Are convenience stores more profitable than the processing industry? Do you agree?

This is a good question! Based on personal experience, I have broken this issue into pieces and talked about it. Please correct me if I am wrong. Compared with the processing industry, convenience stores can't talk about huge profits, but the profits are definitely higher than the processing industry.

Let’s talk about a phenomenon first. Have you noticed that compared to ten years ago, there are many more convenience stores on the streets. Regardless of whether it is a street or an alley, you can find a convenience store within 500 meters. Especially in places like the entrance to the food market at the intersection at the entrance of the community, which is convenient for transportation and has a large flow of people, there are basically several convenience stores opening side by side.

Why is this happening?

The main reason is that the threshold for opening a convenience store is low, low cost and high profit.

Let’s start with the low threshold. Convenience stores are almost no technical investments. You can open a convenience store with one freezer, one shelf, one person, or even a store. In my hometown in Sichuan, there are many residents on the first floor of the community who live in their own houses. They buy some beer, melon seeds, rice, oil and salt, and set up two mahjong tables, and a convenience store + teahouse is opened.

Besides the low cost, the main cost of convenience stores is the purchase fee, and the purchase can be made on credit.

When I opened the store, there was a 2-yuan store selling daily necessities across the street. The owner was from Hunan. We communicated a lot. From him, I learned that daily necessities and supermarket purchases were free of charge. Why doesn't it cost money? For a newly opened store, go to a wholesaler to get goods and ask for payment. Each time you get a little less goods, restock a few times a month. When the goods are sold out, you can buy them again. When they are sold out, you can buy them again. Fix a wholesaler. Once you get acquainted with the wholesaler, the wholesaler can give you the goods first and then pay for the goods after they are sold. You can also return the unsold goods. The industry is in serious involution, and wholesalers are not having a good time. Shipping first and collecting payment later is the daily routine of most wholesalers.

Back to the topic, through the above story, the convenience store purchase cost problem has been solved. Other costs such as labor, water, electricity and rent can be basically ignored for small private convenience stores. For chain convenience stores, they reduce costs through large-scale operations.

Finally, let’s talk about high profits. You can easily check the convenience store gross profit margin data online, so I won’t extract it. Let me tell you my personal experience.

I stayed in Chengdu for more than ten years before coming to Shanghai. There are two major food wholesale malls in Chengdu, Huafeng Food City and Western Food City. I often go there to buy things. A bottle of beer retails for 4 yuan in a convenience store and costs 24 a piece (12 bottles) in the food city. A bottle of Nongfu Spring in a retail store costs 2 yuan a bottle and costs 26 a piece (24 bottles) in the food city. The premise of this price is that I personally I go to the food store to buy in the name of a customer, no more than one or two items at a time. What if I am a merchant purchasing dozens of items at a time? What if I am a chain convenience store and purchase several dozens of cars at a time? Everyone knows that the larger the purchase quantity, the lower the price.

Some people may be unconvinced and say that I am talking about individual small convenience stores, and chain convenience stores are not so exaggerated. Come on, let me tell you everything. I don't deny that chain stores have more labor costs than individuals, store rental costs, tax costs, etc., but you must know that chain convenience stores have their own business models and profit methods.

Everyone is familiar with the scale effect.

Chain stores rely on economies of scale. On the one hand, they skip wholesalers and directly connect to factories in terms of supply. At the same time, because of large quantities, they have more say in prices; on the other hand, economies of scale will inevitably drive chain stores Providing better services and a more comfortable shopping environment will attract more customers. If the purchase cost is low, the more customers will consume, the more profits will naturally come from it.

Also because of its scale, chain stores have their own management resources to manage store logistics, losses, operations and many other aspects. Professional management will inevitably bring higher economic benefits.

The same scale effect brings to chain stores, as well as other incomes besides buying low and selling high. Each city has its own chain brand. Chengdu has Hongqi Chain, Shanghai has FamilyMart, and Wuhan has Zhongbai. Please add more to other cities. Take Chengdu as an example. Hongqi Chain has 3,000 stores across Chengdu. Are all 3,000 stores self-operated by Hongqi Chain? Apparently not. If an individual wants to join a chain store, the so-called management fee, deposit, franchise fee, etc. all serve the economic benefits of the chain company.

Let’s talk about another thing that everyone doesn’t know. If you are a small processing factory and have your own flagship product, but are not well-known and have a low market share, how can you quickly open up the market? The most direct way is to rely on chain convenience stores and large supermarkets. How can I go to a hair salon or chain store? Managing relationships is a trivial matter. Some chain stores will have an entrance fee or other fees. That is to say, if you want to sell your things with me, you must pay the transportation fee first, and if you sell it, I will also take a commission. This is also the responsibility of the chain store. One of the profit points.

Let’s go back to the problem itself. After talking about side A, let’s talk about side B, the processing industry. The scale effect was mentioned above. To be precise, the scale effect applies to all industries. Therefore, the processing industry discussed here is limited to small and medium-sized processing enterprises.

Similarly compare the three points of convenience stores, threshold cost profit.

As the processing industry is the backbone of the real economy, the threshold means cost.

People who have never been in a processing company may say that processing companies just put in the materials and make the products, which is too superficial.

Let’s do a brief analysis. There are three thresholds that any processing enterprise must face: equipment, technology and technical talents, and downstream enterprises.

First, no matter how big or small the company is, even a purely manual workshop requires machinery, equipment, space, and raw materials. In accounting, this is called fixed assets and is called production cost, especially equipment and space. Each item is real. The investment in gold and silver has already invested half of the money before you start making money.

Second, technology and technical talents. It is impossible to process products without technical knowledge. Products processed without technical talents have no quality assurance, and products with unstable quality cannot have a market. If you want technical talent, you have to recruit people. To recruit people with high salary, it also comes with money. Even if you are the backbone of the technology, you still need help to open the processing plant. Even if you sweep the floor and turn on the lights, you still need to pay someone to do it.

Third, downstream. After investing countless funds and energy, a high-quality product is made. What should I do after it is made? Sell ??it. Only by selling it can you make money and make a profit. Then the question comes again, who are your customers and who buy your products, how to sell the products, and after-sales service is needed to make the business last long... These are all costs that processing companies need to pay. Not to mention issues such as national taxation, transportation, warehouse storage, etc.

The above are all costs. And what about income? In most cases, processing companies have only one income: selling products.

Having said so many boring truths, let me give you an example and talk about my previous store. Two years ago, I created a stewed vegetable shop and processed and sold it myself. At that time, pork cost 12 yuan a pound, and it was processed and sold for 30 yuan. High profit, right? In the end, I lost more than 100,000 yuan, which directly transformed me from a passionate young man before opening the store to working to pay off debts now. Poor management is one aspect and is beyond the scope of today’s discussion. The gross profit is 60%. Before opening the store, it cost 80,000 yuan to renovate and purchase the equipment. After the decoration, it cost 20,000 yuan to purchase raw materials. Before the store opened, it cost 20,000 yuan to make a trial. It also cost people to taste it and a certain management department to take care of it. These were all unprofitable cost investments. After opening the business and selling products, I made money, but the workers’ wages, living expenses, and daily water, electricity, and gas expenses were diluting my profits. At that time, I wanted to do some channel promotion, online promotion, express delivery, packaging costs, and various expenses were diluting my profits. Profit, and my only income from profit is selling goods. A glimpse of the leopard, this is the real situation of the processing industry.

Talking too much. To sum up, the problem itself is actually the difference between the secondary industry and the tertiary industry. The tertiary industry is inherently a high value-added and high-profit industry. The processing industry will naturally not be as profitable as convenience stores.

I am Lao Bi, a migrant worker. The above is my answer. Thank you for your attention. Please comment if you have any different opinions.