Visit any major Asian city and you can't walk more than a couple of hundred metres without seeing a modern, branded convenience store. These outlets, with their increasingly innovative product offerings aimed at time-short city dwellers, are growing at a pace that exceeds that of the retail industry as a whole.
The sales growth of convenience stores across Asia Pacific from 2014-19 is estimated at 14% annually in constant terms, according to Euromonitor International, a London-based market research company. For entire grocery channel, the figure is slightly lower at 12%.
"[Convenience store sales] growth is expected to be healthy but slightly below the global average due to the maturity in the Asian market," said Timothy Barrett, a retailing analyst at Euromonitor.
"Much of this will be derived from outlet growth, which is expected to outpace sales growth."
Mr Barrett forecasts a 20% rise in the number of convenience stores over the five-year period, compared with "marginally negative" outlet growth for all grocery retailing formats.
The research company Nielsen notes that convenience store outlet growth slowed to 7% last year from 15% earlier, but significant opportunities remain, particularly in developing countries and those with low relative store density, said Peter Gale, managing director of retailer services in Asia Pacific, the Middle East, Africa and Greater China.
In South Korea, there are 27,000 convenience store outlets or one for every 1,800 people compared with 12,000 stores in Thailand or 1:5,500. In China the ratio is 1: 21,000, and in Vietnam it is 1:69,000.
A rising trend toward small-format stores including convenience stores and minimarts could also be seen in Philippines and Vietnam, he added.
Nielsen said small-format stores showed the strongest growth in Asia from 2009-11, led by Taiwan (31.5%), Indonesia (22.4%), Thailand (19.7%) and Korea (16.2%), while growth for hypermarkets and supermarkets slowed down. As of the end of 2012, Asia had 81,781 convenience stores, 29% more than in 2010, according to Nielsen.
A customer enters a 7-Eleven convenience store in Tokyo.
GROWTH FACTORS
Analysts say expansion is being driven by stable economies, rising disposable income, changing lifestyle patterns, favourable demographic trends and increasing urbanisation, alongside improvements in food and non-food offerings and aggressive expansion by retailers.
Urbanisation is a major driver, says Mr Barrett, noting that most urban consumers will be time-pressed office workers who will embrace the convenience store format.
A report by the McKinsey Global Institute pointed out that 63% of the world's fastest-emerging cities are in Asia and this growth will add a billion new consumers with total purchasing power in excess of $10 trillion to the global economy.
"The tradeoff for this purchasing power is sometimes a consumer's time," said Mr Barrett. "A good job can place a number of constraints on one's time, which makes people more likely to want to eat on the go, or grab something quick from a convenience store instead of making a full-fledged trip to the grocery store or hypermarket."
Shushmul Maheshwari, CEO of the India-based business consultancy RNCOS, says consumers are increasingly demanding not only quality and value for money, but also a wide range of products, convenience and comfort.
"The increasing in product selection and more locations have worked in tandem to make convenience stores more convenient than other traditional grocery shops — a trait that is in high demand today," he said.
Economies of scale from large numbers of stores give retailers the ability to offer consumers "easy-to-consume" options at attractive prices. Some retailers utilise private-label products to bring prices down while others place greater emphasis on premium quality and better services.
Mr Maheshwari said that although Asian consumers were still price-sensitive, they have become more sophisticated and demanding, as seen in their enthusiasm, for Western brands.
Mr Barrett agreed, saying that the most popular packaged food and beverage products in these outlets had lifted the status of convenience stores to be seen as more modern than traditional grocery outlets. In many countries they become places for young people to congregate.
Many stores, notably Circle-K and 7-Eleven in Indonesia, now have dine-in areas to encourage continued consumption.
Mr Gale of Nielsen said that demographic changes, especially smaller households including more singles and childless couples, were changing consumer spending patterns. The trend toward increased out-of-home dining has convenience stores competing with fast-food restaurants to offer better food including in-store bakeries and ready-to-eat meals.
Ageing populations will become another big driver of convenience store growth. The number of people aged 65 or above will reach 857 million in 2050, compared with 207 million in 2000.
"This is a real problem in both Japan and China, the two largest regional economies. The elderly are becoming a larger segment of society," said Mr Barrett. "They typically are able to eat and travel less, which makes the smaller and ready-to-eat offerings of convenience stores very attractive."
In Japan, for instance, 7-Eleven offers bento box delivery from some of its many stores.
CHALLENGES & COMPETITION
However, some traditional markets have managed to resist the modern-trade and convenience onslaught. "The best example is India, where traditional grocery outlets represented over 98% of all grocery sales in 2014," said Mr Barrett. "In some countries, India included, the government makes it hard for this cultural shift to happen."
Indonesia, meanwhile has one law that regulates the minimum distance from a traditional outlet for a convenience store, and another that caps the number of stores that can be directly owned by any one company.
"While this sort of red tape is likely to hold up overall growth, convenience store sales still grew by almost 275% from 2009-14 in Indonesia, an increase of over US$5 billion over that time," he said. "Clearly the demand for the channel is there, and growth has found a way despite attempted government limitations."
Another challenge identified by Mr Gale is that food on the go is an extremely competitive area in Asian countries with their rich street-food cultures. "The challenge is to differentiate with unique tastes and products."
While top convenience store players have to compete with traditional grocery stores, they are also facing "cut-throat" competition to boost profits and enhance market share, notes Mr Maheshwari.
"The fast changing habits of consumer make it difficult for retailers to adjust fast. It calls for speedy action from a particular retailer as opposed to its competitor," he said.