Chapter 302: Chain Convenience Stores and the Wolf Pack Strategy
Yang Wendong thought for a moment and said, "That approach sounds viable, but even if we're acquiring old buildings, the location still matters, right?"
Liu Huayu replied, "Yes, supermarkets definitely need to be in good locations. But Hong Kong Island is only so big. Aside from the stores that haven't opened yet, the dozen or so Carrefour branches we have are all in prime spots.
As for the rest, they don't necessarily need to be crammed into the core areas. It's perfectly fine to open stores in peripheral areas of Central, Admiralty, or Causeway Bay. There are lots of old buildings in those places. Originally, we had to spend a long time choosing rental properties anyway—so why not just buy the old buildings outright and rebuild from scratch?"
Yang Wendong nodded. "This idea requires heavier early investment, but it will definitely be more cost-effective in the long run."
Liu Huayu continued, "Exactly. In fact, I'm already preparing to do that over in the Kowloon Peninsula. Over there, we can directly purchase old buildings in town centers. But on Hong Kong Island, it's different—there are fewer old buildings in the core, and even when they exist, they're hard to buy."
Yang Wendong then looked at Zheng Zhijie and asked, "What do you think?"
"It's a solid idea, though the investment will definitely be higher," Zheng Zhijie replied. "But once we buy an old building and tear it down, we can rebuild with more floors. For example, we could put a cinema on the ground floor, supermarkets on the middle floors, and restaurants or other businesses above. That way, it becomes a mini commercial hub."
"That's a good idea. Cinemas and supermarkets can complement each other and attract more people," Yang Wendong said in agreement.
To build a thriving commercial area, you need multiple types of businesses—entertainment, shopping, dining, etc. In his past life, the core model of Wanda Plaza was just that—only on a much larger scale.
Zheng Zhijie added, "If that's the case, our internal real estate company will need to adjust some of its budget and investment plans."
"I remember the real estate company was still acquiring properties in Kowloon recently, right?" Yang Wendong asked.
"Yes," Zheng Zhijie confirmed.
After thinking it over, Yang Wendong said, "Other than the projects already under negotiation, put the rest on hold for now. Focus the funds on supporting Carrefour. Follow the plan you just mentioned—build small commercial complexes. Put together a proposal and let me take a look."
The previous phase of expansion had been somewhat unstructured. Since Yang Wendong knew that property values in the Kowloon area were rising rapidly, he had prioritized acquiring real estate there. But those properties would need to be liquidated once land prices peaked.
Now, it was the second half of 1962. Although the property crisis was still over two years away, it was time to start curbing excessive real estate investment. It made more sense to channel funds into long-term businesses—small commercial buildings that could also support his ventures in cinemas and supermarkets.
"Understood," Zheng Zhijie replied. "But if we go this route, the pace of expansion will definitely be slower compared to the previous leasing-based strategy."
"Now that we have real competition, there's no need to rush," Yang Wendong said, shaking his head. "We'll focus on stable operations, building a strong brand, and sincerely serving the people of Hong Kong. This is going to be a long-term battle."
From the day Carrefour opened its doors, Yang Wendong never expected everyone else to sit around with their eyes shut while he made huge profits and monopolized the retail market.
Once a supermarket business reaches a certain scale, it's bound to attract competition. Even Walmart in the U.S. wasn't the first supermarket, but they won in the end through extreme cost control and superior service.
Now that Jardine had entered the field, Yang Wendong wasn't afraid, but in terms of available capital and mobilizable resources, he had to admit they had the upper hand. So scrambling to compete for properties while prices were high was meaningless. It was better to focus on growing Carrefour steadily and plan for the long haul.
Besides, a real estate crisis would hit Hong Kong in the future, and when that happened, he could seize the opportunity to strike back.
"Got it," Liu Huayu said.
"I'll work closely with Mr. Liu as well," Zheng Zhijie added.
"Mm." Yang Wendong nodded. Then he said, "But if Jardine's ParknShop continues expanding without regard for cost, we'll need to make some targeted moves too."
"Are you thinking of a price war?" Liu Huayu asked.
"That's part of it," Yang Wendong replied. "You can tighten control on vegetable prices to attract more customers. But that alone won't steal business from people who live near their stores."
"My idea is to open smaller retail stores around their supermarkets."
"Smaller retail stores?" Liu Huayu thought for a moment. "You mean like convenience stores?"
Yang Wendong nodded. "Yes, but a bit more upscale. They should stock a wide variety of everyday necessities. Once we have enough of them, we can start drawing business away from the big supermarkets nearby."
At that point, Zheng Zhijie asked, puzzled, "But isn't it usually the big supermarkets that take business from the smaller stores?"
"You're not wrong," Yang Wendong said with a smile. "But do you know why that happens? Why are prices at small stores usually higher than at large supermarkets?"
"Because their procurement costs are higher?" Zheng Zhijie guessed.
"Exactly," said Yang Wendong. "Large supermarkets benefit from centralized purchasing and unified marketing, which brings in more foot traffic and reduces procurement and operating costs. Small shops simply can't compete with that.
But what if those small shops are affiliated with Carrefour? They could source inventory directly from our warehouses. We could even deliver to them during regular shipments. That alone would drastically reduce costs across the board."
"That's absolutely right," Liu Huayu chimed in. "If small stores can take inventory straight from our warehouses, their operating costs will drop significantly."
"I see now," Zheng Zhijie said. "But still, we won't be able to match large supermarkets when it comes to cost—especially stores in prime locations, right?"
"That's true," Liu Huayu said. "But why do we need to compete directly with supermarkets on price? As long as our prices aren't outrageous, that's enough. Don't forget the convenience factor. With enough locations, these small stores become incredibly accessible.
Just imagine—if you only need to buy a couple of small items, would you rather pay a little more at a nearby shop or walk half an hour to the supermarket, wait in line, and carry everything back?"
"If that's the case," said Zheng Zhijie, "I wouldn't bother going to the supermarket, even if the small shop is slightly more expensive."
"Exactly." Yang Wendong nodded. "That's the idea behind my new plan—the wolf pack strategy. Open enough small stores around Jardine's ParknShop locations, and use Carrefour's low-cost supply chain to support them.
These small stores might not be able to threaten ParknShop's survival, but they can definitely impact their business."
"I understand now," Zheng Zhijie said. "I'll have someone scout the areas around ParknShop locations, identify suitable spots, and we'll buy them up."
"Mm. No need to rush this," Yang Wendong added. "Right now, Hongkong Land is our competitor, so don't open stores immediately. First, just acquire the properties."
"Got it," Zheng Zhijie replied.
Yang Wendong continued, "Old Liu, send someone to Japan, the United States, or Europe to study how chain convenience stores are run in those countries. Not to copy them exactly, but at least to take them as reference."
"Understood." Liu Huayu nodded, then added, "I actually learned a bit about those types of small chain supermarkets when I was in the U.S. I'm not an expert, but I do have a question.
Over there, most of those chain businesses don't manage the stores themselves. They generally adopt a franchise model. The headquarters handles procurement and logistics, delivering goods directly to the stores. So, in Hong Kong, should we manage the stores ourselves, or go the franchise route?"
"I've considered that too," said Yang Wendong. "Direct operation and franchising are two contrasting models, but that doesn't mean they can't coexist. I think we can adopt a hybrid approach—run some directly, franchise others. Later on, we can evaluate which model performs better and adjust accordingly."
For large companies in the service industry, both models had their pros and cons. Direct operation meant complete control—everything from management to quality and service was in the company's hands. The downside was the enormous investment required.
Franchising, on the other hand, meant the company didn't need to put in much capital and could even profit from franchisees. It also allowed the brand to expand rapidly. But it came with a high degree of management difficulty—if a franchisee caused trouble, the entire brand could suffer.
It also depended on the type of business. Large supermarkets generally had to be directly operated. But for smaller stores, franchising was more practical. Managing every corner store centrally just wasn't realistic.
That said, Hong Kong was a special case. The territory was small enough that direct operation wasn't entirely out of the question.
Zheng Zhijie chimed in, "Mr. Liu, regardless of how we proceed later, in the early stages we'll definitely need to operate the stores ourselves. Only by delivering results and building the brand will we be able to attract franchisees."
"Mr. Zheng is absolutely right," Liu Huayu said with a smile.
Yang Wendong nodded. "Let's go with that for now. First, find suitable locations and buy them. Whether we operate them ourselves or lease them out later doesn't matter—what matters now is locking in those prime spots."
In the service industry, rent was often the most critical cost. If you owned the property, you had a built-in advantage—especially in a place like Hong Kong.
In actual history, ParknShop and Wellcome were the dominant forces in Hong Kong's supermarket sector. But in the end, they were still swallowed by larger capital groups, likely in part due to unsustainable rental costs. In any business, once you start making big money, landlords get greedy and jack up the rent.
"No problem," said Zheng Zhijie. "I've already been acquiring a number of street-facing shops. Some of them could definitely be used for this type of convenience store. I'll start focusing on securing better locations moving forward."
"Let's stop calling them 'corner stores' or 'mini supermarkets,'" said Yang Wendong. "From now on, we'll call them convenience stores—chain convenience stores, whether directly operated or franchised."
"Convenience stores—it's a good name," Liu Huayu nodded, then asked, "What about the brand? Are we going to use the Carrefour name, or something different?"
"We'll need a new name," Yang Wendong said after thinking for a moment. "I haven't decided yet. There's still time before the first one opens, so let's wait a bit."
In his past life, there had been countless convenience store brands, but the one he liked best was 7-Eleven. The name was simple and effective—open from 7 a.m. to 11 p.m.—easy to understand and highly adaptable internationally.
But that brand already existed in the U.S. and had been registered across the British Commonwealth. He couldn't use it unless he got authorization or managed a reverse acquisition of the brand.
He had already looked into it. 7-Eleven was currently owned by the Southland Corporation, an American company whose primary business was ice production. But the advent of refrigerators had caused massive losses in that sector. Lin Youtian in the U.S. had tried to approach them about acquiring or licensing the 7-Eleven brand, but so far, there had been no progress.
"I'll also brainstorm some brand names on my end and let you review them later," Liu Huayu said.
"That's fine," Yang Wendong nodded.
If they couldn't get the 7-Eleven brand, then they'd have to create one themselves.
That was the nature of business—competition was inevitable. Without it, every market would just become a monopoly.
A new player entering the supermarket space with this much momentum was to be expected. Hong Kong was small, and Chinese and British capital groups were constantly competing for a share of the pie. Competition was a good thing.
Defeating rivals in your own territory using business strategies was the only way to build the credentials needed to go global and compete with foreign powers.
In other industries, Yang Wendong had also been on the offensive—real estate, shipping—but those markets were so vast the competition wasn't as obvious yet. The day his operations grew to the scale of Jardine Matheson or Swire Group, conflict with the major British-funded conglomerates would be inevitable. That was how economic development worked—new capital groups only rose by stepping over the bones of the old ones.
Still, given that British Hong Kong was currently under colonial rule, it wasn't the right time for Chinese capital to directly confront British companies like Jardine. The timing wasn't right, and Yang Wendong's financial resources weren't quite there yet.
Fortunately, the British colonial government, in the interest of maintaining stability, treated Chinese capital more fairly than it had in the past. At least on the surface, they made an effort to appear "fair," and Yang Wendong had used various opportunities to build a reasonably good relationship with Governor Robert Black.
On October 15, at the invitation of the Governor's Office, Yang Wendong once again met with Governor Robert Black.
"Governor, it's a pleasure to see you again," Yang Wendong said with a smile as he extended his hand.
"Mr. Yang, I'm very pleased to see you as well," Governor Robert Black replied with a smile. "Since your five tankers were put to use transporting water, the water shortage situation in Hong Kong has improved significantly."
"I'm just doing what I can," Yang Wendong said humbly. "It's a shame, though—these tankers are hard to come by. Over the past few weeks, I've only managed to secure one more."
Water shortages in Hong Kong would remain an unsolved issue until at least 1965, so acquiring second-hand ships was an ongoing effort. It was also the best time to expand his fleet before the Middle East crisis erupted.
Cargo ships were easier to buy, but tankers were another matter entirely. There weren't many of them, especially super-large tankers. Most had been built in the 1950s and were still in use, so few had been decommissioned.
Governor Robert Black nodded. "Just getting one is already quite an achievement. I understand the difficulties shipping companies face. Rapidly increasing capacity in a short time is no easy task. You've already done a great deal, Mr. Yang."
"Mm." Yang Wendong nodded, then asked, "Governor, did you call me here today to discuss the drought situation?"
At this point, among all private efforts supporting drought relief in Hong Kong, Yang Wendong's businesses represented the largest and most impactful force.
Unlike the Hong Kong government or other charitable foundations, the support model used by Changxing Group was designed to also benefit itself. Even though the profit margin wasn't high, the brand exposure was immense. In the long run, it would still yield returns.
It was a cycle of positive reinforcement—creating benefits that sustained development while also addressing the water crisis in affected areas.
"That's not the reason," Governor Robert Black said. "Mr. Yang, you've already done quite a lot for the water shortage. The reason I asked you here today is because the Hong Kong government has officially approved your museum proposal."
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