OneHours' fall, beginning of reshuffle in 24-hour convenience store sector
Feb. 27 (NBD) -- Beijing's local convenience store brand OurHours ended up being sold after months of struggle to revive the brand, and a new round of reshuffle is expected in China's convenience store industry.
According to Securities Daily, more than 90 OurHours outlets in East China and Chongqing were taken over by Japanese convenience store franchise chain Lawson's China businesses under a deal signed in January and will be operated under the Lawson brand in the future. Remaining OurHours stores in Beijing, Tianjin, and Chengdu were sold to a Beijing-based commerce company and will retain the OurHours brand.
Founded in 2011 as a wholly-owned subsidiary of Forise Holdings, OurHours was once hailed as "7-11 of China."
In 2017, the convenience store chain accounted for the lion's share of Beijing's convenience store market with 350 stores. In November of the year, the company announced the plan to invest 10 billion yuan (1.5 billion U.S. dollars) to establish a presence in 100 cities within five years.
In the first half of 2018, the number of OneHours' stores nationwide amounted to over 800.
However, due to China's P2P lending meltdown, Forise suffered serious financial troubles, which put the brake on OneHours' fast expansion.
Since November 2018, OneHours has shut down around 90 stores in Beijing, according to an internal document revealed in media reports.
Though this hasn't been confirmed, Securities Daily found at several OneHours stores in the city in recent months that nearly half of their shelves were empty and the stores also stopped offering lunches.
Since last year, several convenience store chains including Lin and 131 have wound up the business due to financial issues.
The gloomy situation may be caused by the previous large fund inflows which have given rise to convenience stores's over-reliance on capital for expansion. As a result, when investors withdrew, those store operators would immediately be cornered.
Data shows China's convenience store sector has witnessed more than 70 fundraising events since convenience stores were deemed as a new opportunity for the new retail market in 2016, with capital inflows reaching at least 10 billion yuan (1.5 billion U.S. dollars). With massive capital influx, convenience store brands all ramped up efforts to opening new outlets so as to increase revenue.
A report jointly released by the China Chain Store and Franchise Association (CCSFA) and Boston Consulting Group shows the number of China's chain convenience stores reached about 106,000 in 2017, up 13 percent year on year. Total sales for the year rose 23 percent to surpass 190 billion yuan (28.4 billion U.S. dollars).
In addition to OneHours, Lin is a case in point. In August 2018, Lin closed all of its 168 stores overnight as its funder, P2P platform Shanlin Finance, collapsed with bank accounts frozen for suspicion of Ponzi scheme.
According to the Report on the Prosperity Index of China's Convenience Stores for Q3 of 2018 published by CCSFA, the convenience store industry is cooling down.
The industry will experience a new round of reshuffle, said one industry insider.
The top priority for chain convenience stores at present is to figure out a way to increase efficiency amid rising rents and labor costs.
Many convenience stores don't have a professional team for cost control, so the majority are losing money, senior food industry analyst Zhu Danpeng told Securities Daily.
In addition to merchandises, convenience stores could consider offering services, such as express distribution services, pseudo-banking services, and recreation and entertainment services for children.