. The convenience store is the most densely populated industry (because most of the 24 hours or at least 16 hours of business hours need to be changed, so the staff density per square meter has been far higher than other formats). Therefore, the rapid promotion of labor cost has caused tremendous pressure on convenience stores, and is also an important reason for many convenience stores to shrink.

According to the data of good neighbors, the single store turnover doubled from 2009 to 2015, but the two major cost increases of rent and labor were more than doubled or even nearly two times.

Therefore, the two problems of the convenience store industry exist at the same time: on the one hand, they are faced with huge historical opportunities and need capital investment; on the other hand, their own historical profit status is not good enough, so it is difficult to get the recognition and investment of market capital.

Convenience stores should rely on high-frequency customer contacts and rigid demand to get users, and then gradually introduce various local life services.

In the end, it may be possible to squeeze out existing formats with very low promotion cost and marginal cost, thus becoming the most influential retail service industry.

From the perspective of capital market,

It is not an independent industry, nor an independent analyst. Instead, it belongs to the retail industry and refers to its valuation model, that is, the valuation model based on PE (multiple of market value corresponding profits) and PS (multiple of market value corresponding to sales).

But if this model is used, the valuation of convenience stores will remain low at the same customer base.

As we all know, convenience stores have to choose the most convenient but also most expensive shops. In order to provide convenience, convenience stores have a much lower price than large supermarkets.

And because of 24 hours of business, the convenience store's manpower allocation is also several times larger than that of a large supermarket.

From the whole store, the most important cost investment of convenience stores is in the background, including IT, marketing, high frequency full temperature logistics facilities, processing factories and central kitchen, etc. these inputs are far more important than those of large supermarkets.

For example, the investment of Japanese peers is basically in the construction of headquarters and backstage. Instead, the investment of stores is actually given to the franchisees.

If we rely on the scale of store sales to calculate the value of convenience stores, how should we calculate the assets invested in the backstage? Or how should the investment backstage funds be rewarded? Should our Chinese convenience stores be dominated by these brands from Japan in the future?

Therefore, we call for a discussion on the valuation of convenience store industry, and research and analysis of how to design the valuation model of convenience stores.

Japanese colleagues have an interesting description of convenience stores: small business circles and manufacturing chain retail businesses.

Similar businesses include Japan's 7-11, Muji, German ALDI, Rite Aid and so on.

The common characteristics of these convenience stores are that they serve only limited business circles and users, and form competitive and differentiated products by selecting products and services that are highly selective for users. In the long run, the diversified demand and lifetime value of fixed users can be exploited for a long time to get superimposed income.