Shi Yuzhu once summarized an experience: " China's population is pyramid-shaped, and the real top of the tower is the three cities of Beijing, Shanghai and Guangzhou. But most companies lose money in these three cities because the cost is too high. In fact, the more the city is, the more money it makes, because the cost is lower. "
These "cities below" now have another name - the sinking market. Whether it is the household name of Nao Platinum in the past or the Pinduoduo and Qutoutiao, which are now listed in the United States, their success is a perfect proof of Shi Yuzhu's words. The same is true in the catering industry. The hot new tea drinks such as Heytea and Naixue’s Tea are all born in second- and third-tier cities.
Data from the National Bureau of Statistics shows that in 2018, the population of third- and fourth-tier cities and below accounted for as high as 77.55%, and the huge population base naturally corresponds to the same huge market potential. Since 2008, the Gini coefficient of Chinese residents' income has decreased year by year, which also reflects that the consumption level in third- and fourth-tier cities is rapidly increasing. There are endless new business models to try around these "long-tail people".
As Li Feng, founder of Fengrui Capital, said: " With the rise of social e-commerce such as Pinduoduo, consumers in sinking markets such as low-tier cities are being educated and mature. For the catering industry, this will be a huge increase in consumption and an opportunity for consumption upgrades. "
However, money in the sinking market is not that easy to make. Not long ago, Guojin Securities changed its rating from "increasing holdings" to "reducing holdings" because it did not agree with Haidilao 's sinking market strategy. Guojin analyst Tang Chuan believes that 's consumption habit of Haidilao's third- and fourth-tier cities is a try-out behavior that focuses on gatherings, rather than the daily dining scene that mainly focuses on small and medium-sized tables in first- and second-tier cities, so it is not optimistic about Haidilao's future performance in third- and fourth-tier cities.
This also reflects that the "dimensionality reduction strike" of the catering industry is not universal everywhere. Catering giants such as McDonald's , KFC are constantly trying, hoping to make this place an emerging growth point. In addition to these leading companies, many brands want to cut a piece of this delicious cake, and they have already achieved very good results, such as Zhengxin Chicken Steak , Mixue Bingcheng , etc.
You may rarely see them in first- and second-tier cities, but there are many third- and fourth-tier cities, which also produces a series of enviable data. Official data from Zhengxin Chicken Cutlets show that they have 17,600 chain stores, far exceeding the sum of the number of KFC and McDonald's stores. They sell more than 700 million pieces of chicken chops every year, and more than half of the stores are from franchise stores in second- and third-tier cities. Mixue Bingcheng had more than 5,000 stores last year, firmly occupying the first echelon among my country's tea brands.
This article hopes to study the business methods of these two companies to help everyone summarize the commonalities and ways of playing the sinking market.
Why can they succeed?
Strategy: Taking direct stores as the standard paradigm, the expansion is accelerated by low franchise fees
Most of the restaurant companies that do well in the sinking market are open to joining, and the two companies we are discussing here are the same.
In 2000, the first store of Zhengxin Chicken Chop was opened in , Wenzhou , Zhejiang. In the following 13 years, it opened 2,000 direct-operated stores and set up more than 40 logistics bases across the country. In this process, Zhengxin has been constantly trialing and erroring, and has explored a complete set of standard processes. Whether it is the operation path for store profitability or the guarantee of back-end, such as logistics and transportation, warehousing management, product processing, etc., it has formed a standardized system architecture.
In 2013, Zhengxin Chicken Emissions launched franchise and quickly released the volume. The popularity of direct sales has aroused great enthusiasm among franchisees, and the franchise investment cost is only about 110,000 yuan. This franchise fee is extremely competitive at most chain brands that start at 200,000 yuan. This is a healthy development process: the excellent performance of direct-operated stores has enhanced the brand influence of Zhengxin Chicken Steak, so it has continuously attracted franchisees to join; through actively participating franchisees, Zhengxin Chicken Steak stores are spread across the country, and their influence has increased exponentially, and the company can concentrate more efforts to develop direct-operated stores.The same is true for
Mixue Bingcheng, which uses direct stores as an excellent sample and expands rapidly with the same low franchise fee strategy.
Backend: Complete supply chain system
In addition to the demonstration role of direct stores, a complete supply chain system is also another key point for their rapid expansion. Compasses Logistics Co., Ltd., a subsidiary of Zhengxin Group, has been committed to optimizing the distribution of catering inside and outside the group. Currently, relying on the seven central databases, more than 50 forward warehouse distribution centers spread across the country have been established.
At the same time, Zhengxin Group also has a self-built supply chain platform to provide procurement, distribution and other supply chain services for its brand franchise stores and other stores, so that the supply chain links such as logistics and refrigeration can be optimized to achieve the role of reducing costs and improving efficiency.
Based on the above measures, Zhengxin Supply Chain can bear great pressure. Therefore, in addition to providing one-stop supply chain solutions for Zhengxin Chicken Chop, Zhengxin Supply Chain also provides supply chain ecological services for other brand restaurants. According to official reports, Zhengxin Food Supply Chain currently serves more than 28,000 stores, and annual sales have reached more than 10 billion yuan.
In the low-threshold industry, if there is no support from a strong supply chain, then taking the low-price route is undoubtedly a dead end. 's excellent supply chain system is a deep and wide moat that can greatly increase the entry threshold for competitors. Mixue Bingcheng relies on huge procurement volume and has strong bargaining power. At the same time, it also has a complete industrial chain closed loop, including an independent central factory, R&D center and warehousing and logistics center.
Front-end: Localized marketing strategy
Before we discuss marketing strategies, we might as well outline the user portrait of the sinking market. Shi Zhuojie, investment director of Suning Ecological Chain Fund, believes: "The income of this group is generally between 2,000 and 3,000 yuan per person, and is generally mainly based on family consumption, and enjoys leisure time beyond the first-tier cities."
They generally have practical but not high life goals and have more leisure time, so what impresses them is often the discounted price or suitable social scenarios . Correspondingly, the success of the two companies, Zhengxin and Mixue, is inseparable from their low-price strategies.
The unit price of most products in Mixue Bingcheng does not exceed 10 yuan. With its characteristics of quality and low price, it firmly grasps the huge number of youth markets and forms a strong brand barrier. Its popular ice cream is only sold for 2 yuan, but this pricing does not mean a loss. Relying on the advantages of the supply chain, the low cost is enough to support the low pricing. At the same time, the 2 yuan ice cream can also divert traffic to other products. At the same time, increases consumer participation and conducts experiential marketing is also a plus for Mixue Bingcheng. Its internet celebrity product shake milkshake must be shaken upside down before drinking it, which also makes shake milkshake popular on Douyin, and even the daily sales of a single store once exceeded 2,000 cups. The same is true for
Zhengxin Chicken Steak. All products are priced within 12 yuan, which is close to the psychological price of consumers. At the same time, because the chicken chops have a dry taste, most stores will sell them with drinks, but Zhengxin chicken chops have long adopted the free drink model. Consumers spend 12 yuan to buy a chicken chop and get a matching soft drink for free. This is much beyond expectations for consumers and leaves an impression of high cost performance.
is precisely because of its low-price marketing strategy that adapts to localization that these two companies have been able to stand firm in the complex competition in the sinking market.
Is it really easy to make money in the sinking market
First of all, unlike first- and second-tier cities, third- and fourth-tier cities have a small population, so most brands are still competing for the stock market, so the repurchase rate is an extremely important indicator, which is also a key factor in the inability to survive in the sinking market. Big cities compete for traffic, and small cities compete for repurchase. Because the sinking market often does not have that high traffic, if catering stores can only meet the needs of a certain specific scenario, they usually do not have enough customer flow. Therefore, local products for urgent needs are a good choice, such as buns, lunch boxes, etc.
Zhengxin Chicken Steak is also facing this problem now. It is also trying a variety of products, such as launching Zhengxinzhe tea, hoping to solve the problem of insufficient repurchase rate for consumers with the help of a multi-brand matrix.This is also the reason why most brands fail without making adjustments and directly moving the inherent catering model of first- and second-tier cities to small county towns.
Secondly, many people believe that business in the sinking market is easy to do. Moving the inherent catering model of first- and second-tier cities to small counties will have the effect of "dimensionality reduction strike". But if it is really that easy, there will not be so many catering giants who have failed in the sinking market. Just like Zhengxin Chicken Chop and Mixue Bingcheng, must have its own unique "business practice" when doing catering in the sinking market. Sometimes even if you only make some small changes, you will have unexpected results. Take Coco's menu as an example. In first- and second-tier cities, its menu focuses on products with an average of about 16 yuan per person, while in third- and fourth-tier cities, products with an average of about 10 yuan per person will be placed at the forefront. This is a very typical differentiated behavior.
Finally, the business environment in third- and fourth-tier cities is still relatively complex. Hu Yanping, who returned to his hometown to start a business and open a restaurant, said: "In the more than 70 days since the opening, the people from the Urban Management Bureau have come 10 times, the Environmental Protection Bureau has come 5 times, and the Industrial and Commercial Bureau has come 7 times." Frequent inspections have caused great trouble to him, and enterprises or individuals who are digging gold in the sinking market should pay more attention to this phenomenon.
In short, there is a big business in the sinking market, but how to seize this wave of opportunities and achieve things like Zhengxin Chicken Chop, Mixue Bingcheng and other companies is still something that requires great effort to study.
References
1, "The rising "sinking market"丨Investor's Perspective"
2, "Fengrui Capital Li Feng: The sinking market is just to stimulate demand, it is meaningless to talk about sinking"
