Image source @ Visual China
The article | Pole Commercial, the author | Shanshan Liu, Editor | Yang Ming
For the giant loss of The Tiger Car, the competition in first- and second-tier cities is fierce, the online traffic dividend has peaked, the growth space for joining that can be found is getting smaller and smaller, and the only way to break through the traffic bottleneck is to increase the sinking market. The question is, is the sinking market the recipe for its growth?
Recently, after submitting a listing prospectus to the Hong Kong Stock Exchange, Tuhu, China's largest car maintenance e-commerce platform in the quiet period of the IPO, can't wait to embark on the road of expansion again - unlike the fierce competition of "cats and tigers" in first- and second-tier cities in the past, Tuhu Yangche specially introduced the factory store county market joining policy, and carried out a short period of preferential treatment and reduction in management fees and profit sharing. The intention to accelerate the "harvesting" of the sinking market before the IPO and telling a better story to the capital market is quite obvious.
"Cat Tiger Dog refers to the three Tuhu car, Tmall car, Beijing car will be three, in the past few years the three capital forces crazy deer car after the market, with funds, traffic and supply chain capabilities, forced countless auto repair shops to join, and gradually in the first and second tier cities formed a layer of 4S stores, brand stores, fast repair stores situation." Zheng Wei, an auto aftermarket practitioner, said.
This kind of menacing was especially evident last year: in 2021, Cat Tiger Dog launched a wave of franchise expansion offensive, and the China Merchants Association took turns in dozens of cities to "harvest" stores to join. Statistics from the auto aftermarket self-media "AC Auto" show that Tuhu Car added 1200+ stores last year, Tmall car added 1000+ stores, and Beijing Car will add 300+ in the first quarter.
According to the latest external publicity data of Tuhu Yangche, the number of factory stores under Tuhu Yangche has exceeded 3800 (more than 3500 prospectuses), tmall has more than 2000 cars, and The Beijing Automobile Association has also intentionally or unintentionally emphasized the concept of "Jingdong Car" after breaking through 1400 in September last year, and the trend of terminal stores has gradually become three parts of the world.
In Zheng Wei's view, the business model of Tuhu car breeding is actually the user's online purchase, offline cash in related products and services - that is, the business model of the door is life and death.
This means that the future core of "cats and tigers" is still the integration and integration of stores. Although Tuhu Car, Tmall Car, Chexiangjia, etc. have previously set the "10,000 store target", even if the largest unicorn Tuhu car is still far from the target of 15,000 workshop stores.
It is worth noting that Mobil, Linglong Tire, Chijia, Little Thumb and other parts companies and insurance companies have also entered the automotive aftermarket, each setting the goal of "thousands to tens of thousands" stores, and the automotive aftermarket in first- and second-tier cities will completely become Red Sea competition in 2021.
For Tuhu Car in the huge loss, the fierce competition in first- and second-tier cities, the online traffic dividend has peaked, and the growth space for joining that can be found is getting smaller and smaller, "how to break through the traffic bottleneck is related to how it tells stories to the capital market." ”
The only way out is to sink the market to increment. The question is, is the sinking market a recipe for Tuhu's car owners?
Sinking downwards, the "harvest" mom-and-pop shop accelerated its expansion
From the perspective of market forecast data, from 2022 to 2025, the number of mainland cars will grow at an average annual growth rate of more than 4% on a huge base of 300 million vehicles, and the automotive aftermarket industry is still in an upward period.
Behind it is the rapid growth of car ownership in the sinking market. According to the "2021 Insight Report on the Car Purchase Behavior of China's Sinking Market" by Ai Media Consulting, the sinking market size of China's auto industry will exceed 2 trillion yuan in 2020. Driven by the policy, the demand for car purchases in the sinking market group for the first time is high, with 58.8% of the car purchase demand groups, and the proportion of old cars replacing new cars has reached 34.1%.
Obviously, it is a huge potential gold mine for the automotive aftermarket – Deloitte data forecasts show that the size of China's auto aftermarket will reach 1.72 trillion yuan in 2025, of which a large part will be contributed by the sinking market.
This is the underlying logic of capital favoring to compete for the sinking market. "From the perspective of the general trend, the car ownership in first- and second-tier cities tends to be saturated, and the purchase limit is increased, and the new energy is shifted, and at least 50% of the country's cars are scattered in the third- and fourth-tier and rural areas, where the population flow is small, the customer source is relatively stable, and the growth potential is far more than that of the first- and second-tier cities." In the view of industry insiders such as Jiang Renhai, CEO of Kuaizun Car Service, the first and second lines will not be the main battlefield of the automotive aftermarket, and the sinking market will occupy more than 50% of the market share in the automotive aftermarket.
In fact, first- and second-tier cities have not brought the expected returns of interest to the automotive aftermarket. Over the past few years, Internet players have fought with 4S shops and repair shops for many years through various O2O layouts, but they still suffered various failures. Although Tuhu Car has broken through the siege with the money-burning model and become a unicorn in the automotive aftermarket that is about to IPO, it is still facing a three-year loss of nearly 10 billion yuan and an unclear future profit prospect.
On the one hand, the dividend has peaked, and on the other hand, the potential is huge. "Cats, Tigers and Dogs" accelerate to the county market that runs out of Pinduoduo, Qutoutiao, and Kuaishou, which is also expected by the industry.
The first to launch a clear-cut and large-scale downward market attack was Tmall Car. In March 2020, the "New Kangzhong" jointly established by Tmall car operators - Ali, Kangzhong and Auto Superman began to change from direct operation to franchise, and carried out some tilt in policy, aiming at the sinking market, and its COO Li Yi once clearly stated: "It is easier to open a store in the third and fourth-tier cities, and even the county seat, and the operation recovery cycle is faster than that of the first- and second-tier cities." ”
Tuhu car has also been sinking, but compared to Tmall car to open stores to the sinking market, the action is relatively slow, before it was more of a cooperative store - rather than a core workshop store to layout the fourth- and fifth-tier cities or county markets. This is also the reason why although many county markets have Tuhu car certification cooperative stores, there are no workshop stores.
In the Tuhu car maintenance system, from site selection to operation completely controlled by Tuhu is a self-operated workshop store, the cost is too high, the proportion is getting smaller and smaller; using the Tuhu brand, in addition to the franchise fee, management fee, franchisees also need to pay Tuhu profit sharing franchise workshop stores; the number of certified cooperative stores is very large, but only with the partner business, profit sharing.
It can be seen that joining the factory store is its core business model, and it is also the key to Tuhu Car to create a "diversion-retention-turnover" online and offline traffic closed loop.
According to the calculations of Tuhu Yangche's previous investment conference, the capacity of factory stores in first- and second-tier cities is more than 10,000, and the capacity of factory stores in the sinking market is more than 9,000 - from the actual situation before, Tuhu Yangche's workshop stores in first- and second-tier cities are close to saturation, such as in Shanghai and Beijing, there are 313 and 192 workshop stores respectively. However, in the sinking market, the workshop store has increased its layout since last year, and the policy has not been tilted before, and the number of stores is still quite small.
How to rapidly expand workshop stores in the sinking market? "There are two ways, one is to attract investors to open new stores, and the other is to renovate existing stores." Some insiders said that in view of the professionalism of the automotive aftermarket, opening up the franchise channel and "harvesting" the widespread presence of mom-and-pop shops in the sinking market is the best choice for cats and tigers to expand.
According to Tianyancha data, as of the first quarter of 2021, the number of registered automobile maintenance enterprises nationwide continued to climb, with more than 620,000 registered auto repair plants, 80% of which are three types of repair shops, of which at least 80% are mom-and-pop shops or single-store - most of these mom-and-pop shops are distributed in the vast county sinking market.
Some insiders said that most of these county-level mom-and-pop shops have been operating in the local area for many years, accumulating rich network resources and forming a unique and stable customer relationship. However, in the past few years, the epidemic has been repeated and competition has intensified, and the original human relations and resources have become less and less obvious under the impact of platform funds and traffic.
This is a "harvesting" opportunity for Tuhu: in theory, they can quickly expand their stores and power map through the "integration and transformation" of mom-and-pop stores, maintain the original store relationship network, and tell the capital market a story of the rising period before the IPO.
Risk transfer, the platform lies to win the franchisee is difficult to return the cost?
If you want to become a Tuhu car franchise workshop, the entry threshold for capital investment is not low.
Tuhu's car investment policy has two levels of franchise standards, which are for different types of franchise stores:
1. More than 800 square meters, as well as more than a certain number of stores in the customer rest area and workstations. The brand usage fee of this type of store is 400,000 yuan / 3 years;
2. For stores under 800 square meters, the brand usage fee is 200,000 yuan / 3 years.
The above two types of stores need to pay a deposit of 100,000 yuan and a management fee of 8,000 yuan / month, while the monthly profit distribution amount is calculated as 10%. In the latest county-specific investment promotion, Tuhu mainly carried out preferential or reduction in management fees and profit sharing within 6 months.
"The input cost is quite large, and whether to join needs to be carefully considered." Lao Luo, who thought about applying for Tuhu car last year, said that he operated three old auto repair shops in a prefecture-level city in the west, which has a certain influence in the local area and also recognizes the trend of Internetization after the car, but because of the high cost investment, he has not dared to make a decision.
He calculated an account for the "pole business": brand usage fee of 200,000-400,000, security deposit of 100,000, decoration of 100,000-300,000, equipment 150,000-200,000, a year to Tuhu car management fee of 96,000, rent of about 200,000 (auto repair industry rent is generally paid annually), not counting personnel salaries and other costs, the initial investment in each store needs at least 700,000 yuan.
"If you don't do a good job, then it's a job for the platform, and the return is far away." In Lao Luo's view, for the platform, the store is a self-financing model, earning 10% of the profit share, and the store does not earn 8,000 yuan per month management fee "lying to earn".
Lao Luo believes that from the perspective of mom-and-pop stores, the key to making traditional stores change from old to new is not to be "harvested", but how to win-win - this is the key to convincing themselves whether they are willing to join.
According to Tuhu's car investment promotion, among the franchisees of the original auto repair shops, the performance of the franchisee increased by an average of 60% in the year of joining, and the average monthly gross profit income of a single store in the national workshop store was more than 150,000 yuan. It seems that the benefits are indeed not small. But the premise is that this model can be explained in the sinking market.
Cat, Tiger Dog has told the "growth" stories of some sinking franchisees in many promotional drafts, but considering that there are 2844 county markets, and the human feelings and economy of each county market are different, this "growth" story has not yet been common.
From the "pole business" to understand from many parties, more franchisees are still struggling in how to return the original. "When the platform was promoted, it was frankly said that it could bring us efficient diversion." After spending more than 600,000 yuan to become a franchisee of a car maintenance e-commerce platform for 1 year, in the face of a business that has always been difficult to see, and no one accepts to take over the situation, Lao He suddenly found that the dream of "relying on the big tree to make money" is really not so easy to achieve.
Lao He is the owner of an auto repair shop in Yueyang, Changsha, from learning auto repair to starting a business, immersed in the auto repair market for more than 20 years, relying on years of accumulated customers and good reputation, life is not bad. But in recent years, there have been more and more cars on the street, and they have paid more and more attention to technology and services, but the business has become worse and worse, and sometimes the profit is not enough even for the store rent.
In Lao He's view, there are many reasons for the continuous deterioration of survival: First, under the repeated epidemics, the auto repair competition is becoming more and more inward-looking. Second, cats, tigers and dogs, chain stores rely on technology, traffic, capital advantages of dimensionality reduction blow, coupled with the annual increase in employee wages and other fixed costs, are continuing to compress the living space.
At the end of 2020, holding the idea that the Internet is the future trend, Lao He became a franchisee of an e-commerce maintenance platform, and spent more than 600,000 yuan on franchise fees, brand usage fees, decoration fees, etc. But he soon found that the Platform's Publicity of the Internet drainage, pulling new effects in small places is not obvious, the original old customers are in the store to place orders + services, but also gradually become the platform order, and then installed in the store, "and all offline customer information will be uploaded to the platform system, in fact, for the platform drainage." ”
Lao Ho is not alone. Another franchisee also said that "no money is made, and the return time is not expected"; another franchisee with 4 stores is relatively optimistic, saying that there is currently a good location store to achieve single store profitability.
Despite this, the above-mentioned franchisees also believe that "the group of car owners in small places is always limited, the consumption habits and behaviors are completely different from those in first- and second-tier cities, and the efficiency of pushing is not high, and there may be more than 20 new customers in stores every month." ”
It is easy to understand that the huge online traffic of the cat and tiger dog platform is not equal to the traffic of a regional market, which is simply not used by the store - even in the case of the real diversion of the large platform, the determinant of the traffic of the car aftermarket store still comes from offline, that is, the location of the store.
"This is fundamentally different from the sinking of e-commerce." Observers believe that customers of sinking e-commerce merchants thousands of kilometers away can come from the north, Shanghai, Guangzhou, and Shenzhen, but the auto aftermarket business is obviously impossible, and it is still only offline business within the "3 kilometers" range. At the same time, the automotive aftermarket is not like the takeaway industry, and the repurchase rate and retention rate will not be so obvious.
At the same time, due to the professionalism of car maintenance, cats and tigers are not involved in complex maintenance with high unit price, high profits and high technical requirements, and are good at business such as tires, car wash beauty, fast repair and fast insurance, these businesses have certain effects in a short period of time through promotions and marketing activities, but the unit price of customers is not high, and it is difficult to establish customer loyalty.
"Whether a single store in the sinking market can be profitable is related to multiple factors, 60% rely on their own operation, 30% rely on store location, and may only 10% rely on the platform." This is the summary of Lao Luo: Tuhu car owners accelerate the "harvesting" of sinking mom-and-pop shops, which may only make the market more inward.
"Strong control" controversy, first- and second-line experience is difficult to copy to sink
In addition to traffic, "strong control" of franchised workshop stores is another core keyword such as Tuhu Car And Beijing Car Club - in addition to the unified standard brand identity, decoration style, etc., supply chain procurement, information management, etc. are controlled by the Tuhu car chain system, including the most important "lifeblood" of franchisees - revenue.
According to industry insiders in the chain industry, the control of franchisees is related to whether the implementation of chain standardization is in place - weak control often means that brand value, product quality, service quality and other platforms rely on the basis of survival, facing the impact of many post-uncertainties of franchisees. In particular, the aftermarket mom-and-pop shop has been mired in chaos such as "opaque" and "fake and real", and this "strong control franchise" model has become a story that the platform likes to tell to investors and users.
From the perspective of the platform, "strong control" is not only conducive to the standardized management and collaboration of the platform, but also equivalent to firmly grasping the customer information data and the voice of the store. In addition, it is also conducive to the formation of centripetal force and large-scale combat capabilities of the platform, and ultimately build its own "moat".
This business model, which has caused widespread controversy in first- and second-tier cities, but was finally promoted, has more practical problems after copying and pasting into the sinking market.
Judging from the "AC Auto" survey, the core elements such as operational standards, digital capabilities, online traffic, brand effects, service experience, price systems, and marketing solutions that large platforms and large chains rely on in first- and second-tier cities may not be applicable in the sinking market.
The most difficult thing is not that the business model needs to be reshaped, but that the conflict between the business philosophy and the mom-and-pop shop is difficult to reconcile.
"Since the store is responsible for its own profit and loss, and has paid a lot of brand fees and franchise fees, then this kind of joining is nothing more than the platform authorizing franchisees to use certain privileges under the specified conditions, and the two sides are essentially cooperative behaviors, rather than similar to the platform's self-operated every move and strong supervision." Some practitioner bosses said bluntly.
In addition, there are more bosses who are unwilling to lose the brand of the store brand that has been operating for many years because of the franchise "change of door". "If I lose the brand independence and management decision-making power that I have been operating for many years because of joining, it is difficult for me to accept." Lao Luo believes that joining for himself is to seek increments, rather than completely attaching to the platform and accepting the platform's "management for management's sake" approach.
These bosses are not without reason. After all, for most of the mom-and-pop stores in the sinking market, income, connections, resources, etc. come from the store, and completely losing the entrepreneur's innovative ideas and initiative because of joining the platform is tantamount to taking life and death into the hands of the platform.
Some bosses mentioned that from the perspective of the maintenance franchise model under the US NAPA, there is no concept of strong control, in addition to providing accessories supply for franchised stores, lower than the price system of other channels, that is, to provide training and certification services for stores. In short, it is to help franchised stores improve supply chain efficiency and achieve project and service standardization, rather than controlling the "life and death" of stores.
"Strong control" cannot completely solve the problems of franchisee and cooperative store service experience and product quality. On multiple social, review and complaint platforms, complaints related to Tuhu car maintenance are difficult to count, and the maintenance level, service attitude, and quality of accessories are the focus of complaints. At the same time, in addition to user complaints about workshop stores, there are also many franchisees complaining about the Tuhu car platform.
In fact, many entrepreneurs in the sinking market are actually not opposed to the trend of informatization, but hope that they can cooperate with more platforms at the same time without taking sides, such as changing the door of "cats, tigers and dogs or other brands" at the same time, bringing more increments to themselves.
Therefore, when Internet platforms, parts brand owners, supply chain platforms, OEMs and other automotive aftermarket forces regard the sinking market as the focus of attack, can Tuhu's "strong joining" and "strong control" models really sink and run through, becoming a good recipe for it to break through the "traffic bottleneck"?
Perhaps, only when the number of the future Tuhu car "harvest" sinking mom-and-pop shop is released, can it be finally verified.