Tue, Jan 04, 2011 - Page 2 News List

Convenience stores embrace makeover

EVER INCREASING CIRCLES:Hi-Life, the third-largest convenience store chain in the nation, has installed bakeries at 175 of its stores, providing fresh bread on-site every day

Staff Writer, with CNA

Tough competition among convenience stores has forced many to abandon the traditional business model with its focus on revenue per ping (3.3m2) and employ new store designs that allow them to enter the coffee shop and eatery markets.

“Opening bigger stores is the current trend,” said James Hsieh (謝健南), chief operating officer at President Chain Store Corp which operates 7-Eleven in Taiwan.

He said that 60 percent of the 4,750 stores 7-Eleven operates in Taiwan now have a seating area.

Over the last three years, the increase in the number of convenience stores has slowed down. On average, convenience stores are now only about a six-minute walk apart. The challenge therefore is how to increase the chains’ customer base in a crowded market.

Based on a survey that showed shoppers would like to have a place to sit, 7-Eleven two years ago began introducing seated areas comprising counters and stools — in a move that has been well received.

Similarly, 80 percent of -FamilyMart stores, the nation’s second-largest convenience store chain, have also been outfitted with seats as part of an effort to increase sales of fresh food products, such as packaged meals and sandwiches, which have a higher gross margin.

FamilyMart said the sale of fresh food items currently accounts for only 12 percent of its revenue. In Taiwan, the industry average is 20 percent, while in Japan and Shanghai it is between 30 percent and 40 percent.

While its fresh food prices are not as competitive as those available at food stands and other sidewalk eateries, FamilyMart said it has the advantage of being open around the clock.

The changing convenience store trends mean that smaller 25-ping stores that double as grocery stores are now being expanded to between 35 ping and 45 ping so they can also function as coffee shops and small restaurants.

“In the short term, revenue---per-ping might appear to be falling, but total revenue will increase in the long run,” FamilyMart vice president Wu Sheng-fu (吳勝富) said.

Preferred site locations are also changing as convenience stores turn down high-cost corner locations in favor of less expensive, but bigger spaces.

The trend now is to have larger stores with lower shelves and wider aisles, said Wu Shih-hao (吳仕豪), an associate professor in the department of marketing and distribution management at National Kaohsiung First University of Science and Technology.

“The layout of the stores is being altered,” he said.

Hi-Life, the third-largest convenience store chain in Taiwan, has gone a step further and installed bakeries at 175 of its stores, which means fresh bread is made on-site every day. At some stores, fresh sandwiches and burgers are also made on site.

Beryl Lee (李培芬), secretary-general of the Association of Service Industries, Taiwan, said that after a period of rapid expansion, the convenience store business is now in the process of fine-tuning.

“Unlike the manufacturing sector that makes specific products, the service sector has an invisible yet dynamic research and development aspect,” Lee said. “In fact, convenience stores introduce innovations every day.”

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