Introduction: In addition to strict quality requirements, one must also possess an unparalleled overwhelming advantage. Author: Wang Shiqin

As the snack discount chain brand "Lingshi Youming" announced its B+ round of financing, the snack market has once again stirred up waves.

"Lingshi Youming" was led by Shenwang Fund under New Hope, with Jiayu Capital following. This is the fifth round of financing for the brand in just over two years. Previous investors include Yunlu Capital, Kaifu Fund, Xinxian Capital, etc., all signaling to the outside world that the snack industry is about to usher in a new trend.

Snack collection stores that have gradually grown over the past decade share common characteristics: rapid expansion, strong regional focus, and a focus on lower-tier markets. An indisputable fact is that a large portion of snack collection store consumers do not have strong willingness to spend large amounts, which also determines the current development direction of the snack collection track.

So, are snack collection stores originating from Hunan really a good business?

Are Snack Collection Stores a Rashomon?

Gaoqiao Grand Market is the nourishing source for snack collection stores, providing goods that radiate across the entire South China region, enabling snack collection stores to grow conveniently and quickly during their startup phase.

The fast, short, and efficient approach, combined with the characteristics of snack products having no cycle limits, quick payment recovery, and high production and sales efficiency, allows hundreds or thousands of stores to be opened in a short period. The rapid expansion method lies in replicating franchising.

According to the official website of Lingshi Youming, for a store area of about 100 square meters, including deposit, decoration, shelves, surveillance, air conditioning, cash register equipment, initial stocking of beverages, milk, yogurt, and opening preparation costs, the total is about 510,000 yuan.

The author calculated that adding rent, store transfer fees, labor costs, etc., franchising a prime location may require around one million yuan.

The company provides franchisees with four aspects of service: expansion, training, operations, and promotion. This also corresponds to four pain points: site selection, in-store training, supervision, and customer traffic. It solves many franchisees' needs and alleviates their anxiety.

Image: Lingshi Youming official website

Lingshi Youming organizes a 6-day training session to help franchisees and employees better integrate into the business. At the same time, a professional team handles site selection to solve the traffic problem. Additionally, supervision and online customer traffic generation use internet operational thinking to productize the entire snack collection store, continuously expanding single-store momentum through publicity and completing offline customer traffic generation.

The effect is immediate, with over 1,000 SKUs currently on the shelves.

With high industry prosperity, capital is more willing to pay for it. In May 2022, "Linshi Mofa" announced an angel round financing of nearly 10 million yuan. Earlier entrant Zhao Yiming Snacks completed a 150 million yuan A-round financing in February this year, led by Heiyi Capital with Liangpin Puzi following, and has over 1,200 stores, mostly concentrated in county towns.

Similarly, Lingshi Youming also delivered a report card of 1,200 stores in April 2023, which means that, together with Lingshi Youxuan's over 1,000 stores, Haoxianglai's over 1,200 stores, Lingshi Henmang's over 2,000 stores, and Ailingshi's over 1,000 stores, the total number of stores in the industry is nearly 10,000.

The head echelon of the entire industry has formed, and high gross margins are the only way to make money. Taking Ailingshi as an example, the average daily sales per store start at 12,000 yuan, with a gross margin of 20%, and the estimated daily sales per square meter can reach 120. Some stores can even achieve 30,000-40,000 yuan per day, which is very impressive.

At the same time, some small brands have gradually lost their voice. Within 500 meters of the author's building, two snack collection stores have closed down, leaving only recruitment and agency posters, and a few remaining empty shelves. This all shows that head snack collection store brands have their core strengths, and it's not just "anyone can do it."

Therefore, amidst the crazy pursuit of capital, it is worth exploring whether snack collection stores are a business that anyone can do. Unlike the popularity of Lingshi Henmang, the survival status of small brands seems lackluster, with store openings and closures happening like a revolving door, reminiscent of Rashomon.

In the movie, everyone has a different story about who committed the murder. In reality, whether snack collection stores are a good business is also like that. Some people can make a fortune daily, while others struggle to make a living. Where is the key? Is it in scale?

Competition in the Industry Has Become White-Hot

Scale is, of course, the foundation of snack collection stores. Without scale, there is no supply chain advantage, but having scale alone is not enough.

The low-price strategy is the winning weapon for snack collection stores. Therefore, to maintain their advantage, snack collection stores often build their own warehouses or rent warehouses.

Ailingshi has 55,000 square meters of self-operated logistics with next-day delivery, Lingshi Youxuan has a 40,000 square meter warehousing center, Haoxianglai has 150,000 square meters across 7 distribution centers, and Lingshi Henmang's four logistics warehouses in Changsha, Hengyang, Nanchang, and Jingmen total over 80,000 square meters. Adding Lingshi Youming's 120,000 square meters, the head snack collection stores have a total warehousing area of 445,000 square meters. The effort put in is reflected in consumer response.

Image: Ailingshi official website

Yanjin Puzi's 2022 financial report shows that snack collection stores have become Yanjin Puzi's main business, contributing 211 million yuan in revenue, accounting for 7.31% of annual sales, surpassing traditional supermarkets like Walmart and Bubugao.

In 2022, a total of 11 related companies in the leisure snack track received financing, with total financing exceeding 1.2 billion yuan.

Huatai Securities' food and beverage research group believes that compared to traditional stores, snack discount stores have advantages such as high cost-effectiveness, small SKU packaging with rich categories, community stores focusing on lower-tier markets, direct sourcing and supply from headquarters, and outstanding operational efficiency. Therefore, they describe the snack collection store channel as a "new round of channel dividend" for the leisure snack industry.

After the industry enjoyed the dividend, a flood of contestants rushed in. All this shows that the battle in the snack collection store arena within the entire leisure snack industry has become white-hot.

A research report introduced this model: directly supplied by manufacturers, avoiding middlemen's markup, thus lowering product prices to attract consumers to purchase.

From the data, snack collection stores have a considerable advantage over traditional snack stores, but investing in a snack discount store costs at least twice as much as a regular snack store. Additionally, at least four employees are needed. High returns come with high investment.

Image source: Internet

Brands rushing to make customized versions means the end of the blue ocean era, and snack collection stores have become another channel battlefield for brands. In fact, in today's head snack collection stores, you can buy mainstream brands found in supermarkets, and the line between KA and retail is almost blurred. During the pandemic, the author visited Ailingshi twice. Upon entering, the dazzling array of products offered many choices, and prices were low enough. I bought a large bag containing candies, plum snacks, drinks, jelly, and various snacks. The third-generation stores have been fully upgraded, and based on previous data feedback, the brand has made the traffic flow more reasonable. As soon as you enter, there are traffic-driving products, and next to the cash register are easily accessible candy pills, making the experience very reasonable.

Some people also think snack collection stores are just a gimmick and won't last long. Is that really the case?

Sustained Profitability Across Cycles

Objectively speaking, the industry does have a dividend period. The accelerated expansion of snack collection stores in 2022 is related to the special environment brought by the pandemic. At that time, people were reluctant to leave their communities, and online shopping was affected by logistics uncertainty, which boosted offline retail and created dividends. At the same time, due to the special circumstances, consumers often chose to buy snacks in bulk to avoid not being able to eat them when they wanted. But today, with the pandemic over, consumers have many more choices. What drives consumers to continue spending?

The most advantageous aspect of snack collection stores remains price. In the traditional retail model, snacks go through multiple links from the factory, such as regional agents, distributors, and retailers, and after each channel takes its share, the final retail price is determined. By bypassing intermediate links and directly connecting with brand manufacturers or upstream agents, cutting out middlemen, and passing savings to consumers, prices can be lowered. Unlike traditional supermarkets and KA channels, snack collection stores generally do not charge brands entry fees, display fees, barcode fees, or promotion fees, which saves manufacturers a lot of money and allows product prices to be lowered.

Consumers facing inflation and declining disposable income urgently need products with extreme cost-performance, and snack collection stores can perfectly provide that, offering a much stronger sense of value compared to other channels.

Besides price, operational capability determines the future of snack collection brands. Ailingshi's IP image is a cute little girl, which stems from the fact that over 60% of its user base is female, and most are young. The cuter and more playful, the more users like it. Such an image plays a key role in building brand awareness in users' minds. Having the strongest operational team in the industry is not just talk; a combination of publicity, procurement, and supply chain efforts yields immediate results. By creating 300-500 square meter concept stores in regional centers, they form a complete radiation to the local area, with amenities like rocking cars and game machines, forming a closed loop of online and offline operations, resulting in high customer repurchase rates.

As another battlefield for snack brands, competition is no less intense than in channels. Cutting out middlemen and connecting directly with manufacturers means players must compete on comprehensive operational and channel capabilities.

Besides price and operations, how to cross cycles? There are many things to try, and packaging is one breakthrough. Increasing portion sizes is an important means to enhance consumers' sense of value, changing from single packs to three or five packs. Single loose packs look clever but are somewhat awkward to eat. At the same time, offline activities including some promotional discounts are important means to attract consumers. In the current homogenization of online operations, community is particularly important. For store owners, business is still community business, and services still revolve around the community. There won't be a large number of consumers crossing half the city to shop.

The new god of management, Toshifumi Suzuki, once said: In addition to strict quality requirements, one must also possess an unparalleled overwhelming advantage.

In the future development of the snack collection store track, this statement also applies.