From the roadside stall that originally sold electric skewers to the "king of regional fast food" with an annual income of 1.5 billion, what is the underlying logic of Nancheng Xiang's success?
This article was originally published by Red Meal Network (ID: hongcan18), author: Zhai Bin, editor: Hong Jun.
Wang Guoyu, the founder of Nancheng Xiang, once again "broke his promise".
On April 8, Nancheng Xiang Shanghai "Kongjiang Road Store" officially opened for business. In the past, the words of "to deepen the cultivation of Beijing and strive to be the king of the region" are still in the ears, but with the opening of the Shanghai store, this promise has been broken. This is not the first time that Mr. Wang has "broken his promise", in August last year, Nancheng Xiang, which claimed to "focus on the community and not enter the mall", opened its first shopping mall store in Daxing Longhu Tianjie.
Based on the brand influence and consistent fierce style, Nancheng Xiang "entered" Shanghai Tang this time and quickly became the focus of the industry, bringing an earthquake to the Shanghai catering market and triggering continuous heated discussions in the catering circle.
In many discussions, I found an interesting point, that is: whether it is the number of stores, the coverage area, or the brand revenue, Nancheng Xiang and Laoxiang Chicken, Country Base and other head brands have a considerable gap, why a regional fast food brand with only 200 stores will get so much attention in the industry?
This also brings two thoughts:
What are the advantages of Nancheng Xiang's business model?
Does Nancheng Xiang represent the "ultimate model" of Chinese fast food?
Dismantle the underlying logic of the "king of ping effect".
In 1998, Nancheng Xiang started with electric skewers, and after 26 years of development, it has grown into the "regional king" of Beijing's fast food with more than 200 directly operated stores and an annual income of 1.5 billion yuan.
It is understood that the average annual turnover of Nancheng Xiang's single store is about 10 million yuan, which is almost "5-10 times the average level of similar catering stores in the industry", and one of the 75 square meters of a single store has achieved the highest daily turnover of 50,000+, which can be called the "king of ping effect" in China's fast food industry.
△ Image source: Nancheng Xiang
To achieve such impressive results, many people attribute the reason to Nancheng Xiang's "ultimate cost-effective" product positioning, catering to the general trend of consumption downgrade, and some people think that Nancheng Xiang "stepped on the dividends of the times of community catering". But I think these are just appearances, and there is only one underlying logic of Nanchengxiang's success, that is: "total cost leading".
If you look closely, you will find that Nancheng Xiang, whether it is corporate strategy or tactical actions, is closely focused on "total cost leadership", which is manifested in the following four aspects:
First, "full-time community dining" – a good model saves money
"Other people's homes haven't opened yet, and Nancheng Xiang has already received 10,000 yuan in the account", in 2023, Nancheng Xiang launched the "Breakfast Multiplication Plan", and doubled the store's revenue during the breakfast period in only half a year.
In 2015, Nancheng Xiang determined the brand positioning of "full-time catering", covering five periods of "breakfast, lunch, afternoon tea, dinner and supper", and the store was open for more than 16 hours.
"Full time" allows Nancheng Xiang to flow continuously from morning to night, each time period is fully utilized, and the rent of the store is also diluted to the greatest extent.
Another buff that Nancheng Xiang can succeed in is "rooted in the community", which has the following advantages:
First of all, the "traffic utilization" of community catering is the highest, office buildings can usually only do business for one lunch meal, and the customer flow of shopping malls is mainly concentrated on weekends and two days, while communities can do a full week and have the highest utilization rate.
Secondly, the high repurchase rate of the community allows Nancheng Xiang to save the high cost of attracting new customers. The main customer group of community catering is the family, and the typical group portrait of the family is "one old and one young", their main appeal is the basic "three meals a day", the social demand is very little, the service requirements are not too high, but the price sensitivity is extremely high. Whether it is a 3 yuan buffet breakfast, or unlimited rice, and free fruits, it has hit the core pain point of this customer group, and therefore Nancheng Xiang has gained a very high repurchase rate.
The biggest advantage of high repurchase is that Nancheng Xiang "didn't spend a penny on advertising", and the good business depends on the word-of-mouth spread of the neighbors.
Second, "only make basic models, single products to win the world" - use Uniqlo's thinking to make products
As we all know, Nancheng Xiang's Slogan is "string incense, rice fragrance, wonton fragrance", which is not difficult to see Nancheng Xiang's product strategy, that is: focus on large single products, only make classics.
In the product structure of Nancheng Xiang, there are popular styles in four periods: steamed buns and fritters for breakfast, Angus fat beef rice at noon, lemon tea and milk tea for afternoon tea, small hot pot and skewers for dinner and supper, and there is also a core product that penetrates the four periods, that is, wontons.
△ Image source: Nancheng Xiang
The benefits of this strategy are clear. First of all, the essence of fast food is to solve a meal in a short time, no need for bells and whistles, these basic models can meet the needs of most people, and they are all classics, and they will not be outdated in the long run. Secondly, the basic model has a high degree of standardization, the meal is fast (Nancheng Xiang guarantees that all dishes will be served within 10 minutes), the ordering time is greatly shortened, and the turnover rate has also become higher.
In addition, Nancheng Xiang does not make stir-fried dishes, mainly for fear of affecting efficiency and turnover, and does not make products with soup, because few people will drink soup, and making soup will consume excess energy.
Nancheng Xiang uses Uniqlo's thinking to make products, so that the products are few and fine (Nancheng Xiang has about 40-50 SKUs), and by blowing up a single product, it has obtained a huge procurement advantage to the upstream, effectively reducing the cost of ingredients.
Third, "fresh distribution mode + honeycomb layout" - leading the "fresh" step
Last year, Mr. Wang shouted the slogan of "resolutely resisting prefabricated dishes", which caused a shock in the industry, and his confidence came from the fact that Nancheng Xiang adopted the "supply chain fresh distribution model".
So what is the "supply chain fresh distribution model"?
In one sentence, all the ingredients are transported to the central kitchen on the same day, and after cleaning, segmenting, seasoning and other processes in the central kitchen, they are then distributed to the store through the cold chain.
So what's the benefit of doing that?
First of all, the instant processing of fresh products does not generate inventory, and there is no need for secondary freezing, which ensures the freshness of the ingredients to the greatest extent. At the same time, through the decomposition of the production process of ingredients, the central kitchen allows the front-end stores to achieve "fresh and freshly made", thereby ensuring the taste of the products.
Secondly, the "fresh distribution mode" reduces the intermediate storage link, speeds up the turnover of ingredients (the net vegetables from the factory to the central kitchen, and then to the store, the time does not exceed 24 hours), reduces the cost of packaging, and effectively reduces the cost of ingredients. It is understood that the cost of Nancheng fragrant ingredients is only 27%, which is lower than the industry average of 35%.
Finally, the "fresh distribution model" has allowed Nancheng Xiang to gain great differentiation and brand reputation. This is particularly important in the field of fast food, which has a high penetration rate of pre-made dishes and the strongest consumer response, and has also become one of the main reasons why consumers (especially families with children) choose Nancheng Xiang.
△ Image source: Nancheng Xiang
In addition, in order to make the "fresh distribution model" run efficiently, Nancheng Xiang also carried out a "honeycomb" store layout. Nancheng Xiang is based on the distribution radius of the central kitchen for site selection (the longest delivery distance is 80 kilometers), and the store interval is not more than 1 kilometer, the store density is large enough, and the distribution frequency is increased (some stores even achieve two distributions a day), which effectively reduces the distribution cost.
Fourth, the "flying saucer" organizational structure makes management more efficient and labor costs lower
Nancheng Xiang's core management team (including finance) is less than 40 people, but it manages more than 200 stores and 2 central kitchens, with a total of 3,700 employees. Such efficient management is entirely due to the organizational structure of Nancheng Xiang's "flying saucer".
In 2014, Nancheng Xiang decided to abandon the "traditional hierarchical" organizational structure and adopted a new "flying saucer" organizational structure. The price only retains three sections: strategic center, operation center and resource center, the maximum removal of the "middle layer", all departments only retain one, through flat management, and finally achieve the purpose of streamlining redundancy, saving costs and efficient decision-making.
How efficient is this architecture?
In April last year, Nancheng Xiang proposed the "breakfast doubling plan", which has been fully implemented in June;
Nancheng Xiang's takeaway has been the first in Beijing all year round, but only one person is in charge.
The question is, what should I do if Nancheng Xiang is developing so fast and the headquarters is too busy? What should I do if there are not enough people?
Nancheng Xiang did not go back to the old path of "recruiting people when there are few people", but decided to involve "people who can hear the sound of cannons". Nancheng Xiang selected one or twenty store managers from more than 200 store managers to do "part-time jobs" for the headquarters and gave them a second income, and more importantly, these store managers came from the front line, and they knew more about the current market, how to fight and how to win the war.
Since the start of organizational reform in 2014, in ten years, Nancheng Xiang's revenue has skyrocketed from less than 100 million that year to 1.5 billion last year, an increase of 15 times, but the number of employees is less than in 2014. The reshaping of the organizational structure has made the management of Nancheng Xiang more efficient and the cost lower.
Let's wrap it up
Everyone says that fast food is a track of "bending down to pick up steel hammers", but Nancheng Xiang picked up gold coins in this "hard" track. In 2023, the net profit of Nancheng Xiang will be 7%~12%, so what is the level of the peers? Relevant financial reports show that the net profit of Lao Xiang Chicken and Lao Niang Uncle is about 5%, and the rural base is no more than 2.5%. You know, this is still based on the fact that Nancheng Xiangmen stores are all opened in Beijing, where the rent level is at a high level, and the average salary of employees is 30% higher than that of their peers.
The "total cost leadership" gave Nancheng Xiang a huge competitive advantage and the "right of first fire". In 2023, Nancheng Xiang will take the lead in launching a price war, and the "3 yuan breakfast buffet" will put a large number of peers in a dilemma.
The subsequent launch of the 37.9 yuan self-service small hot pot was also popular, forcing many restaurant owners to boycott Nancheng incense, and even signed an "exclusive agreement". But Wang Guoyu's response was very "Versailles", saying in an interview with the media, "I haven't fought a price war yet" and "I can still make money with three yuan of porridge".
Under the stock market, "total cost leadership" has become the winner or loser of chain brand competition. Brand differentiation is always the "second strategy", and only "cost-based competition" is the key to the success or failure of an enterprise.
Will Nancheng Xiang be the ultimate model of Chinese fast food?
In the past two years, the "hidden champion" Nancheng Xiang has already become a fast food brand with a super high "appearance rate", which has been tracked and reported by a large number of media, and has won various awards, becoming an industry benchmark and being studied and emulated by countless peers.
△ Image source: Photo by Zhai Bin
We can't help but ask, Nancheng incense is so good, is there any shortcoming?
Or to put it another way, does Nancheng Xiang, the "king of ping effects", represent the ultimate direction of the evolution of Chinese fast food?
My answer is definitely: not sure.
There are three reasons for this:
First of all, in terms of the richness of the business, Nancheng Xiang still has room for improvement.
Nancheng Xiang is positioned as "full-time community catering", and the important basis for judging the success of this model lies in whether Nancheng Xiang has exhausted the passenger flow, time period, area and personnel.
If we compare with another brand, we will find that there is still room for improvement in the "rent utilization rate" of Nancheng Xiang.
This brand is - Ziguangyuan.
As another excellent representative of Beijing's local catering, Ziguangyuan, a time-honored brand of more than 100 years, has the same brand positioning as Nancheng Xiang, both focus on the community, and both do business for ordinary people to eat three meals a day.
Compared with Nancheng Xiang, Ziguangyuan's store model is more rich and diverse, with store types ranging from 50 to 6,000 square meters, covering "dinner, breakfast, stalls, takeaways, private domain, retail/e-commerce, and outdoor", which is what Ziguangyuan often calls "one store and seven shops".
△ Image source: Ziguangyuan official blog
What is the effect of "one store and seven shops"?
According to Liu Zheng, president of Ziguangyuan Group, a standard store type in Ziguangyuan, the average monthly turnover of breakfast is 650,000, and the average monthly turnover of stalls is 970,000, and the sum of these two items alone is nearly 1.6 million; another 260-square-meter Jiugong store has a daily turnover of 40,000, dine-in accounts for 40%, takeaway accounts for 20%, and stall snacks account for 40%.
It is not difficult to see that Ziguangyuan's utilization rate of rent has reached the extreme, and it has basically achieved "all formats, all times, all passenger flows, and all scenes".
Compared with Ziguangyuan, the weakest part of Nanchengxiang is actually the leisure time, and the Ziguangyuan stall provides a rich variety, including pastries, lo-mei, snacks and other products;
In the future, from the perspective of the development of the industry, take-out will increasingly become the standard configuration of community catering, such as Uncle Xiong's latest shopping mall type, which still retains the stall of raw food take-out, and the first store of Village Base in Beijing, has set up a stall of freshly made buns, increasing the ability to obtain customers during breakfast time. On the other hand, Nancheng Xiang still needs to be completed in the two formats of "stalls and retail".
Secondly, judging from the channel, Nancheng Xiang is still "limping forward".
In Beijing, Nancheng Xiang is the indisputable "king of community catering", but some people attribute Nancheng Xiang's success to "the opponent is too weak", after all, in the track of community catering, Nancheng Xiang has indeed not encountered any effective resistance. Most of the competitors are too small, and although Chao Yixing is menacing, it is still too early to pose a threat to Nancheng Xiang.
In terms of channels, although Nancheng Xiang has no near-term worries, it has far-term troubles.
Because almost all competing products use the same strategy, "sticking to Nancheng incense to open a store", especially Chaoyixing. Each store in Beijing is no more than 1 km away from Nancheng Xiang, considering the "ultimate cost performance" of Chao Yixing (14 yuan can eat a full meal), once Chao Yixing's model in Beijing is successful and begins to copy, it will definitely have a great impact on Nancheng Xiang in the competition of points.
On the other hand, as Nancheng Xiang continues to open stores, good spots will become more and more scarce (Nancheng Xiang has opened stores in Mentougou and Shunyi outside the Sixth Ring Road), Nancheng Xiang not only has to compete with its peers for good spots, but also faces competition in the beauty industry, retail, fresh food and other formats, and such competition will be more fierce in the future.
△ Image source: Photo by Zhai Bin
Market saturation + intensified competition, the ceiling has been visible, at this time Nancheng Xiang must think about a question: do you want to enter the mall?
The answer is yes.
In fact, Wang Guoyu expressed Nancheng Xiang's willingness to enter the mall a long time ago, "It's not that Nancheng Xiang doesn't want to enter, but the conditions have not been negotiated." With the opening of Nancheng Xiang's first shopping mall store last year, Daxing Longhu Tianjie store, Nancheng Xiang is speeding up the opening of shopping mall stores, such as Fengtai Dayue Chunfeng Li and Haidian Yuquan Commercial Center have been in the fence one after another.
In the short term, "community" is still the basic plate of Nancheng Xiang, but with the intensification of competition in community locations, Nancheng Xiang is no longer an option, but a must.
Communities and shopping malls, both channels must be available, and both legs must be hard.
However, there are also some uncertainties in Nancheng Xiang's opening of stores in shopping malls:
Can the high rent be sustained? What if you can't do breakfast and supper? There are more competitors in the shopping mall, and they are stronger, can Nancheng Xiang survive?
For Nancheng Xiangjin Shopping Mall, Wang Guoyu is still relatively confident, thinking that Nancheng Xiangjin Shopping Mall is equivalent to a "dimensionality reduction strike". However, the turnover of Nancheng Xiang Daxing Longhu Tianjie store in the first month was only seven or eight hundred thousand, which did not seem to meet expectations.
Finally, Nanchengxiang's ability to "operate across regions" needs to be tested.
Nancheng Xiang opened a store in Shanghai, and many people were pessimistic, and one of the most common questions was:
"Nancheng incense can be in Beijing, but it doesn't mean that it can also be in Shanghai."
After all, there are obvious differences between the two places in terms of eating habits, consumer groups, market conditions, and competitive environment.
So can Nancheng Xiang replicate Beijing's success in Shanghai?
I think there are a lot of difficulties, and the problems are mainly focused on two points:
First, the product is "not adaptable". Perhaps in order to "seek stability", or it may be too "confident", Shanghai's products are no different from Beijing's, which has also become the most complained point by Dianping and Douyin consumers. Many consumers think that Nancheng Xiang does not take into account the dietary differences between the north and the south, and the products sold do not meet the tastes of Shanghainese, such as Shanghainese people who eat the Four Great King Kongs and eat soaking rice in the morning, but do not like to drink porridge; Shanghainese people like to eat wontons with shepherd's cabbage, but do not like to eat shrimp wontons, and so on.
From the product, we can clearly feel that Nancheng incense has "path dependence", of course, this is understandable. However, if we do not face up to the differences in the Shanghai market and make adjustments quickly, consumers in Shanghai will not give Nancheng Xiang too many opportunities.
Second, "talent echelon construction" will be a long-term challenge.
As we all know, Nancheng Xiang can develop rapidly, relying on a strong organizational force and effective incentive mechanism, "store manager contracting system + piecework system + instant reward" of the three-board axe effectively activated the initiative and creativity of employees, and helped Nancheng Xiang to achieve "from 1-100" leapfrog development.
Nowadays, "talent" has become a new engine driving the rapid development of Nanchengxiang.
With the opening of Shanghai, Nancheng Xiang has also entered a new stage (100-1000), at this time, a series of organizational construction such as employee recruitment, management, training, incentives, and assessment can catch up with the speed of opening stores, and whether Nancheng Xiang's corporate culture can blossom and bear fruit in Shanghai, and whether it can replicate a team that can fight and win battles in Shanghai, we do not know.
△ Image source: Photo by Zhai Bin
With the commissioning of the Shanghai Central Kitchen (according to Mr. Wang, the central kitchen in Shanghai is built in accordance with the support of 400 stores), Nancheng Xiang is bound to speed up the speed of opening stores.
For all direct brands, "lack of people" is the norm, but also the core reason for restricting the rapid development of enterprises, if Nancheng Xiang wants to develop rapidly, the best way is to open the franchise (you can refer to the same direct brand Haidilao). In fact, Nancheng Xiang did not reject joining, Wang Guoyu once said, "If the conditions are ripe in all aspects, the future will be open to joining, but the form of joining may subvert everyone's cognition - 'joining to lose money is mine'." ”
Write at the end
"Far ahead" is a sentence that Wang Guoyu has often said in the past six months, if we look back at the past, it is not difficult for us to find that the 26-year-old Nancheng Xiang is definitely worthy of this sentence.
From the roadside stall that sold electric skewers at the beginning, to the "king of regional fast food" with an annual income of 1.5 billion, and then to the entry into Shanghai Tang, what we see is a Nancheng incense that constantly breaks the comfort zone and constantly challenges itself.
It may not matter whether Nancheng Xiang can represent the "ultimate model" of Chinese fast food, because the growth background of each brand is different, but Nancheng Xiang's reshaping of community catering, the revolution of the supply chain, and the innovation of organizational structure are more worthy of our attention and discussion.
Nancheng incense may not be perfect, but it is good enough, its value to the industry is not only to teach everyone how to become an "efficient money-making machine", but through the "no listing, no joining, no prefabricated dishes" and other commitments, to express a simple value, that is: if you want to go through the cycle, you must learn to make slow money, "stupid people do stupid things".
If you really want to learn Nancheng incense, Mr. Wang also gave the direction at Nancheng Xiang's annual meeting:
"Tie the knot, fight the dumb battle, and win every step of the way".