Following the trend and opening a restaurant in the sinking market, I lost a lot

In recent years, the sinking market has become a fragrant feast for the catering industry, but a large number of catering people who have broken into the sinking market have returned home, why?

The impact of the epidemic, the involution of the industry, and the contraction of consumer demand have forced a large number of restaurant companies to advance into the sinking market to find an increment.

For example, Haidilao opened 257 stores in third-tier cities and below in 2020, and added 344 stores in the first half of 2021; KFC, in 2021, opened more than 1,200 new stores, 160 new towns, and more than half of the new stores in low-tier cities.

At the same time, various media have magnified the blue ocean prospects of the sinking market, and also promoted a large number of entrepreneurs to follow in and devote themselves to small towns and counties to start a business and open a store.

One after another, the sinking market has become a "big traffic star" and is highly sought after. But at the same time, many people may also notice a strange phenomenon, that is, many high-profile brands that enter the sinking market rarely make a "triumphant sound", and most of them go and have no sound. What's going on?

The reason may be that everyone only sees the "good" of the sinking market and ignores the "pit" in it. Today's article, I want to share with you, catering people enter the sinking market, often planted four big "pits".

01 Blind expansion or price reduction, ignoring the core of low prices is cost and efficiency advantages

Haidilao had no choice but to shut down some of its sinking market stores; the sales of net red ice cream "Zhong Xuegao" in three or four cities were dismal... Why are these big brands that want to be famous and have resources in the sinking market?

One of the reasons is that it is too expensive. In fact, there is still a big gap between the consumption level of third- and fourth-tier cities and first-tier cities, and compared with first-tier cities, consumers in third- and fourth-tier cities are more sensitive to prices, and the relatively acceptable prices in high-grade cities often hit a wall after sinking the market.

According to Meituan takeaway data, the actual average price of users in the sinking market in 2020 is 64.8 yuan. The per capita consumption of Haidilao in third-tier cities and below is about 100.2 yuan, far exceeding the average consumption level of consumers in the sinking market.

At this time, some people may ask, many brands go to the county town to reduce prices, ah, Haidilao can not reduce prices? It is not that Haidilao is unwilling to reduce prices, but that this price can no longer be lowered, and the cost and profit of the price reduction will be damaged, especially in the case of prices and rents rising year by year in these years.

Zhong Xuegao is the same, even if its price in some sinking markets has been reduced to 10 yuan, less than half of the first-tier cities, it is still the price ceiling of the ice cream industry in the sinking market, and the consumption frequency cannot be done. And if it falls further, its raw materials and supply costs will not be able to cover.

In the sinking market, the competition between brands is ostensibly a price advantage, but in essence, it is a cost advantage and an efficiency advantage.

The reason why Michelle Ice City can reduce the price of products to single digits and continue to be stable is due to its cost "compression" in various operational links and huge scale benefits.

Therefore, if catering enterprises want to sprout in the sinking market and develop steadily for a long time, they must not fall into the trap of cost performance, blindly "tighten the belt of their pants" to reduce product prices, but should "elaborate strategy", use strategic methods, let their costs lead their peers, and plan a profit model.

02 Insufficient market insight ignores the huge differences in consumption preferences in different markets

Due to the difference in living space, growth environment and other factors, the consumption preferences of consumers in third-tier cities and below and consumers in first- and second-tier cities also have considerable differences.

If the demand of the head market is simply copied to the sinking market, it is wrong in the strategic direction, because the demand preferences of the two are not at all the same.

When the Yuanqi Forest sank to the third and fourth-tier cities, the "sugar-free" drinks that started in the first- and second-tier cities were directly reproduced into the sinking market, and the sales volume was far less than that of the drinks with a relatively "sweet" taste. Because consumers in the sinking market like "sweet" drinks much better than "sugar-free".

On the vending cabinets of small towns or counties, the front is often Coca-Cola, Unity and other sugary drinks, and the most inconspicuous place is the Yuanqi Forest.

Another example is coffee. According to the "White Paper on Freshly Ground Coffee in China", there are 108,000 cafes in China, of which 75% are located in second-tier cities and above, and in cities below the third tier, boutique cafes account for less than 1%.

Why do specialty coffee shops in the sinking market account for so little? Doesn't specialty coffee want to grab this piece of fat?

In fact, it is not, but the consumers in the sinking market have not undergone the "market education" of coffee, and the gap between the cognition and consumption desire of coffee and the first- and second-tier cities is too large, and the volume of coffee "enthusiasts" is far inferior to that of first- and second-tier cities. This is also the reason why Starbucks and Luckin have vigorously entered the sinking market, but it is difficult to achieve large-scale expansion.

The consumption preferences of a market or group are difficult to change in the short term. Therefore, there are only two ways for brands to sink the market, one is to adjust products and business strategies according to local conditions, and start from scratch with an "empty cup mentality"; the other is to take the lead and invest huge costs in the education market, which is bound to be a long-term and arduous process.

03 Only see the blue ocean, ignoring that there is also fierce competition in the sinking market

Many catering people think that as long as they target the blue sea of the sinking market, they can avoid the "inner volume" like first- and second-tier cities. But in the end, this is just a "fantasy" in the minds of catering people.

Judging from the public data, the sinking market does have a large capacity and enough market potential, but the sinking market also has its unique fragmentation, and the "capacity" of a single local market is actually not large.

First- and second-tier cities can have multiple categories and brands at the same time because of the large population. The sinking market also has a huge population of 600 million, but these people are scattered in a market segment with extremely small capacity.

Some brands that can open 20 stores in a single first- and second-tier city are saturated when they reach a single segment of the sinking market. For example, Haidilao can open more than 40 stores in Xi'an, and there are only five or six in Xianyang.

At the same time, in these individual segments with very small capacity, we will also face numerous competitors. Among them, a large part is local brands, which often understand local consumption habits and have more competitive advantages than foreign brands.

In addition, there are some competitors that make catering brands particularly headache -- a large number of unreasonable "cottage" brands.

Affected by various factors such as poor information, the sinking market has long become a market for "cottages". Once a brand becomes popular, there will soon be a large number of high-quality imitation stores, they play barbaric, love to engage in "price wars", and force the market to become a miasma, the blue ocean becomes a red sea, and the competition becomes inward.

04 Copying successful experience, little is known about the unique properties of the sinking market

First- and second-tier cities are societies composed of "strangers", and sinking markets are "acquaintance markets", which are networks of relationships that constantly radiate outward on the basis of the relationship between relatives, friends and neighbors. This determines that the first- and second-line product models, marketing models, and customer acquisition models are not very suitable for sinking markets.

Product mode. Some brands will copy their product models in first- and second-tier cities to the sinking market, and the result is "out of place" and a dismal ending.

Sipping and feeding once moved the model of one person and one small hot pot to the sinking market, and as a result encountered a series of Waterloo, because the product model of one person and one food is not suitable for the "acquaintance market", and the young people here eat hot pot mostly in the form of "party".

Marketing model. When doing marketing in first- and second-tier cities, the methods of restaurant companies are to invest in advertising, do live broadcasts, engage in public accounts, how to be popular, but in the sinking market, most of these methods are ineffective.

We will see an interesting phenomenon: the opening of a new store in the sinking market will make an electric vehicle team put a horn in a circle around the county, or plant a flag parade, these seemingly "earthy" marketing methods, the communication effect is the best, because under the acquaintance society, everyone has a certain degree of trust, and the more direct the information is, the better.

Customer acquisition mode. The documentary "A String of Life" has well elaborated on the way to obtain customers in the sinking market: familiar customers bring raw customers, the boss and the raw customers are mixed, and the raw customers bring raw customers. In other words, the customer acquisition model of the sinking market is based on acquaintances, fissioning more customers to stabilize the business model.

brief summary

It is true that the sinking market does have a huge increase, but it also has very distinct characteristics, and the blind sinking of restaurant companies will most likely return home. Do enough insight and adopt a targeted strategy to find a growth plan in the sinking market. (Written by Zou Tong, columnist of Red Meal Network)