7-ELeven opened its first store in Xi’an, and the northwest convenience store market ushered in a strong rival.
7-ELeven is accelerating the enclosure in China.
On August 22nd, 7-ELeven’s first store in Shaanxi officially opened in Xi’an High-tech Dadu, and 7-ELeven, the world’s largest chain convenience store, officially entered Shaanxi, filling the gap in Xi’an Japanese convenience store.
This time entering the northwest is also the performance of 7-Eleven’s further expansion in China. Mr. Uchida, chairman and general manager of 柒 壹 (China) Investment Co., Ltd., said that 7-Eleven will strive to shorten the new regional profit cycle from 7 years to less than 3 years based on previous experience.
As the fastest rising city in the “new first-tier cities”, Xi’an’s commercial status has increased over the past few years. In addition to 7-Eleven, Box Ma Xiansheng, Xicha, a little, Fangsuoshudian and other network red brands have entered the Xi’an market in the past year.
On May 24th, the first-tier city research institute released the “2019 City Business Charm Rankings”, and Xi’an jumped from the 8th place last year to the 5th place. The commercial attraction is evident.
Accelerate the pace of expansion
In the past seven years, 7-Eleven has been expanding its market in an authorized manner in the Chinese market, and in most cases, it will establish joint ventures with local companies. For example, this time entering Xi’an, it is the mode of signing a franchise with local enterprises.
Take the 7-Eleven Shaanxi Province exclusive franchise authorization is Shaanxi Saiwen Tike Convenience Chain Co., Ltd. (hereinafter referred to as “Saiwen Tike”). According to the information of Tianyue, it is a company with a background of state-owned assets. It is a wholly-owned subsidiary of Shaanxi Tike Trading Co., Ltd., which was jointly established by Shaanxi Industrial Development Group and Shaanxi Gaochuan Industrial Group, and subscribed for 460 million yuan.
Image Source: Sky Eye
According to “The Third Eye to Watch Retail”, the previous 7-Eleven in Shaanxi will focus on transforming Tick convenience stores, reducing the cost of property investment based on the mature business district. Currently, 15 stores have been registered; Later plans to open franchise licenses for franchisees and speed up the expansion of stores.
The background of state-owned enterprises plus strong capital will help 7-Eleven to a large extent and gain a foothold in the early days of entering the Northwest market.
There is another sentence here. Regarding the difference between authorization and franchise, the authorization is to pay the management fee to the brand party (7-Eleven), the profit belongs to the company of the authorized party; and the franchise is to distribute the profit with the brand party. From the point of view of authority or freedom, the authorization method means greater authority.
For example, the location of 7-Eleven’s convenience store in Xi’an will be solely responsible for the location of Saiwen, and Shaanxi 7-Eleven will be able to reap the full profit after paying the brand management fee to the headquarters, and 7-Eleve will Give relevant support to commodities, supply chain, management, etc.
As the world’s three major convenience store retail chain brands, 7-Eleven’s pace of expansion in China has been quite slow.
In the case of the Beijing market, in the past 10 years, 7-Eleven has opened only 300 stores, and the number of stores nationwide is only about 1,800. Most of the stores have only been opened in recent years.
In comparison, in Shanghai alone, the number of convenience stores has reached more than 1,600, and Rosen has more than 1,300. Compared with competitors, 7-Eleven is in the competitive market of China’s convenience store. Status is not high.
In the face of an increasingly grim situation, 7-Eleven, who has always pursued the goal of “running for profit”, can’t sit still.
In early August, Huanhai News reported that the 7-Eleven convenience store and the wholly-owned company “7-11 (Tangshan) Co., Ltd.” established by Tangshan Golden Key Group and Beijing Zhuangdian Group were formally established.
Unlike the previous licensing model, this 7-Eleven is the first time to enter the new market by joining the open area, changing its consistent store strategy.
A senior retailer said, “This is the choice that 7-Eleven has to face in the face of the environment. How can it be faster if local convenience stores frequently get financing and foreign convenience store rivals expand wildly? Occupying the market has become a problem that 7-Eleven must consider now.”
Intensified competition
In order to attract 7-Eleven to enter Shaanxi, the Xi’an Municipal Government visited Beijing in March 2018 to visit Uchida. According to media reports, the relevant departments of Xi’an only used 22 minutes to complete all the registration information of 7-Eleven Shaanxi, which was never possible before.
7-Eleven is a key investment attraction and enjoys a lot of convenience in terms of property, suppliers and policies. According to the plan of Saiwen, the future 7-Eleven will cover most of Xi’an’s business districts, including Wangzao Modern City, Xiwu Road, Houwei Village, Wenyi North Road and Huancheng South Road.
Fresh food service, as the gold category of 7-Eleven, was previously a franchise party to build a fresh food factory, which inevitably requires huge investment. The 7-Eleven Shaanxi bakery, desserts and other fresh foods are produced by Shaanxi Ziwei Food Co., Ltd., which can reduce the amount of up-front investment costs for Saiwen.
The entry of 7-Eleven has made the competition in the convenience store market in Xi’an more intense.
The 2017 China City Convenience Store Development Index released by the China Chain Store & Franchise Association shows that Xi’an ranks first in the country with a growth rate of 25% in terms of growth rate. Although there is still a gap between the high-density and multi-format convenience store layouts in Guangzhou, Shanghai, Shenzhen and other cities, the convenience store environment in Xi’an is still in the forefront of the country.
As of the end of 2017, there are more than 800 stores in Xi’an, including 160 Jingdong convenience stores, more than 160 Tangjiu conveniences, 120 Aidebao, and 109 Songlin supermarkets.
Every day, the convenience store is one of the most powerful convenience store brands in Xi’an. It ranks 19th among the top 20 convenience stores in China in 2018. It is also known as Xi’an Convenience Store with the love of Debao, Tangjiu and Songlin.
In 2018, the number of stores in convenience stores has reached more than 800 each day, with annual sales exceeding 1.2 billion yuan. In March 2018, each day, the convenience store received a 200 million A round of financing led by Chunxiao Capital.
On the opening day of the first store in Xi’an, 7-Eleven, the convenience store also specially targeted the two stores in the Metropolitan Business Circle, and launched a “every 99-50” promotion. It was opposite to 7-Eleven and had a good smell of gunpowder.
Besides local convenience stores, Internet giants have also entered Xi’an in recent years.
In 2018, Ali Tianmao Store and Jingdong Convenience Store successively entered the Xi’an market. In October of that year, Ali’s Baishi officially acquired Xi’an local convenience store giant Ai Debao, and made a new brand WOWO debut in Xi’an. At the end of 2018, 31 Suning stores opened in Xi’an Metro, and 137 Suning stores opened in Xi’an.
In February of this year, Xi’an Municipal Government issued the “Zi’an City to promote the convenience store innovation development action plan”, according to the plan, by the end of 2020, Xi’an brand chain convenience stores no less than 3,000.
With the penetration of giants such as Ali and JD.com, the local convenience stores have grown stronger. The government has frequently thrown olive branches to the convenience store giant 7-ELeven and the family Family Mart. The competition in the future convenience store market in Xi’an will become more intense.