This year's management keywords in the convenience store industry vary slightly by ranking. While No. 1 and No. 2 corporations CU (BGF Retail) and GS25 (GS Retail) are focusing on overseas markets and attracting foreign tourists, No. 3 and No. 4 corporations 7-Eleven (Koreaseven) and E-MART24 are concentrating more on strategies to win support from domestic franchise owners along with strengthening their fundamentals.
According to related industries on the 19th, 7-Eleven of Lotte Group has recently been speeding up efforts to improve its deficit structure. After acquiring Ministop in 2022, 7-Eleven wanted to cement its position as the No. 3 convenience store operator and stand shoulder to shoulder with the No. 1 and No. 2 convenience store companies, but it did not generate the expected acquisition synergies.
As quarterly deficits continued, it has been boldly closing nonprofitable stores. According to Koreaseven, the total number of 7-Eleven stores nationwide fell from about 14,000 in 2022 to about 12,000 last year.
It has also moved to control expenses. It carried out voluntary retirement for two consecutive years and is focusing on making management expenses more efficient. Although implementing voluntary retirement incurs one-time voluntary retirement expenses, it can reduce labor costs. Along with cutting SG&A, it also readjusted logistics fees collected from supplier partners. Logistics fees are expenses incurred when products move to convenience store warehouses and are shipped out to each branch.
A representative of a convenience store supplier said, "Other convenience stores pay an average fee of 5%, but this time, as 7-Eleven adjusted logistics fees, the effective fee rose to as high as 12%." 7-Eleven partners interpret the fee readjustment as part of 7-Eleven's expense-efficiency drive. As a result, losses are trending down. Cumulative operating loss through the third quarter last year was 44.2 billion won, more than a 20% reduction from the same period a year earlier.
It is also putting effort into store makeovers. A prime example is expanding the new store model "New Wave," which combines value-for-money fashion and beauty goods with food. The interior of New Wave stores is designed to maximize foot traffic. With the on-the-spot "Food Station" at the center, differentiated items such as pizza, fried chicken, and beaded ice cream are placed up front, while one section displays Korea League (K League) and KBO uniforms and collaboration merchandise, as well as popular overseas beauty products. The store layout targets people in their 20s and 30s.
E-MART24 is in a similar situation. E-MART24, which implemented voluntary retirement last year for the first time in its 11-year history, saw sales fall and operating losses widen. E-MART24 posted sales of 2.053 trillion won and an operating loss of 46.3 billion won last year. It also closed low-revenue stores. As of last year, it had about 5,500 locations. An E-MART24 representative said, "Sales decreased as we closed low-revenue stores, and operating losses grew as we reflected voluntary retirement expenses."
E-MART24 plans to overcome this situation with innovative stores. A prime example is the "Trend Lab Seongsu" location unveiled in Seongsu-dong, Seoul. This store is designed to effectively showcase the new brand identity and vision E-MART24 pursues. An E-MART representative said it is "a place intended to instill in consumers the perception that 'you can find all the hottest items if you go to this store.'"
It is also remaking the face of E-MART24 with a next-generation store (standard model) outfitted with a new interior. A prime example is the Magok Premium store, which opened late last year in Magok-dong, Gangseo District, Seoul. There, instead of placing steady sellers (consistently best-selling items) at the front, new products and the most popular recent items are displayed up front. An E-MART24 representative said, "We aim to establish a brand image as the convenience store that understands people in their 10s to 30s best," adding, "This year, we plan to secure 650 such standard-model stores."
As competition between 7-Eleven and E-MART24 to catch up with the top two operators intensifies, attention is on whether the convenience store industry's ranking will be reshuffled. That is because the two-strong structure in convenience stores is so solid. A convenience store industry representative said, "If we first shore up the fundamentals and look for chances while tightening our shoelaces, won't there come a day when newspaper headlines change again?" The year-end report cards of the No. 3 and No. 4 convenience store companies bear watching.