BEIJING – Convenience stores in China are bucking the trend of slower growth in the retail sector and have entered a new phase of expansion, according to a report published by the China Chain Store & Franchise Association and the Nomura Research Institute, as reported by China Times.

The 15 major convenience store chains in China posted 18.2% growth in sales in 2013 (the most recent year for which data was available), higher than department stores' 9.6% and the 7.8% posted by hypermarkets and supermarkets. Compared to store closures by department stores and declines in gross profit margins recorded by several hypermarket and supermarket operators, those 15 c-store chains opened a combined 4,484 new stores in 2013, representing a 3.4% increase.

Newcomers in the convenience store business, which mainly operate in the second- and third-tier cities, also sped up the pace of their expansion, according to the report. This success may be just the beginning for the largely untapped Chinese convenience market: the country has only 54 convenience stores per 1 million people, compared to Japan's 388 or Taiwan's 425.

The development of e-commerce in China has also led to innovation of services offered by convenience stores, and the wide reach of the chains make them an ideal sector for conducting online-to-offline business, which has become a popular retail trend. The major convenience store chains have all begun online operations, either working with existing e-commerce companies or setting up their own retail websites. Based on experiences of convenience stores in the well-developed markets of Japan and Taiwan, Chinese retailers have learned that offering a wider range of services helps build customer loyalty.

Despite the strong outlook challenges remain, particularly related to regulatory issues concerning what services a store can offer, since the process of obtaining government approval to operate a new service can be complicated. Convenience operators also need to better manage their suppliers of fresh food because of the variable quality of their produce and inadequate logistics that could affect food safety.