Click to read the original article for details Store owner Aunt Ni was indignant: "How can we survive if they cut prices like this?" According to Aunt Ni, convenience stores mainly profit from beverages in summer and milk and dairy products in winter, but this physical store discounts everything. For example, 2-yuan Nongfu Spring and C'estbon water are sold at 1.2 yuan, and 3-yuan Ganten is sold at 2.4 yuan. "With such discounts, where will our customers come from?" Aunt Ni said that fewer people enter the store, and income is getting worse. Store owner Aunt Zhang confronted the salesperson: "Don't you care? This price was set by you!" Aunt Zhang pulled the salesperson aside and began to complain. The salesperson, a representative of one of the three major water brands (Nongfu, C'estbon, Ganten), explained that the regional managers of the three major water brands had met specifically to sanction this store. They forbade any distributor from supplying this store, and any violation would result in immediate fines or loss of distribution rights. However, the salesperson privately told me their difficulty: they cannot control the wholesale market. Why? Even if they control distributors and prevent them from delivering to this chain store, the latter can simply go to the wholesale market to pick up goods themselves, and it is equally cheap. Distributors in the wholesale market have always shipped goods as long as there is profit, regardless of who comes to pick them up. Moreover, they try to sell more at lower margins. For example, if you buy a case of water, they will give you a 3-yuan discount; if you buy a hundred cases, they will discount 3.5 yuan per case. Who wouldn't want that? In addition, this store pays in cash and never delays payment. Such a valuable customer is hard to come by, so who would turn them away? The survival situation of convenience stores can be summed up in one sentence: Within the radiation radius of this store, convenience stores can hardly survive. What kind of store is this? What kind of store can make it difficult for convenience stores to survive? Is it a large supermarket? According to common logic, convenience stores only struggle when located next to large supermarkets. But this chain's stores are not large, typically around 80-100 square meters, only slightly bigger than the average 30-50 square meter convenience store. How does this store attract customers? Low prices. 1.2-yuan Nongfu, 2.4-yuan Ganten... Moreover, any snack brand you can name, such as UHA milk candy, Fujiya, and Kinder Joy, is sold at low prices. So how does it make money? Hand-grabbed snacks, also known as bulk snacks, are mostly from brands you've never seen. Of course, some popular brands are also available. For example, Shanghai X Niu biscuits. The distributor's purchase price is 7.1 yuan per jin, and the lowest discount price in outside supermarkets is 12 yuan per jin, but they can sell it at 7.9 yuan per jin. In addition, other snacks are also very cheap. When sold by weight, the main price points are 8.8 yuan, 10.8 yuan, and 13.8 yuan, far lower than supermarkets. At this point, anyone in retail probably knows this store. It's called Snack Busy, and it originated in Changsha (the previous hot trend was the community group buying pioneer, Xingsheng Youxuan). In 5 years, it has opened 400 stores, almost all franchised. How hot is the business? 1. Many imitators As of the end of 2020, there were over a thousand stores nationwide imitating Snack Busy, including chains and single stores. If each store in a chain is counted individually, this number would be multiplied by 5. What does imitation mean? Pixel-level copying. Except for changing two characters, everything else—storefront, decoration, price range, product layout, and goods sold—is exactly the same. Why change two characters? They have no choice. Snack Busy's LED scrolling screen says, "In Changsha, we are very cheap." What about elsewhere? Of course, they need to change it to "In Shanghai, we are very cheap," "In Chongqing, we are very cheap," "In Shenzhen, we are very cheap." 2. High sales per square meter Through surveys of franchise owners and direct-store employees, a Snack Busy store of 80-100 square meters has daily sales of around 8,000 to 10,000 yuan. What does that mean? Compared to other chain convenience stores, their 80-100 square meter stores only have daily sales of about 5,000 yuan. 3. Original brands cannot survive In Changsha, due to the rise of Snack Busy, the original snack store brands are struggling: Wang Xiaojian Fresh Fruit Snacks was forced to withdraw completely from Changsha; Xiaozui Snacks, which had just positioned itself as "Small snacks, masterfully made" in 2018-2019, died in the cradle; Moya Snack House sells some snacks that Snack Busy doesn't have, and uses 1-yuan retail Nongfu Spring and C'estbon water to counter Snack Busy, but with little effect. Take one store as an example: when another Snack Busy opens on the same street, their average daily sales drop from 5,000-8,000 yuan to below 3,000 yuan. Note that these snack stores each had 20 to 70 chain stores before Snack Busy appeared. What was the outcome? They were still overwhelmed. 4. Franchisees flock to the door I interviewed several franchise owners in Changsha. One older man said he joined too late; if he had joined earlier, he could have opened more stores. Now every inch of Changsha is packed. In the first two years, when Snack Busy focused on the Changzhutan area (Changsha, Zhuzhou, and Xiangtan are very close, and locals collectively call them Changzhutan), people from Huaihua, Yueyang, Changde... basically every prefecture-level city in Hunan, went to Snack Busy's headquarters in the Gaoqiao wholesale market to visit their boss and beg to join. Snack Busy's expansion route is also quite steady: Changsha—after filling the city with 200 stores—enter Xiangtan—after filling that—enter Zhuzhou; after completing Changzhutan—enter other prefecture-level cities. Why is Zhuzhou ranked last among the three cities? Because Zhuzhou has Dai Yonghong, which has been rooted there since 2005. It is said that "Dai Yonghong Bulk Snacks" has over 200 stores across Hunan province (but none in Changsha, possibly because competition is fiercer there). Dai Yonghong took 15 years to reach 200 stores. How long did Snack Busy take? Less than 3 years. Snack Busy's strategy is clear: besiege Changsha and Xiangtan, and finally take the hardest bone—Zhuzhou. 5. Recent financing In May 2021, Snack Busy just received 240 million yuan in Series A funding. Everyone underestimated it Even so, I still say that everyone has underestimated Snack Busy's development potential, including Snack Busy itself. What is its potential? It didn't just beat snack stores; it beat convenience stores, and it can beat Taobao. The phrase "beat Taobao" is not accurate. To be precise, it can beat Taobao's "snack" category. 1. Defeating e-commerce Why? Compared to Snack Busy, e-commerce has these drawbacks: 1) Not convenient enough: Buying snacks takes days to arrive, not as convenient as a store at your doorstep. 2) Cannot attract impulse purchases: Snacks are inherently impulse purchases, and browsing a snack store triggers more impulses. 3) Lack of trust: You can't see the store, can't communicate face-to-face, can't touch the product, can't see the real appearance... Even with live streaming, consumer contact is relatively less concrete. This means trust is not as strong as in physical stores. 4) High unit price: Cannot buy in small quantities. In a snack store, you can grab one or two small packs and weigh them. Especially elementary school students in Changsha, after school with their parents, basically walk into the snack store, pick up 1-2 packs of snacks, weigh them, and leave. Fewer categories. Since each pack is relatively low-priced, with the same money, I can buy more different snacks offline. But online, you have to buy a large pack or a whole box. 5) Not low-priced: First, as mentioned, the unit price is high; Second, Snack Busy's prices are not expensive. Only when you buy a whole box of the same product does the online price become lower than offline. But Chinese consumers tend to buy small quantities and buy again after finishing; Third, which is cheaper? Online information is complex, and consumers cannot choose. What about Snack Busy? A store at the community entrance, selling bread at 13.8 yuan per jin—is that expensive? 6) E-commerce costs are rising: According to Three Squirrels' prospectus, in 2018, the largest sales expense was freight, at 472 million yuan, accounting for 32.29%; followed by platform service fees, at 249 million yuan, accounting for 17.03%, compared to 14.86% in 2016. The direct response is that snack e-commerce is expanding offline. In September 2016, Three Squirrels opened its first physical store in Wuhu, Anhui, and has since opened 45 stores nationwide. In 2017, Baicaowei, after closing offline stores for seven years, returned offline, continuing to lay out offline supermarket channels and launching the "One City, One Store" plan. All these lead to inflated prices for e-commerce snacks. 7) Too much information, no choice: E-commerce. Which snack should consumers choose? Which store's products are better? In contrast, consumers see Snack Busy's high-end decoration and branded goods, and they think the bulk snacks must be good too. Live streaming. Even with live streaming, the information is complex, and you don't have much time to watch. If there's a snack store near home, cheap and convenient, I can just buy it on my way home from work. Why waste time watching live streams? I'd rather rest or scroll through Douyin. 2. Defeating large supermarkets Snack Busy can also defeat large supermarkets: 1) Far away: Supermarkets are far from home. When you only want to buy a small amount, you don't choose to go to the supermarket. 2) High prices: Various fees. Entry fees, management fees, barcode fees, festival fees, front-end margins, back-end margins... all lead to high unit prices. 3) Slow updates and limited products: Manufacturers that enter pay fees, and general manufacturers cannot enter. This leads to slow product updates and naturally limited variety. 4) Cannot buy in small quantities: Every time you fancy a snack, you have to buy a large amount. Try going to a supermarket and picking just one small pack of each snack, and see how the weighing lady reacts. Either she glares at you, or she takes them out, weighs each one, and prints a label for each, wasting your time. It still has drawbacks Having said so much about Snack Busy's advantages, it still has drawbacks: 1. Classification problem Snack Busy's rise relies on the prevalence of snack stores in Changsha, so many people think it's just a type of snack store—a low-price snack store. But nationally, how big can snack stores be? Convenience stores are more numerous. In most parts of the country, especially in the north, there are no decent snack stores; there are more convenience stores. For example, in Shanxi, chain convenience stores like Tangjiu (1,580 stores) and Jinfu (1,391 stores) total 3,000 stores in 2020. Next are fruit stores. In many places, snack stores are classified as fruit stores, where fruit stores also sell snacks. This makes it normal for people to underestimate Snack Busy's prospects. According to current thinking, if you want consumers to accept the concept of a snack store in an area with zero foundation, it requires a process of continuous testing and improvement. For example, in Chongqing, many snack stores have tried and basically failed. According to Chen Jianying, head of Chongqing Lebangbang Company, in 2015, their first bulk snack store opened in the Jiangbei Jinyuan underground mall, in cooperation with the founder of Zhejiang's "Lao Po Da Ren," the pioneer of bulk snack stores in China. Named "Xiaokou Dakou," business was poor. Later, they operated independently and opened "Lebangbang" snack stores. In 2019, news came that they had planned to expand aggressively but stalled due to rent and landlord breaches. In other words, snack stores have not survived in many places, and Snack Busy's national expansion will face obstacles. 2. Wrong approach How is Snack Busy preparing to expand nationwide? Currently, Snack Busy's approach is not particularly clever. From the fact that it hasn't sued some regional copycat stores, it can be inferred that it is letting those copycats educate consumers first. From the geographical distribution of the copycat stores it has sued, Snack Busy is targeting areas it plans to enter, such as copycats within Hunan; for most areas it hasn't planned to enter, it temporarily ignores them. What is the right approach? Before discussing this, let's look at the difference between Snack Busy and previous snack stores. Besides low prices, before Snack Busy appeared, general snack stores did not sell beverages or fixed-weight snacks (packaged with specifications, unlike bulk snacks), because their locations were not as convenient as convenience stores. If they sold the same things as convenience stores, they would have no advantage. But Snack Busy's model uses the most common water and beverages to attract traffic. How? Low prices. Then it uses genuine fixed-weight packaged snacks to build trust. From this, it's clear that Snack Busy sells the products that account for the majority of convenience store sales. If you look at it from a different angle, Snack Busy's classification is obvious. From the snack store perspective, it's a cheap snack store, using water, beverages, and bagged snacks that sell well in convenience stores to attract traffic; From the convenience store perspective, it's a new generation of convenience stores, not only cheaper but also adding bulk snacks sold in snack stores, at even lower prices. It is actually a convenience store, a low-price convenience store. However, due to habitual thinking and the misleading name "Snack Busy," all imitators nationwide have added "snack" to their names. Only by classifying it as a convenience store can we see Snack Busy's prospects: How many convenience stores are there nationwide? If Snack Busy grabs a share of that market, how big could it be? Q&A (Q: question; A: answer) Q: Since original snack stores are not convenient, is Snack Busy also not convenient? A: Yes, because its radiation radius is much larger than ordinary convenience stores, so consumers take longer to reach the store. Q: Will that affect its sales? A: Yes. If everyone has money, they might not bother walking a few extra steps to save 0.8 yuan on a 2-yuan bottle of water; but when the economy is not good, especially when consumers tighten their wallets, everyone would rather walk a few more steps. Q: Since Snack Busy is another type of convenience store, why haven't original convenience stores competed on low prices? A: For convenience stores, their profit sources are the same, so they cannot lower prices. Their main products are beverages, milk, and dairy products; and they sell the same goods. If you dare to lower prices, I will definitely lower mine too. And the result of all low prices is that everyone goes out of business, and eventually no one opens convenience stores. Reasoning backward, it's hard for a convenience store to succeed with low prices. Q: Why can Snack Busy succeed with low prices? A: Because its profit source is different. Snack Busy's profit comes from bulk snacks, which is the biggest difference from original convenience stores. Why can bulk snacks give it enough profit? Because consumers don't care much about bulk snack brands. Without brands, pricing power is in the store's hands. I say it's this price, so it's this price. The profit margin is also under my control. Without brands, I can easily find substitutes, and consumers won't notice. Q: How can Snack Busy make money with such low prices? A: Small profits, quick turnover. From the consumer's perspective, it's easy to see. Convenience stores are expensive. What does that cause? Consumers only buy what they need immediately. For other items, they'll buy tomorrow; what difference does it make which store they buy from? Snack Busy is cheap. What does that cause? I'll buy things I need in the next few days and store them. Mainly because I don't want to make an extra trip; if I miss this opportunity, I'll have to walk further next time. Just like when you go to a supermarket, you encourage yourself to buy more because you don't want to make another trip. The reason is the same: it's cheaper than convenience stores. Q: What about convenience stores? Snack Busy has been around for a while; haven't they noticed? A: Convenience stores have long realized their weakness. Now, chain convenience stores including Meiyijia are trying to sell bulk snacks in their stores. But it basically won't work. Because their main business is still the original convenience store, and Nongfu Spring won't drop to 1.2 yuan. Without these traffic-driving products, business will remain the same. Q: So, what is the key for Snack Busy to expand beyond Hunan? A: Take away convenience stores' business. In other places, just directly compete with convenience stores. Why bother with snack stores? Convenience stores have been educated nationwide, while snack stores are a new category that needs education again. You sell similar products to convenience stores; if you beat them, you become the king of convenience stores. Q: Is low price the best model for retail? A: Look at other retail formats; which one didn't succeed with low prices? Walmart's everyday low prices; Costco, which was mobbed by Shanghai aunties; Japan's Don Quijote; Germany's ALDI... Even Yonghui succeeded because Chongqing New Century Supermarket had high prices. Also e-commerce, live streaming, etc. Of course, the key is how you achieve low prices. And in retail, low price is the most powerful weapon. Q: Any expectations for future community business models? A: In the foreseeable future, three formats will remain around communities, all related to food. The community store model focused on fresh produce; the chain convenience store model focused on pre-cooked food and fresh food; and another model: the Snack Busy model, focused on snacks while also taking over other convenience stores and small shops. Bio: Sunshine Head, 10 years of entrepreneurship, focusing on food marketing. Main focus: corporate strategy and marketing. Good at interpreting business truths from a human perspective and logic. After ten years of sharpening a sword, I now share my 10 years of entrepreneurial experience with you, providing a practical and rich guide to avoid pitfalls. I also welcome discussions and exchanges with friends. PS: From September 23-25, 2021, the 2021 (4th) China FMCG Conference, hosted by New Distribution, will be held in Shanghai. Focusing on industry trends + practical cases + growth connections, 3,000 FMCG practitioners will gather. 11 themed forums cover new consumption: Zero Snack Era·Light Wellness, Small Categories·Big Bang, Gen Z·New Wine and Tea; new retail: Community E-commerce, Mid-game? Endgame? Interpretation, Heavy Investment in Local O2O, Short Video and Live Streaming; new marketing: Digitalization, BC Integration, Martech, DTC and Private Traffic, Distribution B2B, Big Merchants and Digital Distribution, etc., with operators from various segments bringing the latest case studies. Confirmed heavyweight guests so far include: 1. Tao Shiquan, founder of Jiangxiaobai; 2. Yao Xuhong, general manager of Meiyijia Holdings; 3. Lu Xiuqiong, global expert partner at Bain & Company and former VP of marketing for Coca-Cola China; 4. Chen Xiaodong, senior VP of Nestlé Greater China; 5. Zhang Fujun, president of Lee Kum Kee Sauce Group China; 6. Bi Chaojiao, general manager of China Resources Snow Breweries Marketing Center; 7. Yang Hongbin, VP of Junlebao Dairy Group; 8. Yang Shun, COO of Lipton Greater China; 9. Zhang Yipeng, general manager of Kuaishou E-commerce SKA Brand Operations Center; 10. Li De, e-commerce general manager of Gold Hong Ye Paper Group... A grand event for FMCG professionals; you must be there! Are you "watching" me?