More Stores, Less Margin: China’s Convenience Stores Need a New Playbook

China’s chain retailers are still expanding their physical footprints. But more stores do not necessarily translate into better store-level performance.

The country’s top 100 chain retailers generated RMB 2.07 trillion in sales in 2025, down 2.7%, while their combined store count rose 12.4% to 289,700 locations, according to the China Chain Store & Franchise Association (CCFA).

The figures point to a market where expansion and productivity are no longer moving in tandem. Store networks are still growing, but traffic, basket size and profitability are under pressure. The real test for retailers is shifting from how many stores they can open to how much profit each store can generate.

Convenience stores are especially exposed to that shift. The format has long depended on proximity, speed and certainty. But as instant retail, discount chains and foodservice players chip away at key shopping occasions, convenience stores can no longer rely on location alone.

The old convenience premium is breaking down

The convenience-store model used to be simple: stay close to the customer, open for long hours, carry the essentials and solve immediate needs. Its value came from frequency. Consumers could drop in often, buy what they needed quickly and leave with certainty.

That bargain is weaker now because each part of the old convenience proposition is being challenged.

Instant retail has redefined distance. For many younger consumers, ordering from a phone and receiving goods in roughly half an hour can feel more convenient than going downstairs. For standardized categories such as beverages, snacks, tissues, personal care and basic household items, convenience stores are no longer the default answer to urgent needs.

Discount chains have attacked the other side of the equation: price. Beverages, snacks, dairy products that once supported convenience-store margins are now easy to find nearby at lower prices. When the same products are cheaper two blocks away, the convenience-store markup becomes harder to defend.

Food delivery, coffee chains, tea shops and community fresh-food stores have taken aim at another pillar of the format: daily routine. Breakfast, lunch, afternoon tea, late-night meals and household replenishment used to create natural store visits. Now each occasion has a specialist competitor.

The result is not that convenience stores have lost their purpose. They still own pass-by traffic, immediate possession, visible hot food, late-night access and low-friction decision-making. But those advantages are narrower than they used to be. They must be operated with precision, not assumed as a given.

Stop managing categories. Start managing missions.

That makes the next upgrade for convenience stores less about format refresh and more about operating logic. A better app, a cleaner storefront or a larger fresh-food section may help, but none of them solves the core problem on its own. 

The bigger shift is from channel thinking to mission thinking. 

A channel-led operator asks how much space to give beverages, snacks, daily necessities and ready-to-eat food. A mission-led operator starts with a different question: what does the customer need to solve at this specific moment? 

In the morning, the mission may be a clean, fast, grab-and-go breakfast. In the afternoon, it may be coffee and a small snack. After midnight, it may be medicine, alcohol, tobacco, charging cables or hot food from the only store still open. 

Once the business is viewed this way, the operating choices change. SKU rationalization, planograms, labor scheduling, pricing and replenishment should all be built around the occasions a store is trying to win. Fresh food should not be judged only by sales, but by waste, sell-through, repeat purchase and labor intensity. Own-brand products should not be added simply to lift margin, but to defend the occasions where the chain can offer something distinctive.

Local relevance may matter more than national scale

Mission-led retail also makes convenience more local. A store outside an office tower, a university, a subway station and a residential compound may all carry the same sign, but they should not operate as the same business.

That gives regional chains, and more localized national operators, a real opening. Scale still matters in procurement, supply chain and technology. But scale can also produce a flattened store model, where every location looks efficient on paper and underperforms in practice.

Operators that understand local food habits, price sensitivity, commuting patterns and daily routines will be better positioned to decide which missions are still worth owning. In some locations, that may mean breakfast and coffee. In others, late-night essentials, fresh food or quick household top-ups may matter more.

The point is not to abandon standardization altogether. It is to know where standardization creates efficiency and where it destroys relevance.

For Dmall, this is where retail technology needs to go next: helping retailers turn store-level data into localized assortment, replenishment, pricing and execution decisions that reflect the missions each store is built to serve.

Conclusion

That is the real reset for China’s convenience stores. The format does not need to abandon convenience. It needs to stop treating convenience as a fixed formula built around proximity, long hours and a standard assortment.

Convenience is becoming more situational: a fast breakfast before the commute, a lighter lunch than delivery, a hot meal after overtime, a late-night emergency purchase, or a quick top-up on the way home. The winners will be the chains that can identify those moments, build the store around them and deliver a solution with acceptable price, trusted quality and minimal friction.

That is a harder business than opening more stores. It is also the one still worth defending.