Is confinement center a good business?

What kind of industry is the confinement center? Is it a good business? The author proposes and analyzes the "six major problems" of confinement centers.

Not long ago, I went to visit a friend at a confinement center. One of the elders, after looking at the high service fees (tens to hundreds of thousands per month), had the idea of ​​opening a confinement center in his hometown.

I told him about the "six major obstacles" of the confinement center, and it was obvious that he was discouraged.

1. Old ideas create new species

The concept of confinement after childbirth has a long history. In China, even if you have never experienced confinement after childbirth, you must have heard of the sayings such as "The Ten Misconceptions About Confinement After Childbirth". Generation after generation, various confinement methods have been passed down until our generation began to have our own ideas.

Postpartum care centers emerged in Taiwan in the 1980s and were introduced to mainland China around 2003. They mainly provide services such as postpartum recovery, baby care, nutritional meals and psychological support for postpartum women.

For many new parents, the confinement center is not only a temporary safe haven for role transition, but also a time window to ease family conflicts between two generations.

2. New species evolve into three major business formats

Confinement centers are mainly divided into stand-alone type, hotel type and hospital-affiliated type.

A stand-alone house literally means a single building with relatively complete facilities and services, which is suitable for people who pursue high-end, higher privacy and security (of course, there is also a floor-type house, which means renting one or several floors. Even with an exclusive elevator, the experience is still weaker than that of a stand-alone house).

The hotel-style service is to cooperate with the hotel and use the existing decoration facilities of the hotel rooms to provide confinement care services, which is suitable for people who pursue comfort and convenience. For enterprises, compared with the stand-alone style, its store opening cost and store opening cycle are also more friendly.

The hospital-affiliated type is backed by a hospital. Compared with other types, it has more professional and convenient medical care and emergency treatment capabilities. It is suitable for pregnant women with special medical needs and groups with high requirements for medical safety (such as elderly pregnant women, pregnant women who have caesarean sections, and pregnant women and babies with related diseases). Speaking of convenience, for example, when the baby's jaundice value is too high, it is much more convenient to provide medical care.

3. Why is capital still flocking to it despite the obvious decline in birth rate?

A Jewish businessman once said that it is easiest to make money from women and children. However, it is very difficult to make money from "women + children".

The leading postpartum care center, Aidi Palace ("the first postpartum care center stock"), suffered a full-year loss of HK$178 million in 2022 (with a total revenue of HK$680 million), and a loss of HK$22.92 million in the first half of 2023 (with a total revenue of HK$307 million). Its current market value is HK$337 million.

After 2016, Tencent, ByteDance, Gaorong, Hillhouse Capital, KKR, IDG and other leading capitals began to get involved in the postpartum care center industry. Saint Bella alone raised more than 600 million yuan in financing.

This is a story about penetration rate, which Luckin Coffee often talked about back then. The penetration rate of maternity centers in Taiwan reached 62.46% in 2019, while that of mainland China was only 5.4% in 2021. Under the premise of cultural convergence, such a potential difference in penetration rate makes this story inherently provocative.

No one can predict the future absolutely, and no one wants to miss every possible future.

So you can only put your eggs in multiple baskets, so that you are not the one who is abandoned when the industry harvests in autumn. It seems like you are trying to grab chestnuts from the fire, but in fact everyone has their own Plan B.

4. The postpartum care center industry can be summarized as “six key points”

Focus on assets, safety, labor, operations, customers and consumption.

1. Asset-heavy: High customer orders do not mean high profits

The heavy proportion of asset investment is the "Sword of Damocles" hanging over the heads of confinement centers.

Site cost: If you want to provide good service, you need to provide comprehensive services and facilities. You need to reserve enough space for guest rooms, living rooms, activity areas, nursing areas, etc. This means a huge investment in renting a site.

Decoration cost: Confinement centers have higher requirements for safety and comfort, and the design costs, decoration materials, and construction costs will also be higher.

Equipment investment: In order to ensure professional services, professional medical, monitoring, baby care and other equipment are required. These equipments cost a lot to purchase and maintain.

Under the influence of industry attributes, no player can escape the "curse".

Industry leader Aidi Palace has adopted an asset-light approach, namely the "smaller service units + flexible room" model, since 2022. It first rents smaller service units to conduct business, and then flexibly rents rooms based on future orders.

This method can effectively reduce the initial investment of a new store, and can more effectively reduce the losses caused by vacant rooms during the occupancy process of the new store, which will further shorten the investment recovery period and improve the return on net assets.

2. Focus on safety: Safety issues are fatal issues

Both mothers and babies are very vulnerable both physically and psychologically. The safety of babies in particular concerns every family. A postpartum care center in Guangzhou had a serious feeding error incident, which was undoubtedly a disaster for the branch. There has always been zero tolerance for baby safety issues.

Medical safety: Professional medical staff and medical equipment are needed to effectively deal with emergencies. At the same time, regular disinfection is also required to prevent diseases and avoid cross infection.

Safety of care: Safety is the first priority when feeding and caring for babies. Babies are very fragile and improper care may lead to irreversible consequences.

Visitor safety: The confinement center should strictly manage visitors, check the identity of everyone who comes in, and prevent suspicious people from entering. At the same time, limit the number of visitors and visiting time to reduce the risks brought by people coming and going.

Food safety: For postpartum women, the diet should not only be nutritionally comprehensive, but also ensure food safety.

Environmental safety: The environment must be kept clean and comfortable, and attention must also be paid to safety in electricity use and fire protection.

Psychological safety: Always pay attention to the mental state of each mother and provide necessary psychological support and counseling.

Information security: Protect the personal information of mothers and babies and prevent data leakage.

3. Emphasis on labor: In a more special service industry, there is no room for error

Because confinement centers face two special groups, mothers and babies, they not only have higher requirements in terms of safety, professionalism and thoughtfulness, but also require service staff to have more considerations due to the emotional fragility of mothers during this special period after childbirth.

A professional and complete nursing team: Because the confinement center needs to provide postpartum care for mothers, infant care services, and nutritional meals for mothers, it needs to be equipped with professional nursing staff, postpartum recovery therapists, nutritionists, and pediatricians (depending on the positioning of the confinement center, full-time employment and part-time cooperation methods are chosen).

Personalized service: Confinement centers mainly provide centralized care and one-to-one services for baby care. The latter requires more manpower support. Although the wool comes from the sheep, one-to-one services are charged separately, but when the overall price is raised, users will reconsider their value judgment.

24-hour service: The confinement center provides service around the clock, especially for caring for babies at night and handling possible emergencies. This requires sufficient manpower to ensure the continuity, timeliness and thoughtfulness of the service.

Regular training and management: In an industry like postpartum care centers that have high service requirements, professional training and assessment of employees are required to ensure adequate service quality. At the same time, due to the high-load and high-pressure working environment, professional managers are needed to carry out daily management and coordination work. The turnover rate of nursing staff in postpartum care centers is relatively high. In this context, higher requirements are also placed on the human resources department of the company.

4. Focus on operations: details determine success or failure, and failure is not an option

Due to the nature of the confinement center industry itself, with high investment and high service requirements, the operation and management are also treading on thin ice.

When an industry has little differentiation and requires huge investment, everyone can only work hard on refined operations.

Financial management: How to reduce costs and increase efficiency, ensure profits or minimize losses is the first issue to be considered.

Service process management: Develop scientific and detailed SOPs to ensure that each process can be effectively executed according to established standards and to ensure high requirements and consistency in service quality.

Customer relationship management: With high customer acquisition costs and a high degree of word-of-mouth influence, confinement centers need to establish an effective customer relationship management system. It is better to ask your friends around you. Sometimes users may not choose a service because of good word-of-mouth, but they are very likely to give up because of bad word-of-mouth.

Supply chain management: Confinement centers need to manage the supply chain to ensure the timely supply and quality control of food, daily necessities and other materials to meet the needs of daily operations.

Human resource management: Confinement centers need to effectively manage human resources, including recruiting, training, assessing, deploying and motivating employees to ensure the professionalism and stability of the service team.

5. New customers: New customers are the new way out

The confinement center is an extremely low-frequency business, with a maximum of 2-3 times of single consumption and a sales expense rate of between 15-20%.

In the context of declining birth rates and low-frequency businesses, those who can succeed and become big basically have to focus on high-end businesses. Some of those who are outstanding in mid-range or mid-to-high-end businesses can only guard their own small piece of land.

Therefore, the strategy of each company is basically "attract new customers first, retain existing customers second", taking attracting new customers as the main growth point of the business, while maintaining old customers, improving user loyalty by making word-of-mouth recommendations and increasing repurchase rates to encourage secondary purchases.

6. Heavy consumption: a protracted battle from daily life

During a period of up to one month or even longer, the cost of a confinement center for both mothers and babies is considerable.

Energy consumption: In order to provide the right temperature for mothers and babies, the air conditioning in confinement centers is basically "all year round", and even many rooms are centrally air-conditioned, which consumes a lot of electricity. Of course, there are also a lot of water and hot water fees.

Food consumption: Confinement centers generally adopt the form of multiple meals in short intervals, 5-6 meals a day, which requires the purchase of a large amount of fresh ingredients, such as meat, vegetables, fruits, medicinal materials, etc.

Daily consumables: Confinement centers require a large amount of disposable items (such as diapers, sanitary napkins, disinfectants, etc.), cleaning supplies, bedding, etc., which are all high-frequency consumables.

Equipment maintenance: The medical equipment, monitoring equipment, kitchen equipment, etc. used in the confinement center need to be regularly maintained and replaced to ensure their normal operation and service quality.

Property management: The daily cleaning, security, fire protection and other property management services of the confinement center also require continuous capital investment.

5. Good policies do not equal good prospects

Although the fertility policy has been continuously stimulated, from the single-child policy in 2013, to the universal two-child policy in 2016, and then to the three-child policy in 2021. However, the birth rate continues to decline due to insufficient consumer confidence and changes in fertility concepts.

The decline in the number of births has a direct impact on the base number of people served by confinement centers. When the mid-range market is not big enough, everyone is flocking to the high-end market, but after all, there are fewer people to serve, which is also a shackle restricting the development of this industry.

6. If the confinement period is not enough, the postpartum care can make up for it

Many confinement centers do not make money themselves, but rely on postpartum care for profits.

After all, the gross profit margin of confinement care is too low. Once the occupancy rate does not reach 50-60%, it will face the problem of loss. In this way, confinement care is equivalent to a traffic product, and postpartum care is a profit product.

The development of postpartum care projects is mainly due to the needs of new mothers for postpartum recovery. They want to be mothers and be themselves, and the two are not mutually exclusive.

The confinement center itself has a confinement package, but obviously, the number of visits is definitely not enough. At this time, your confinement therapist will sell you a package. Some people spend 70,000 to 80,000 yuan for confinement, and some even buy a confinement package of 100,000 yuan.

Postpartum care will also face the problem of service crisis. First, many mothers are impulsive consumers and may regret buying the package immediately, which will naturally form a bad impression of postpartum care. Second, everyone's physical sensation is different. Because everyone is very different, the process can be standardized, but the experience may vary greatly. Third, postpartum care is a long cycle and it is difficult to achieve immediate results.

7. The end of the postpartum care center is chain and high-end

In order to achieve convenience, the confinement center has a clear service radius, and the only way to increase market share is to continue to open stores. However, opening stores will inevitably face high costs, so they can only focus on high-end products.

It is very difficult to measure the cost-effectiveness of this industry, because the consumption itself is difficult to mention the cost-effectiveness. It is said that more than half (actually I am conservative) of the confinement centers are in a loss, and the price war behind blindly can only be a war of self-destruction.

Another breakthrough in high-end development is customization, from a relatively standardized era to a relatively customized era. Customized services are created based on different factors such as cultural differences between the north and south, first and multiple births, and differences in the age of pregnant mothers.

Finally, let me summarize it in one sentence:

When young people have more confidence in the future, practitioners in confinement centers will be less worried.

Every couple is weighing the pros and cons, and behind every decision is real careful consideration and a thorough understanding of the situation!

Author: Zang Feng WeChat public account: Strategist Zang Feng