Speech: Xi Yijia (investor of Black Ant Capital, this article is shared by Xi Yijia at the 4th New Wave Brand Conference), Editor: Ye Zhefeng, original title: "In-depth visit to dozens of counties, Xi Yijia of Black Ant Capital: 2024, how to do county consumer business?" Header image from: Visual China.
In the past year, the continuous sinking and diffusion of snack discount stores, new tea drinks, new fast food and other formats are one of the few areas in the entire consumer market that are still growing rapidly, and the 10,000-store chain has also become the goal of the new and old heads to accelerate the practice.
* With the dividends exhausted and the big cities close to full, in fact, more innovation and growth point to a large but easily ignored market - county consumption.
According to the data disclosed by the County Industrial Economic Development Forum (2023), the county-level economic GDP has accounted for 38% of the national GDP, and the market capacity is very considerable.
In addition, due to the small impact of the previous epidemic, the improvement of logistics and transportation, the rapid penetration of short information, and the steady growth of consumption capacity have made the value of this hot land urgently need to be deeply explored.
Black Ant Capital has gained a rare insight into the industry by visiting dozens of counties in various regions and covering thousands of questionnaires in nearly 500 counties. The purpose of this article is to share the opportunities of the county-level consumer market, the differentiated characteristics of consumers, and the innovative growth paths of different categories. I hope to give new inspiration and ideas to entrepreneurs who are wandering or involuting in the stock market.
1. What are the opportunities in the county-level consumer market?
How to understand today's county consumer market?
Hello everyone, I want to work with all entrepreneurs today to learn how to make opportunities in the county market.
We have been looking at the county market since 2021, and we have actually run more than 500 stores, and we have also seen some very good emerging formats.
You will see the term county market in various articles and information, but we first need to understand what kind of market it is today.
According to the 2020 Chinese census data, the prefecture-level cities and third- and fourth-tier cities that everyone can think of are in the top bracket, accounting for 32% of the Chinese population.
The population and GDP of the county market can also account for 1 3 of China's whole, and the county market, which we usually don't pay much attention to, actually contains China's most important underlying consumption power.
For example, in Ganzhou City, Jiangxi Province, there are 2 county-level cities and 13 counties under this third-tier city, and there are many townships under each county-level city and county, and all the counties and townships constitute the county market we discussed.
Take Dongping City, Shandong Province, a county-level city with a GDP of about 20 billion yuan, for example, there is only one KFC in this market, but there is no Starbucks, which is also the average for county-level cities in China.
And go to Gaoyou, Jiangsu, a county-level city with more spending power, there may be 7 KFC, 2 commercial complexes, and Starbucks. The above are some of the commercial formats we have seen in the county market.
There are many structural changes in the county economy.
We have done a lot of household surveys and found that in fact, the transportation of the county market is very convenient, and a 15-minute battery car ride can cover a very wide range.
The commercial format of the county is mainly concentrated in one street, and the walking time from beginning to end may be about 10 to 15 minutes, and because it cannot support an independent single format, there will be many 3 yuan stores or various collection stores.
During this time, everyone has been saying that China's economy is changing and may enter a new normal, and there are actually many structural opportunities behind it.
China has an urbanization rate of 5 points every 5 years, so 1 point in 1 year will bring 17 million urbanized people, of which about 7 million will enter the coverage of the county market.
In the past two years, the population of the county has gradually become denser, for example, in the past, people would say, after earning money, I will go back to my hometown to build a house, but now they will say that after earning money, I will go back to the county to buy a house. In an economy as large as China, the migration and mobility of people will bring many business opportunities.
Whether it is business or investment, it is necessary to understand national policies, and new urbanization and rural revitalization are the policies that have been mentioned in the past two years, and supply-side reform should provide effective supply.
At present, high-speed rail has covered more than 1,000 counties or county-level cities across the country, and by the end of 2023, 21 provinces have achieved county-to-county expressways, and the development of infrastructure has further promoted the change of population flow.
Take the inflow and outflow of population in Changsha on April 30 last year as an example, we will findIn many provinces in China, where the internal circulation of population flow is dominant, the flow of population from prefecture-level cities to county towns varies greatly.
Pushing forward 5 10 years, people who work in Changsha may return to the county once or twice a year, but now the frequency of everyone returning to their hometowns has greatly increased. We ran a lot of counties and found outThe county has a much larger population than usual on weekends, and these phenomena will bring about changes in the county's business format.
To give one of the most intuitive examples, in the past, although the rent of a small county store with a turnover of 5,000 6,000 yuan a day was very low, it may not be able to contribute a very good commercial format, but now it can do 7,000 or 8,000 yuan a day is a particularly good store model.
In the past two years, whether it is some tea chain brands or snack store brands, we have found that franchisees in the county basically feel that this is a business with growth prospects as long as they get the store.
Of course, the opportunities are constantly changing, and there may be a little less in the near future, but the chain business format is slowly eating up this huge Chinese market through the population flow changes in the county.
Second, review the county-level consumer portrait, how to provide a consumption upgrade without mentioning the highest standard?
What is the difference between consumers in the sinking market?
Let's talk about the consumers in the county, we have summarized their consumer portraits, and there are several core differences with first- and second-tier consumers.
First, a 15-minute battery car ride. This can actually cover a very long distance, which reflects the fact that these consumers live a very leisurely life, do not have a particularly wide social circle, and at the same time they have a relatively high loyalty to the brand and offline chain stores.
Second, multi-point dissemination of information. Push forward 20 30 years, in that era, as long as there were channels, you could sell goods, but now with the change of infrastructure, more business is through Douyin, Kuaishou to quickly penetrate the county consumers.
We have done a lot of interviews and found that their really effective working time at the end of the day is 3 hours, and a lot of time is spent on short**, which means that information dissemination has changed from traditional TV transmission to multi-point communication.
Therefore, consumers in the county market will have more awareness of good products and brands.
Third, the county is still a society of semi-acquaintances, and they may go across the city to buy some goods in Sam's Market. There are also many business opportunities behind such business practices.
We found that basic consumption related to life and safety accounted for about 61% of the county's consumers' spending, and they have a concept of brand and good consumption, but there is still a priority in the upgrading logic of each category behind it.
For example, the proportion of childcare expenses involving babies has increased rapidly, and we have seen new products such as cotton towels in the homes of consumers in many counties.
To sum up, what consumers in the county market are looking for is a consumption upgrade that does not rise.
Under the macro trend of population flow, there are more and more consumers in the county, they need more goods, as a brand or a businessman, we need to think about how to provide better services, how to better reach consumers in the county through channel efficiency and brand communication changes.
There are nearly 3,000 county-level administrative districts in China, but if you successfully impress county-level consumers and can open 5-7 stores in a county, it must be a 10,000-store brand.
What are the conditions for becoming a Shenwandian chain?
We summarized the county stores and classified them according to the different levels of efficiency and experience attributes provided to consumers, and found that the county market has undergone several major changes in the past two years.
First, the growth of consumption capacity has been steady, and the economy has not suffered too many macro shocks. In the past three years, the epidemic has brought some regional situations, but in 80% and 90% of the counties, we find that they have been very little affected, and the economic stability of the whole county is relatively high.
Although the income is not comparable.
In first- and second-tier cities, where per capita disposable income has been growing steadily, and the vast majority of people have their own homes, many of the county consumers we surveyed can spend 3,000 to 5,000 yuan a month on consumption.
Second, county consumers continue to seek better goods. The key to delivering a better product is a team you can rely on.
Whether it is a convenience store, a drugstore, or a stationery store, they have a common feature that the business model replication ability is particularly strong, and ultimately to achieve such a replication model in nearly 3,000 counties requires very strong team capabilities.
The team here includes both the internal team of the enterprise, as well as the external leverage, which may be a franchisee or a distributor, behind which must be to make money, share good money, and have sufficient profit space when what everyone does is simple enough.
Therefore, offline commercial formats such as convenience stores and stationery stores, store employees only need to do the simplest **, and it is also the easiest to appear in all 10,000 store formats.
According to the categories we summarized, the complexity of store operations increases from left to right, and the requirements for service experience are particularly high when it comes to the main meal. For example, when we go to Haidilao, we not only eat hot pot, but also include the demand for service.
For founders, the further to the left, the easier it is to copy, and to make complex things simple through the iteration of the business model, that can form a barrier. The further to the right, the more necessary to let consumers quickly perceive the concept and differentiation of the brand through better services and experiences under the trend of experience convergence.
For example, if you are a company that sells retail goods, you are often faced with the challenge of further reducing ** and improving efficiency, which is relatively difficult for start-ups.
But the further you go, the heavier the experience attribute is, if you run a mom-and-pop shop or a small restaurant, by providing quality service or personalized attention, such as being able to call out the names of regular customers, even in the county can make a very good business format, and become a very main force in the county.
But in the process, brand founders need to find a balance:How to make the original category with heavy experience attributes simpler, so that it is easier to standardize and scale expansion.
This means that our store ceiling may grow from the initial 300 to 500 or even 1,000, and at the same time, retail brands can reach more products and find variable channels to cover a wider sinking market of 100 cities and 10,000 stores.
3. Dismantle several types of commercial formats that are developing rapidly in sinking markets.
Snack collection store: replace the traditional low-line multi-layer distribution system to improve efficiency and reduce the price increase rate.
Let's first take a look at the example of snack stores, which is one of the few major variables in the consumer sector that has grown significantly in recent years. Among them, Zhao Yiming Snacks has more than 2,600 stores as of December 2023, with a year-on-year growth rate of nearly 300%.
They disclosed data two days ago that in the first half of 2023, they will be able to achieve nearly 3 billion revenue and more than 70 million net profit, showing a stable operating stateAnd instead of relying on capital subsidies or external thrusts, it is based on the underlying logic of the business model: every participant in the chain can make a profit.
We have seen that many listed companies have achieved significant growth after cooperating with snack stores, and about 15% of their channel proportion may come from these stores, and some brands that did not have such channels in the early stage may lose 5000 60 million yuan in sales in a single province.
Because the snack store channel itself has broken through, a 500ml bottle of mineral water sells for 1About 2 yuan, 500ml of cola in 2About 3 yuan gives consumers real value, which is the power of channel change.
But this business needs the support of the category behind it. Snacks themselves are a high-frequency and rigid demand category, and the average consumption frequency of snacks among consumers in the counties we surveyed can reach 24 times, such a frequency can only be better covered by offline stores.
In the county market, competitors are not only snack stores of the same category, but supermarkets, mom-and-pop shops, and e-commerce channels, and the snack category is a strong trigger for multi-category consumption, and about 50% of consumers will want to buy it when they see it.
Its attributes have led to particularly strong offline consumption attributes, which are not easy to be penetrated by online channels such as Douyin, Kuaishou, and Pinduoduo.
Under the 30 yuan customer order, although Pinduoduo is already very cheap, the fulfillment cost to the county seat is high, and the transmission cost of the commodity link increases. This leaves a broad space for snack stores to penetrate, and they can penetrate the vast county and township markets through business model innovation.
Therefore, as long as the business model is mature enough, the first chain is stable enough, and the stores are standardized enough, 3 or 5 stores can be opened in a county, so as to support the nationwide 10,000-store chain retail platform.
And we dig deep into these store systems, there are some very low-level business logic behind them, which may be KA market diversion, it may be old mom-and-pop stores, or traditional.
Restructuring of the primary and secondary distributor system.
But no matter what kind of logic, in the final analysis, it is to make the product low, so that consumers can see the real value. We will find that 95% of these snack stores have established direct sourcing channels with brands, rather than obtaining low prices through the wholesale market.
After achieving more than 95% of the direct supply, the best stores can achieve a terminal retail price of 13 times, bringing about 20% of the store gross profit and 8% of the ** chain gross profit of 10%.
In all the retail terminals in the county market, whether it is an old snack collection store, a KA direct sales system or a dealer system, the price increase rate is much lower, behind which is the destructive innovation of the industry and the high profit concession to consumers.
Tea drink: around the core market store encryption + outward radiation, reduce the difficulty of chain distribution and headquarters management.
Looking at the new tea beverage format, when we invested in Heytea in 2017 and 2018, we found that its drinks were very delicious, but in the production process, such as fruit peeling and cheese freshly beating, etc., it took more time to complete the store site, and in recent years, Heytea has also joined hands with the ** chain to do a lot of R&D investment and production of automation equipment.
Looking at the new tea beverage industry, the head tea chain brand that can now achieve more than 5 billion GMV may only supply the first chain cost of 30 million 40 million, and the logic behind it lies in the rapid expansion of the tea chain due to the maturity of the first chain.
Since 2019, the market size of tea drinks in third- and fourth-tier cities has shown significant growth, with about 60 billion yuan in 2019 and is expected to be about 140 billion yuan in 2023.
This rapid growth reveals the enormous potential of Tier 3 and below.
While consumers in first-tier cities are accustomed to a cup of milk tea for 10 to 12 yuan, in county markets, it has become a pleasant experience for consumers to visit tea shops like Mixue Bingcheng, with many middle-aged and elderly consumers even trying tea brand products for the first time.
Although there is a high density of tea shops in shopping malls in first-tier cities, often with 8 to 10 tea shops competing fiercely in a single shopping mall, why are there still so many high-quality tea brands?
The reason is that the change in urban structure has brought a lot of opportunities to third- and fourth-tier cities. These emerging brands aim at the consumer demand and consumption upgrading trend of the sinking market, and successfully tap and fill the blank market space.
The high efficiency improvement around the ** chain has brought a lot of opportunities for chaining. Efficient distribution system and scientific franchisee management system make the brand and franchisees form a close cooperative relationship.
When a franchisee successfully opens 5 10 stores under one brand or a distributor follows the brand for many years and makes money, they surround the brand and actively maintain the brand reputation.
By optimizing the centralized management of the ** chain and improving the efficiency of franchisees, the brand can ensure that the goods and services it provides are more standardized than the surrounding husband and wife stores and self-employed individuals. This model also means greater development opportunities for brands.
Epilogue. Therefore, in the end, we will find that the change of the county market is a huge industry trend, whether it is in the next 10 years, whether it is the 2035 China macro plan, or the further improvement of rural revitalization and urbanization rate, we can find some structural opportunities under the great changes.
Good business formats and innovations are slowly precipitated in the changes of the times, when your model can really make every link in the link - business, producer, distributor, franchisee and consumer are profitable, your business format will definitely become the next 10 billion, 100 billion business format.
This content is the author's independent view and does not represent the position of Tiger Sniff. Do not do without permission**, please contact hezuo@huxiu for authorizationcom
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