China’s convenience store segment booms; 7-Eleven, FamilyMart ones to watch: Bain

China's next booming sector? Convenience stores

Convenience stores boomed in China last year as the pace sped up and consumers sought quick purchases of snacks and home staples at neighborhood bricks-and-mortar retail outlets, according to global consultant Bain & Company.

"Online is the ultimate convenience channel, but it cannot serve all the needs of shoppers," said Bruno Lannes, a partner at Bain & Company in Shanghai.

"Convenience stores because of their locations—either close to where you live or where you work work—are really good for top-up purchases, or on-the-go purchases, which online (channels) cannot serve very well," he told CNBC's "Squawk Box".

In its second China Shopper Report 2016, released on Nov. 24, the consulting firm put the pace of growth for convenience stores at 13 percent in 2015 on-year, a figure it called "exciting" as the value share in the urban fast-moving consumer goods market.

7-Eleven made its debut in Shanghai in 2009 with four stores.
Ren Yuming | VCG | Getty Images

In contrast, compound annual growth rate (CAGR) for hypermarkets declined by 0.2 percent in 2015, reversing 2.2 percent and 5.0 percent growth in 2014 and 2013 respectively. Supermarkets and minimarkets grew 4.0 percent in 2015, down from 9.5 percent and 12.8 percent in 2014 and 2013.

E-commerce grew 36.5 percent in 2015, down from 34.1 percent and 40.9 percent in 2014 and 2013 respectively.

However, the strong growth in convenience stores sales was largely because of new store openings, noted Bain.

"The big challenge for convenience store players as they enjoy enviable growth is determining how to achieve and maintain profits amid high urban real estate costs," the consultancy said in its report.

Bain noted convenience stores expand offerings along with allowing customers to pay bills, buy tickets and pick up online purchases to keep momentum going.

It identified national premium players like 7-Eleven and Japan's FamilyMart chains, and regional brands such as Meiyijia and Tianfu as the ones to watch to watch.

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