Click to read the original text for details The pandemic, which began three years ago, has pushed many companies to the brink of anxiety and giving up. In the spring of 2020, at the start of the pandemic, the founder of the restaurant chain Xibei stated that the company lost 700-800 million yuan in revenue around the Spring Festival, and if the situation continued, its cash reserves would "not last three months." "Insomnia is a minor issue; I've been holding on until now, but I'm about to reach the breaking point. Honestly, this is the straw that breaks the camel's back," said Wang Qiang, a restaurant owner, helplessly. Relying on over 20 years of experience and connections in the restaurant industry, he opened a Huaiyang cuisine restaurant in Liangmaqiao, East Third Ring Road, Beijing, in the second half of 2019, investing over 6 million yuan. Unexpectedly, just a few months after opening in August, the pandemic hit. "The pandemic keeps recurring; just as we recover for a few months, it comes back again." From a chef to a restaurant owner, Wang Qiang, like many peers, has personally experienced the pain the restaurant industry has endured over the past three years. Under the pandemic, besides catering and retail, industries such as civil aviation and tourism have also been struggling. 1 Restaurant Industry: Closing Stores to Cut Losses During the Spring Festival of 2020, the sudden outbreak of COVID-19 hit the restaurant industry first. According to the "Survey and Analysis Report on the Operating Conditions and Development Trends of China's Catering Industry during the COVID-19 Pandemic" released by the China Cuisine Association at that time, 78% of catering enterprises suffered a 100% loss in operating revenue during the pandemic. "The losses are too high; when I calculate carefully, it's over 10 million yuan," Wang Qiang said. Since opening in August 2019, his restaurant has been closed intermittently four or five times, each closure lasting from 2 months to over 4 months. "Such closures have wiped out all the revenue from the opening period. For a new store, such losses are unbearable." Wang Qiang's situation is just a microcosm of the restaurant industry. "These three years of the pandemic have been tough for all restaurant peers. Several friends who run chain direct-sale stores have been closing stores to stop losses," Wang Qiang said. According to Qichacha data, in 2021, the number of catering-related enterprises that were cancelled or revoked reached 935,000. Industry insiders told Ling Shou that the difficulties in the restaurant industry mainly focus on two aspects: First, while unable to operate normally, store rents and employee social insurance must be paid on time, and the payment of large amounts of rent and other fees can lead to insufficient cash flow for enterprises; Second, local epidemic prevention and control policies are unstable and often over-implemented, making operations even more difficult for many enterprises. With the recurring pandemic, few companies in the restaurant market can sit still. Even leading companies have begun closing stores to stop losses and adjusting strategies to save themselves. Since the pandemic in 2020, with the massive closure of restaurant outlets and the freeing up of market space, Haidilao attempted to expand against the trend and bottom-fish the restaurant market. In just two years, its store count increased from 768 to 1,443, successfully doubling. However, the early positioning did not bring the dividend of recovery but instead hit a new low since its listing in September 2018—recording its first annual loss in 2020. Haidilao had to launch a large-scale store closure campaign, permanently closing 260 stores in 2021. Similarly, the hot pot company Xiabuxiabu closed 229 stores in 2021, exceeding the total closures of the past seven years, and recorded a net loss attributable to shareholders of -293 million yuan, mired in huge losses. Against this backdrop, on April 6, the State Council executive meeting was held, calling for increased relief and employment support for industries severely impacted by the pandemic. The meeting required that for industries severely hit by the pandemic, such as catering, retail, tourism, and civil aviation, the payment of pension insurance premiums be deferred in the second quarter of 2022, and the scope of the already-implemented phased deferral of unemployment and work injury insurance premiums be expanded to alleviate the financial pressure on these industries, especially small, medium, and micro enterprises and individual businesses. "At the beginning of this wave of the pandemic in Beijing, there were policies advocating rent exemptions, but for us, it's unlikely that individual landlords will waive rent," Wang Qiang told Ling Shou. For restaurant owners like Wang Qiang, the most important thing now is cash flow recovery and a stable operating environment, which are prerequisites for survival. 2 New Consumer Sector Becomes a Hard-Hit Area This round of the pandemic is arguably the most severe since the initial outbreak in early 2020. It is characterized by a long duration and relatively wide spread, coupled with a weak domestic economy and insufficient consumer confidence, making the new consumer sector a hard-hit area. Looking at the new tea drink track, in March this year, Lelecha closed its last store in Guangzhou, fully withdrawing from the South China market; Chayan Yuese revealed that it lost an average of 20 million yuan per month during the pandemic and launched its third round of concentrated store closures in November last year; since the end of last year, Heytea was reported to have undergone major internal layoffs involving 30% of employees; Naixue Tea, listed in Hong Kong, had an adjusted net loss of approximately 145 million yuan in 2021. New tea drink companies under the pandemic, from layoffs, store closures, price cuts, to strategic contraction, cannot hide their anxiety. As a star track in recent years, the new tea drink industry has seen a large influx of capital. For both investment institutions and companies, listing is the ultimate goal. However, currently, only Naixue Tea is listed in this track. Clearly, many companies are waiting for IPOs, including Heytea, Mixue Bingcheng, and Lelecha, all of which have been rumored to go public. Industry insiders analyze that these brands are also the most eager to list. With the support of capital, the new tea drink track has seen explosive growth. Lelecha, Guming, Shuyi Shaoxiancao, ChaBaiDao, traditional milk tea shops transforming, and new brands emerging—old and new players are crowding in. In 2021, various traditional and new consumer products benefited to some extent from the era's dividends. The domestic economic cycle accelerated the "internal circulation" of consumer goods, and the easing of the pandemic brought a small boom to milk tea drinks. In this environment, a large number of new tea drink enterprises that rely on capital transfusion to survive quickly emerged. But now, with the new consumer track weakening, capital attention has shifted to semiconductors, synthetic biology, or Web 3 projects. For those internet-famous new tea drink brands that emerged rapidly and urgently need capital transfusion, it seems they have come to a crossroads. Additionally, it is worth mentioning that the low-alcohol beverage market, which was favored by capital last year, is also seeing a significant contraction in market size. According to data from the China Chain Store & Franchise Association, the number of small bars in China reached 35,000 in 2020, a decrease of 7,000 from 2019. In 2021, although the market size of the small bar industry grew from the previous year, due to pandemic disruptions, the number of stores only reached 38,000, not recovering to pre-pandemic levels. Furthermore, fast fashion consumption such as cosmetics and clothing has also been severely affected by the pandemic. According to Ling Shou's review of the interim report for fiscal year 2022 (September 1, 2021, to February 28, 2022) of Fast Retailing, the parent company of Uniqlo, even though total revenue reached 1.22 trillion yen, a year-on-year increase of 1.3%, and operating profit was 189.278 billion yen, a year-on-year increase of 12.7%, Uniqlo's sales revenue and operating profit in the Chinese market both declined, with 133 stores in Greater China temporarily closed. Besides Uniqlo, many overseas fast fashion clothing brands have been caught in a "wave of store closures" in recent years, retreating from the offline market in China. For example, in January 2021, Inditex, the parent company of Zara, announced plans to close all Chinese stores of its three sub-brands, retaining only their official websites and Tmall flagship stores. Previously, brands such as Old Navy and Esprit under GAP also announced complete store closures and withdrawal from the domestic market. On one hand, the recurring pandemic has led to a sharp decline in offline revenue; on the other hand, store opening costs remain high. Retail "new species" have also collectively fallen into the quagmire of store closures. WOW COLOUR's total store count is only 135, half of its peak of 300; THE COLORIST's franchise stores decreased from 170 to 111, closing 59; NOISY Beauty closed nearly 10 stores. Under the impact of the pandemic and various factors, new consumer brands are directly facing industry shocks, and being unable to ship, incurring losses, and closing stores have become realities that many retail brands have to accept. 3 Retail Supermarkets on the Frontline In 2021, facing the complex economic situation under the pandemic, major supermarkets began to frequently close stores to reduce losses, especially those with long-term losses and no hope of profitability. It is reported that in 2021, 19 listed supermarket companies closed a total of 806 stores, with Lianhua Supermarket, Hongqi Chain, and Zhongbai Group closing 294, 146, and 130 stores respectively. Renrenle and Bubugao also closed more stores than they opened. It is worth mentioning that on March 31 this year, Carrefour's flagship store in Zhongguancun, Beijing, the largest in Asia, also closed. According to statistics, from 2018 to 2022, Carrefour closed more than 80 stores in China. However, entering 2022, supermarkets have shown rare signs of recovery. In the first quarter, including Yonghui Superstores, Lianhua Supermarket, and Andeli Department Store, not only did revenue grow year-on-year, but net profits also turned positive. Among them, Yonghui's net profit surged over 20 times year-on-year, and Andeli's increased nearly 30 times. Industry analysis attributes this to: first, under the pandemic, residents' stockpiling and government procurement for supply guarantees, coupled with consumption coupons, drove demand growth; second, with capital retreat and strict government regulation, emerging business formats such as internet platforms have adjusted and contracted, reducing price wars and alleviating pressure on supermarket diversion and gross margins; third, rising CPI is also conducive to same-store sales growth. In this regard, industry observers told Ling Shou that the recovery of supermarkets in the first quarter is due to, on one hand, the contribution of Spring Festival holiday consumption to supermarket performance, and on the other hand, the "stockpiling" by everyone during the pandemic, which has improved enterprise performance over the past two years. Additionally, some companies have actively built digital capabilities, optimized supply chains, and improved home delivery business and online operations. With the improvement of the industry's operating environment, the supermarket industry's profitability is expected to recover in 2022. The above-mentioned person said that overall, under the forced pressure of the pandemic and the unfavorable market environment, many companies have actively responded and made some progress. Next, they should further improve in areas such as matching consumer needs. With the further impact of the pandemic and the new normal of the economy, no company can be immune. Apart from limited responses, we can only hope that the pandemic ends soon and that relevant policies can be adjusted and changed, after all, too many companies are struggling on the brink of death. Survival is the greatest hope. Source: Ling Shou (ID: lingshouke) Author: Qingshan Good article! Must like, watch, and share.