TNS Reveals Demand For Convenience Stores In China

Research reveals extent of opportunity for Shanghai’s fastest-growing convenience chain

Shanghai – FamilyMart is on track to double its market share in Shanghai if it can meet demand for a new kind of convenience store among young shoppers, new research from leading consultancy TNS has found.

The Commitment Economy, a global survey of over 39,000 people in 17 markets, reveals that many consumers who currently shop elsewhere would like to shop at FamilyMart, and the convenience chain could grow its market share in Shanghai from 4.7 percent to 7.9 percent if all those hankering after the brand were able to shop there.

According to the study, the main barriers preventing people from becoming “One of the Family” are practical, relating to location and price. However FamilyMart’s ambitious plans for growth in China are making its products increasingly accessible to Chinese shoppers.

The Japanese-owned retailer has singled out Shanghai, with its high buying power, as the starting point for expanding in China, launching over 400 outlets in the city since its first store opened in 2004. This rapidly growing network – and FamilyMart’s modern, 24-hour format – are tempting young urbanites away from both traditional corner shops and the hypermarket aisles.

According to TNS, China’s biggest retailers could see the rise of the convenience store impacting on their bottom line. Whilst shoppers are unlikely to abandon major supermarkets such as Carrefour and Tesco altogether, the findings reveal a lack of affection among Chinese consumers for these retail giants, which could see their profits eroded over time.

As much as 10 percent of Carrefour’s 29.7 percent share of shoppers are not committed to the brand, and would choose to shop elsewhere if they could. Tesco’s 10.8 percent market share could be reduced by 2.4 percent for the same reason. Both chains compared unfavourably to FamilyMart in terms of intimacy and being community-focused.

Sandy Chen, Senior Research Director, TNS China, said: “Shanghai’s young and increasingly cosmopolitan shoppers are moving away from the old hole-in-the wall, mom-and-pop corner shops in favour of more modern retailers suited to their lifestyle – from grabbing lunch on the go to booking tickets and paying bills.  This has given rise to an abundance of modern purveyors using sophisticated analytics to grow their consumer base.

“To preserve market share in this competitive environment the big retailers could learn some important lessons from their convenience chain competitors, such as improving the speed and ease of the shopping experience, and focusing on fresh, high quality products.  If China’s retail giants get these things right whilst leveraging their size and scale to outperform convenience chains on price, then smaller players such as FamilyMart will have a bigger challenge on their hands.”

The opportunities and risks for Shanghai’s retailers were determined by comparing their current market share with the appeal they have in the minds of consumers.  This allows businesses to identify where there is unmet demand – and therefore potential new customers – and conversely, where there is a danger of existing customers defecting to a rival.

Jan Hofmeyr, Chief Researcher, Behaviour Change, at TNS said, “Many of the biggest names in the retail sector enjoy unrivalled market share, but this can often conceal the number of shoppers who would happily switch allegiance if they could.  These ‘Sad Shoppers’, as we call them, are an easy target for competitors looking to steal market share.  All it takes is for a rival brand to identify the triggers that will prompt customers to switch.

“As consumers are confronted with more and more choice, retailers should be asking themselves whether footfall is backed up by real commitment to the brand.”

TABLE:  Who has most to gain?

TNS has calculated which retailers have most to gain by courting ‘Sad Shoppers’.  Stores are ranked in terms of which have the greatest growth opportunity in total market share terms (see further details of methodology below).