FamilyMart restructures in China, expands into lower-tier cities, and rebounds

by LU Yibei

FamilyMart, one of Japan’s largest convenience store chains, reported strong financial results from March to August 2024, despite a slight decline in operating income. The company’s net profit surged by 98% to 65.4 billion yen, thanks to its digital transformation and the successful restructuring of its China operations.

Since partnering with Ting Hsin Group in 2000, FamilyMart has steadily expanded in China, opening its first store in Shanghai in 2004. Before 2019, the chain grew rapidly in East China, focusing on Shanghai and other major cities. By 2019, FamilyMart had 2,500 stores and achieved full profitability in Shanghai by 2008 and nationwide by 2012—making it the fastest foreign convenience store to do so.

However, FamilyMart’s path in China hasn’t been without challenges. The company’s relationship with Ting Hsin was strained by disputes over business strategies and profit sharing, culminating in a legal battle over brand royalties in 2019, which FamilyMart ultimately lost. The Japanese company hesitated to expand into second- and third-tier cities, while Ting Hsin was more optimistic.

In March 2024, the two companies reached a restructuring agreement, forming a joint venture where Ting Hsin holds an 80% stake in East China operations, managing 2,114 stores in cities like Shanghai, Suzhou, and Hangzhou. Expansion in other regions will focus on chain franchises in South, North, and Southwest China.

By August 2024, FamilyMart’s global network grew to 24,386 stores, including 8,113 overseas. In China, it added 100 new stores, with the restructuring contributing a one-time gain of 31.6 billion yen, significantly boosting net profit.

Despite fierce competition, with FamilyMart dropping to 11th in store numbers by 2023, the company is rebounding. It is focusing on store segmentation and differentiation, with new models offering expanded meal options in Shanghai, accelerating the recovery of convenience store sales.

Looking ahead, FamilyMart plans further expansion in East China and second-tier cities, aiming to strengthen its digital capabilities and solidify its presence in China's competitive convenience store market.