When Haidilao starts to "cheapen" service, can hotpot still be good?

One of the secrets to the success of all catering companies is that the average customer spending is lower than the customer's psychological expectations. In the minds of consumers, Haidilao's average customer spending of 100 yuan includes the value of "good service", and makes consumers feel that the psychological expectation of product + good service is greater than 100 yuan. For the sake of cost and survival, this inequality has to be reconstructed.

While Pang Donglai has received a lot of praise on the Internet for its good service, another restaurant, Haidilao, which was once praised for its "impossible to learn" service, is facing doubts.

Recently, there has been a lot of news about Haidilao on social media. First, on May 30, #Haidilao toys cannot be taken by adults casually# became a hot search, and then on June 27, #Haidilao stores have introduced nail art charging standards# became a hot topic. During this period, the news that the "beef cubes" on the condiment counter were removed and orders could only be placed on iPads also triggered a large-scale discussion.

Haidilao, which has its own traffic, has to accept the baptism of traffic again and again. Its "good service" that was once widely praised has been questioned: "Where is the promised service!"

In fact, Haidilao’s discount on “service” is a helpless move. While its “good service” is being questioned, it is also opening up to franchisees, lowering prices, and conducting organizational innovation… Under the new consumption and competition situation, this “leader”’s series of actions and changes have become a microcosm of the entire industry’s transformation and survival.

1. When Haidilao started to be stingy with its service

On July 9, #Haidilao can play mahjong while waiting# became a hot search, sparking another discussion among netizens about Haidilao's service. According to netizens, Xi'an Haidilao Jinhua Road store has piloted a "mahjong area" for customers to use while waiting for a table. At the same time, it is reported that some Haidilao stores are also testing a "throwing egg area".

Service seems to be Haidilao's traffic perpetual motion machine. Before this, the removal of "beef balls" and the charging of manicures had also been on the hot search, and Haidilao responded: "In order to enrich the products of the small condiment table... the beef balls have been adjusted to the iPad, and orders can be placed for free through the iPad." "Pure colors are free, and there are also charged items. The most expensive manicure item costs 69 yuan."

However, these answers still sparked discussion among some consumers. For example, regarding the adjustment of beef balls to iPad, some people think that this is to prevent "freeloaders" and "not to spoil consumers", while others think that this is "too expensive to play with". The comment of "High EQ: Not to spoil consumers; Low EQ: Not to be stingy, but to play with" received nearly 950 likes on Xiaohongshu.

Whether it is "hiding" the more expensive beef balls, displaying "new products" such as ice jelly and spicy strips, or charging for manicures, Haidilao is quietly changing amid the understanding or questioning of netizens.

Once upon a time, thanks to a book called “You Can’t Learn Haidilao”, Haidilao became a model of Chinese catering management: when international brands such as KFC and McDonald’s were expanding their presence in China, Haidilao demonstrated another management model and development concept that was full of human touch and more in line with Chinese local culture, winning by service, and “good service” has also become one of Haidilao’s important labels.

In the past two years, Haidilao's services have appeared in different aspects in online public opinion: on one hand, there are bus pick-ups after concerts and ramen chefs have to skip the "third subject"; on the other hand, "good services" such as "beef balls", "manicures" and "toys" are discounted.

What makes Haidilao so divisive?

To be honest, even with the discount, Haidilao's service is already inferior to some other brands. The reason why it caused controversy is:

1. Haidilao has its own traffic physique, and its free manicure, hair washing and birthday services were very popular;
2. Haidilao’s per capita consumption is high, and the discounted service does not meet the cognitive expectations of many consumers;
3. Contemporary young people who often talk about "social phobia" and "i-people" no longer have such high requirements and desires for services.

In an interview, Lei Jun once shared his experience of reading "You Can't Learn Haidilao" on a plane and the insights he gained from it: "Haidilao reveals what true word-of-mouth is. Many people think that word-of-mouth means good things and cheap things, but in fact the true meaning of word-of-mouth is to exceed users' expectations. When you are better than users imagine, you win."

In 2023, Haidilao's average customer spending per capita is 99.1 yuan, which is the lowest since 2018, but still relatively high compared to other hot pot brands. In comparison, Xiabu Xiabu's average customer spending in 2023 is 62.2 yuan; Red Can Big Data shows that the most popular hot pot brands on the market currently have an average customer spending of between 60 yuan and 90 yuan, accounting for 43.4%.

The average customer spending is lower than the customer's psychological expectations, which is one of the secrets of success for almost all catering companies. In the minds of consumers, the average customer spending of 100 yuan includes the value of "good service", and makes consumers feel that the psychological expectation of product + good service is greater than 100 yuan. With the discount of "good service", the balance of inequality seems to be broken.

In fact, it is not just Haidilao. With “i-people” everywhere, reconstructing the inequality of consumer psychological expectations has become a top priority for all mid- to high-end hotpot brands.

2. Another choice: good service or good product

The changes in Haidilao are a reflection of the changes in the entire hotpot industry.

In the trillion-dollar catering market, hot pot remains one of the most promising categories, but at the same time, the entire industry is facing fierce challenges. The "2024 China Hot Pot Industry Chain Development Status Insight" released by TouBao Research Institute shows that the hot pot market has entered the stage of stock competition, with a high elimination rate in the industry. On average, the number of related companies revoked and cancelled each year is about 40%-50% of the registered volume.

This means that nearly half of the hotpot companies will not survive for more than a year. It is easy to imagine how difficult it is to survive. Against this backdrop, the hotpot market has seen many changes, such as price cuts, with Haidilao, Xiabu Xiabu, and Shuang Hotpot all cutting prices; and the re-selection between "good service" and "good products."

In the past two years, Pang Donglai has become a new generation of traffic benchmark on the Internet, because of its good service to consumers and "no exploitation" of employees - which is very similar to Haidilao in the past. Previously, Haidilao became the benchmark of hot pot, especially mid-to-high-end hot pot, with its service and quality that people could not learn. "Good service" became a hurdle that latecomers could not overcome.

Banu, which was attacking rapidly, once changed its slogan to "Service is not excessive, everything is exquisite". On the surface, it was challenging the "good service" trend led by Haidilao, but in fact it still could not get rid of the latter's shadow.

But nowadays, as cost-effectiveness has gradually become the mainstream trend of consumption, the road to "good service" for hot pot has become increasingly difficult.

There was once a joke about Haidilao that went viral online: A customer wanted to pack up the unfinished watermelon after dining at Haidilao. When he was paying the bill, the waiter brought a large watermelon to him and said, "It's unhygienic to take a cut watermelon home. We've prepared a whole watermelon for you to take away."

Obviously, Haidilao's "good service" is based on the premise of not considering the cost, which refers to the cost of "things" such as watermelon, beef cubes, free toys, etc., and also refers to the cost of "people" such as manicurists and waiters. The per capita consumption is much higher than that of other brands, which makes this road of "good service" quite confident.

However, with the change of residents' consumption concepts and habits, the increase of various costs such as materials and labor, and the rise of many brands, the confidence has been "sucked away" little by little. In order to reduce costs and survive, the consumer psychological expectation inequality (product + service > customer unit price) has to be reconstructed.

1. Reduce the cost of “people” and “materials” and reduce the price of “good service”.

Last year, Haidilao saw a double increase in revenue and net profit, mainly due to the increase in table turnover rate. The financial report shows that in 2023, the overall table turnover rate of Haidilao restaurants was 3.8 times/day, while in 2020-2022, its table turnover rate was 3.5 times/day, 3.0 times/day and 2.9 times/day respectively.

While the turnover rate has increased, Haidilao's labor costs have decreased. Data shows that in 2023, Haidilao's employee costs will be 13.039 billion yuan, with a total number of 153,700 employees and an average employee cost of 84,800 yuan, which is lower than 87,000 yuan in 2022.

This means that employees’ wages have not increased, but they have to provide much more services and labor. “Being good to employees” is one of the main sources of “good service”. When employees’ income is discounted, “good service” will naturally be discounted as well.

2. Return the focus to products and strive to improve consumers’ psychological expectations through product differentiation.

While Haidilao's service is widely praised, its products have also caused discussion, such as the golden enoki mushrooms. However, Haidilao's service is more of a service than a product in the public opinion field. Recently, the new Leishan sour soup pot has once again gained popularity. Some netizens who questioned the service still gave a high evaluation of the sour soup pot in their comments, saying that it is delicious and goes well with the new sour beef.

Behind the praise and criticism is Haidilao's choice between "good products" and "good services". In the hot pot industry, it is not the only one to make such a choice.

"It is only today that I understand what entrepreneurship is - entrepreneurship is a game between us and the market, society, and customers. If you are destined to win, you must first win yourself. If you cannot stick to your own heart, you will be overthrown by changes in the environment. This is the meaning of persistence." At the end of 2023, Banu founder Du Zhongbing said in a speech.

Once upon a time, Chongqing hotpot abandoned the old oil that had been used for a long time, used papain technology instead of the industrial caustic soda method to cook tripe, and adopted higher-quality but more expensive frozen squid... Relying on its products, Banu went from one city to the whole country; from Banu hotpot to Banu tripe hotpot, it engraved productism into its brand genes, and will also slowly blow the trend of productization to the entire hotpot industry.

Later, it was rapid expansion and then a stall... Last year, under the leadership of Du Zhongbing, Banu put on the brakes, refocused its attention on products, and changed its advertising slogan back to "Service is not Banu's specialty, tripe and mushroom soup are", re-straightening out the relationship between service and products.

Only by taking detours can we know the more correct path. In an interview, Du Zhongbing acknowledged the importance of service, experience, channels, promotion and other factors, but insisted that products are the center of everything. "In the past, we flattered and catered to customers, but now we need to provide services based on products."

A series of innovations followed. Recently, Banu Maodu Hotpot announced that it would completely remove common vegetables such as cabbage, spinach, and lettuce from its shelves starting June 1, and put on new seasonal vegetables such as kohlrabi, kale shoots, sweet potato tips, colorful wax gourd, green amaranth, and nepeta, and promised to "put on new products every month" to reach new heights in "freshness".

Although the situation is changing rapidly, there are two certainties in the current catering industry:

First, thousands of years of food culture have made Chinese people love and know how to eat;

Second, as simplicity and practicality begin to lead the new consumption trend in society, consumers have higher requirements for catering, from "delicious" to "delicious and great value".

In general, consumers’ demand for “delicious” food is eternal.

How to achieve “delicious and great value”?

First, the price is reduced, and people fall into the quagmire of endless price cuts;

Second, roll up the product and make it delicious to the extreme. As He Guangqi, the founder of Xiabuxiabu Group, said, "The only way to survive in the catering industry now is to gain consumers' recognition of you in their minds... Let consumers know clearly that the products you provide are the best and highest quality."

With Haidilao and Banu leaning towards or returning to productism, the hotpot industry is undergoing a dramatic change, from fancy roll services to fancy roll products, and from service-driven products to product-driven services.

Good service or good products? How to achieve a harmonious unity between the two has become the ultimate test for all brands.

3. Conclusion

Building a brand requires time, patience and determination, and a good brand requires even longer time, greater patience and stronger determination. Haidilao once stood out from the fiercely competitive Chinese hot pot market with its service and management advantages, went abroad, became an excellent catering brand, and became a model for other brands to learn from.

At present, facing the severe industry situation and fierce industry competition, brands such as Haidilao and Banu have made various choices. These choices may bring them closer to good brands, or further away. What is certain is that the foundation of brand power is product power and service power, and neither is indispensable.