Convenience stores expanding

The convenience store sector grew 23 percent year-on-year in 2017 in terms of same-store sales and new openings, down from 31 percent last year, with double digit growth found in more than 61.6 percent of surveyed cities, according to an industry survey.

The China Chain Store & Franchise Association released its 2018 China Urban Convenience Store Index on May 24, which surveyed a sample of 36 cities. Among them, Xi'an saw the fastest growth of 25.5 percent. Beijing topped first-tier cities with growth of 20.7 percent.

"Convenience store operators' large scale in the country has provided investors returns," said Pei Liang, secretary general of the China Chain Store & Franchise Association. "The new momentum coming from internet giants' involvement has intensified competition and altered the layout of the sector."

The survey found there are now more than 100,000 convenience stores in China, with combined annual revenue of 190 billion yuan ($29.7 billion). First and second-tier cities are still popular locations for new store openings. Regional players have taken the lead in the small-format retail sector, but no single operator has yet established a national presence, excluding stores linked with gas stations.

Single day sales per store averaged about 5,000 yuan in 2017, according to survey responses from 55 convenience store operators. More than half of the stores surveyed offer mobile payment options via Tencent Holdings Ltd's WeChat app, slightly higher than the number offering Alibaba Group Holding Ltd's Alipay.

Companies have poured investment into new technology, with a focus on self-pay stores and updating their logistics, according to the survey. So far 36 percent have adopted online operations. Those companies said online sales contributed 10 percent of their total revenue.

About 40 percent of the companies surveyed have set up a membership system to offer promotional deals. The membership business model is still in its infancy in the Chinese sector, only contributing 35 percent of sales.

Despite the sector's rapid expansion, convenience stores are facing bottlenecks, largely in the rising cost of rent, up by 18 percent year-on-year; labor, up 12 percent; and utility bills, up 6.9 percent.