The life and death of new consumption: price war, franchise competition, and profit protection | Please answer 2023

In 2023, young people are no longer brainwashed by consumerism, and they pay more attention to the value of the goods themselves. So how can brands survive in this new consumption environment? This article will explain it to you.

2023 is the year to embrace the world again.

Young people are no longer brainwashed by consumerism, they pay more attention to the value of the object itself. The way of connecting to the world has changed, and cost performance has become their biggest concern. A spontaneous trip and a carefully planned performance are the ways for people to smooth out the wrinkles in their hearts.

Wealth and business opportunities are born here, but those companies that fail to adapt to the trend of the times are not happy. This includes those large companies with a market value of hundreds of billions of yuan - they are busy reducing costs and increasing efficiency, and their new businesses are lackluster. However, competition is fierce, and the ranking of the Iron Throne of Internet companies has been changing. Many people have left, either actively or passively.

Everyone is a grain of sand in the tide of the times, but every tiny individual deserves attention. Tech Planet's annual series planning will focus more on ordinary people in the tide of the times, pay attention to individual choices and destiny, and pay attention to business trends and fashions. We always believe that it is they who have left rich footnotes to the world.

To this end, Tech Planet launched a series of planning "Answer 2023", the first of which focuses on new consumption.

Low price and rationality may be two key words that can summarize the consumer market in 2023.

In 2023, instead of waiting for the imagined “revenge consumption”, brands welcomed “strict” and “calculating” consumers. They are not not consuming, but they hope to spend less money to buy better things.

This collective shift in consumer attitudes is affecting all consumer sectors. Brands continue to attract consumers’ attention with more cost-effective products, but it has become more difficult to get consumers to spend money.

As 2023 is coming to an end, Tech Planet has started a dialogue with different roles in different new consumer tracks. They come from new tea drinks, coffee, beauty and skin care, as well as this year's hot snack track. From brand founders to ordinary employees, no matter what their identities, they are the people closest to the consumer market. Their stories and feelings may give us a glimpse into the consumption trends in 2023.

2023 may not be considered a "consumption boom year", but those who are still in the game have no intention of quitting the game. Even though the consumption track has not created a wealth myth for a long time, they have not given up.

For consumers, the most important thing for 2024 is to survive. But compared with the "survive" a year ago, this year's three words have more hope.

1. The skin care brands founded this year are priced within 100 yuan

Industry: Beauty and Skin Care, Narrator: Head of Brand Operations

I have always been in the consumer industry, and previously worked in e-commerce in Hangzhou. Last year, I started a fresh food brand with a friend, but it was not very successful. He has his own supply channels, but it is still difficult to create an IP.

This year, I returned to the consumer sector and entered the skin care field, which is my old profession. The company is a newly established brand, and I am responsible for building the brand from 0 to 1. In fact, for a small team, you have to be responsible for everything.

When I returned to this industry, I found that the track had changed a lot. This year, due to the Japanese sewage discharge incident and the overall environmental impact, I thought that domestic brands would have a chance. Consumers will pay more attention to domestic brands. But consumers have also become much more rational and will not choose domestic products completely just because of the so-called support for domestic products. Today's consumers will pay more attention to the product itself. If you can meet my needs and really have the same effect as foreign brands, they will really place an order.

Our brand's products were only launched this month. The entire pricing strategy in the early stage was affected by this year's environment. Considering the changes in consumer views, our prices are mainly affordable, all within 100 yuan. The combination set of lotion + emulsion is only 188 yuan and comes with a lot of samples.

Although our products were launched late, I have been communicating with my peers this year. In fact, the entire beauty and skincare industry has been relatively flat this year. In the first half of the year, everyone had high expectations for the 38th Festival promotion, but the final results did not meet expectations. Then on 618 and Double 11, everyone had growth, but we can never go back to 2019.

For new brands, it is actually difficult to operate in any channel right now. We launched the Douyin channel first, and we haven’t opened a store on Taobao yet. Spending money on marketing and getting on top live broadcast rooms is no longer suitable now, and no brand dares to invest so much money. So even though we are just starting out, we have started to think long-term, and even if it’s a little slower, we have to ensure repeat purchases and break even.

Whether it is beauty or skincare, everyone now pays more attention to conversion in marketing, not just our small brand. I have lowered my expectations a lot now, and I just hope that there will be some improvement in 2024.

2. Opening a noodle shop for a year is only enough to earn my own salary

Industry: offline noodle restaurant, Narrator: Wuye Noodles franchisee

In the first-tier cities where I live, almost all Wuye Noodles franchisees have closed their stores, with only a few left. I am one of the few lucky ones.

At the end of last year, I joined Wuye Noodles and worked there for a year. I was lucky because my store is located in a park. My customers are white-collar workers who work in the park and there are many repeat customers. I can guarantee that there will be business from Monday to Friday. But for stores on the street or in shopping malls, they can only do business on weekends and there is basically no one on weekdays.

So I don’t do takeout orders, the profit is relatively low. Many of the Wuye Mixed Noodles franchisees I know have closed down, and no one has much business.

I was able to survive mainly because of the location. The stores might be a few hundred meters apart, and the flow of people might be different. There was also less competition in the park, with only two noodle shops. White-collar workers in the park would come to me when they wanted to eat noodles.

Actually, this is my first time to do catering. I worked in a supermarket chain before. I worked as a laborer in the store during meal time. Although I am one of the few franchisees who did not lose money, I still do not recommend that you do catering franchise. Especially young people who have their own savings should not open a store to start a business casually. 2023 is really hard. After a year of hard work, I can only earn my own salary to manage this 100-square-meter store. I can only survive and barely break even.

In 2024, I just hope to survive because the number of companies in the park is also decreasing, and the number of customers is also decreasing.

3. The madness of mass-market snacks: hoping that the company they bet on will be successfully listed

Industry: Bulk snacks, Narrator: A snack brand marketing employee

My last job was doing marketing work in an e-commerce platform. But everyone knows that the Internet is gradually declining, while the mass-market snack market is on the rise. So in June this year, I crossed industries and came to the offline retail industry.

In May this year, our company's branch office was just established. When I joined, half of the office space on the entire floor was vacant. But in just 4 months, the entire floor was full. This year, the total number of employees in the company may have almost tripled, and now the company has nearly 1,000 people. This is completely different from the Internet industry, and the change in personnel has brought me the most direct impact.

Although a lot of hot money has flowed into this industry, people in the industry have not enjoyed the dividends. Apart from endless snacks, the company does not have more benefits, which is far less than the heyday of the Internet, and may even be worse than the Internet companies after the benefits have shrunk.

My salary is the same as my last company, and now I still have one or two days off per week, and many systems are not standardized. Strictly speaking, the salary is a little worse. But I didn't come here for the money, but for the track and the company.

I found that most of the people who came here had the same idea as me. Our company has many people from other listed retail companies and leading new consumer brands. Everyone is attracted by this track and the company is still in a period of rapid development, hoping to go public with the company.

But it is different from the previous IPOs of Internet companies. In the past, we did it for financial freedom, but now we are also very clear that the IPO of the company will not help us accumulate personal wealth. We are all for this experience, which will make us more valuable in the workplace in the future.

The development speed of this industry is much faster than I thought, even faster than the Internet industry. This industry has entered a wave of mergers without going through a "fierce battle", which is quite unexpected to me.

Snack food is probably one of the few sectors that is growing this year, and I am glad that I made the switch. Although my work status was quite saturated in the second half of this year, I was dealing with things I had never experienced before every day. Because online and offline are indeed quite different. In fact, many tasks are not within my scope of responsibility, but the company is still in a 0-1 state, and the department division is very rough, and I have to do everything.

There is a not-so-appropriate description that my current mentality is similar to "sleeping on straw and tasting gall". I work a lot harder and I just hope that the company I bet on can become the final winner in the industry and be successfully listed.

4. New tea drinks in 2023: Grab stores in the first half of the year and maintain profits in the second half of the year

Industry: New tea drinks, Narrator: Wen Feng, founder of Chayu brand

Chayu is a regional tea beverage brand in the southwest region. We have more than 400 stores in Sichuan, Chongqing, Tibet and other regions.

The tea beverage market has undergone significant changes in the first and second half of this year. At the end of last year, we put store expansion at the top of our priority list for 2023, and we predicted significant growth in 2023. Before May, the brand development was still good, but after May, the brand development began to fall short of expectations.

At the beginning of this year, many individual entrepreneurs wanted to join, so there was a wave of collective store openings in the first half of the year. All brands have no shortage of franchisees, and they are all scrambling for stores. Some stores may not be able to be transferred at all during the epidemic, but in the first half of this year, the direct transfer fee was raised by 50%, and many people were still willing to take it.

However, starting from May, the newly opened franchisees found that the market was not as good as expected, the business did not meet expectations, and the competition was very fierce. Therefore, in the second half of the year, the enthusiasm of many franchisees to start businesses has decreased. I have communicated with many brands, and it is not just our brand. Perhaps the entire industry has experienced similar situations since May.

In fact, the opening of franchises for Heytea and Nayuki’s Tea this year did not have a particularly big impact on us. On the franchisee side, their franchisee groups are different from ours. They may need franchisees with stronger investment strength and certain resources. We need more entrepreneurial franchisees.

The impact on consumers is not significant, because the distribution of our stores and business districts is also different, and the overlap of consumers is not particularly large. It may have a greater impact on brands in the same price range such as Gu Ming, Cha Bai Dao, and Shanghai Auntie.

However, the price war between Luckin Coffee and Kudi this year has had a huge impact on tea brands. Because the consumer groups of coffee and tea are relatively similar, many tea brands have also chosen to cut prices. On the one hand, they directly choose to lower prices, and on the other hand, they use marketing activities to offer a second cup at half price, which is a disguised price cut.

Plus, there are only so many consumers. Now many cities have a milk tea street. In the past, there may be 4 or 5 milk tea shops on a street, but now there are more than 10 or even 20 on a street. Since May, our overall strategy has been adjusted. We pay more attention to the profitability of old franchisees, including product development, event marketing planning, and price adjustments.

Looking back at 2023, there have been relatively large changes in the tea beverage industry.

In 2019, the tea beverage industry was still in a rapid development stage. After a three-year hiatus, we expected that it would continue the development momentum of 2019 and there would be at least two or three years of rapid development, but we did not expect that it would directly enter the inventory period in 2023.

First, consumers' preferences for categories are changing. Traditional Chinese tea drinks are more popular this year. Consumers now prefer healthy fresh milk tea with a more prominent tea flavor, so we have switched to pure milk tea this year. In addition, consumers' concepts have also changed this year. Consumers are not unwilling to spend money, but just hope to spend less money to buy better products.

The focus of next year will still be on the old franchisees. We will definitely continue to develop, but we will definitely not set higher goals or be as aggressive as in previous years. First of all, we must focus on stability. At this stage, the most important task of the brand is to improve the profitability of stores.

5. The price war between Luckin Coffee and Kudi Coffee has not snatched away customers but stores

My partner and I started a business in the light food industry. In 2020, we felt that competition in the coffee industry was too fierce, so we waited and watched. Until the pandemic, we wanted to find long-term demand that was not affected by the outside world. At that time, we thought that coffee was such a category.

Last year, when we were locked down at home due to the epidemic, my partner and I completed the initial brand launch work of Yinliu Coffee remotely, including logo design, company registration, etc.

We only opened our first store in December last year because there were still some restrictions on operations in Shanghai in the second half of last year. It took two or three months from the first store to the second, and about a month from the second to the third, but it got faster and faster later on.

The results of the past year were roughly in line with my expectations. We currently have over 40 stores, 35 of which are in Shanghai. The first few months for franchisees are a run-in period, and most stores that have been in business for more than three months are profitable.

Shanghai is probably the city with the most intense competition in the coffee market. The reason why Shanghai is so popular is not because there are too many coffee shops, but because there are too many professional players.

I think that in the end, chain brands will remain in Shanghai, because professionalism can only be achieved through spending money. The price of soft furnishings in some coffee shops in Shanghai during the Christmas season alone may have exceeded the price of hard furnishings in small coffee shops in other places.

There is a price war in the coffee industry this year, which will definitely put pressure on us, but the break-even point for each brand is different.

Most of our stores are in office buildings or on the B1 floor, with rents of less than 15,000 yuan. Outside of the city, it usually costs several thousand yuan. We specialize in coffee + bagel combinations, and many companies choose us for afternoon tea and group meals, so we are different from many coffee brands.

Luckin Coffee and Kudi have a greater impact on us in terms of topicality. Their launch of sauce-flavored lattes and the competition between them will become topics that attract consumers, which will affect their consumption decisions.

On the contrary, the competition between them will affect our site selection. Since the second half of this year, Luckin and Kudi have taken too many locations. Because many office buildings have business protection, they will not allow multiple coffee shops to open. They are very fast. After they grab an office building, we cannot open even if there is a vacancy.

At this time, some brands are often impulsive in their rush to get stores. They accept stores that are too expensive, but they may not be able to make a profit. Therefore, we have not deliberately increased our speed at present, but we still find more suitable stores. We have to admit that our store expansion in recent months has not been as fast as before.

In the past year, I feel that I was more affected by the overall environment. The economy has changed a lot this year. From January to March in the first half of the year, many people were still in a wait-and-see state. Around May this year, everyone was confident, and there were many customers who consulted about opening a store or actually visited the store. But in September and October, things started to get a little sluggish again.

More importantly, both the platform and the consumer are immersed in the atmosphere of low prices. The consumption frequency of our stores has been increasing. It seems difficult for us to analyze who has taken away my traffic, but the entire low-price process will make merchants feel pressured. From the perspective of the brand, I think this year is not bad, but from the perspective of franchisees, many people will definitely think that they are forced to be involved in a price war.

Our brand's countermeasures are more about reducing costs in the upstream supply chain. The cost of each cup of our products should be reduced by a few cents compared to the beginning of this year. The prices of milk, coffee beans, cups, and packaging bags have all been reduced, so our relatively lower selling prices have not reduced the profits of franchisees.

I think the overall coffee market will be better next year than this year. Currently, many coffee shops in small cities are not professional, and there are still many opportunities in second-, third- and fourth-tier cities.

Author: Xi Rui WeChat public account: Tech Planet