When its first store opened in Guangzhou, Circle K was already a well-known brand in the Chinese mainland where the market potential is 20,000 stores

Operated by Convenience Retail Asia (CRA), a member of one of Hong Kong's oldest trading firms Li & Fung (Retailing) Group, Circle K recently opened two stores in Guangzhou. It estimates the market potential in China to be 20,000 stores.
 
"This year, we plan to open 30-50 stores in Guangzhou. We plan to distinguish ourselves from competitors by launching the latest generation of convenience stores in China,'' chief executive Richard Yeung Lap-bun said.

In the first phase of growth, Circle K will open stores in Guangzhou and the surrounding Pearl River Delta (PRD). The second phase will embrace Shanghai. Beijing and surrounding area will come in the third stage.

"The development of China's convenience store sector has reached the fourth generation stage. The first generation were the mom and pop provision stores. The second generation of stores appeared in Shanghai more than five years ago, some being state-owned and others owned by Chinese enterprises. Overall, most stores of this generation still offer products meant for deferred consumption rather than ready-to-consume items,'' Mr Yeung explained.

The third generation, he notes, is the foreign brands, "mostly joint ventures with international branding". These did not adapt and localise - they set up and refined as they progressed.

But Circle K, he points out, dedicated two years to planning.

Building a local model

	Chief executive Richard Yeung Lap-bun outlines Circle K’s expansion plans for the Chinese mainland, where the brand is already well known

So far, the hot and fresh products category has proven to be the fastest-mover.  "When the first store opened in Guangzhou, all bakery products were sold out.''

HSBC Securities Asia retail and media analyst Anne Ling notes that the company's competitive advantages are a "good management team'', pursuing a business model to differentiate Circle K from others. "For example, offering gourmet coffee and Western bakery products allows them to differentiate from 7-Eleven.''

Selling the right food products is crucial. Mr Yeung said research in southern China shows that consumers spend 40 per cent of their disposable income on food and related items, and "they also prefer hot and fresh food".

Other product choices include the best selection of magazines and cigarette brands, groceries at supermarket prices, and Japanese confectionery.

Circle K invested in advanced electronic point-of-sales (EPOS) technology, making the check-out fast and efficient. More services are planned, with bill payments, ATMs, phone booths and phone cards to be added later.

"We see the retail market in China polarising. Mega stores are becoming prominent and killing off a lot of supermarkets, while on the other hand, people will need convenience stores to supplement their daily needs,'' Mr Yeung said.
 
Circle K is well-known in the PRD. "Customers like the brand. Research shows 60 per cent recognise it. Even before we opened, brand awareness was high."

By the end of last year, CRA operated 166 stores in Hong Kong and two in Guangzhou.
 
Related link:
Circle K www.cr-asia.com