Recently, the snack collection store brand 'Zhao Yiming Snacks' completed a 150 million yuan Series A financing round, led by Black Ant Capital with Bestore following. Combined with previous financing news from brands like 'Snack Busy', 'Snack Youming', and 'Panda Momo', snack collection stores focusing on bulk low prices have suddenly become hot. What is a snack collection store? Simply put, it removes the snack food distributor link, directly sourcing or OEMing products from factories, offering low prices and product diversity. In other words, it can be seen as a low-end version of 'Bestore'. How is the listed company 'Bestore' performing? According to its 2021 financial report, Bestore's net profit fell by 18.06%; in the first three quarters of 2022, it fell another 8.84% year-on-year. Bestore, which focuses on brand and quality with higher prices, is not performing well. What about the low-end version of 'Bestore'? Is the snack collection store model, repeatedly backed by capital, truly worth being optimistic about? Mr. Yang is a veteran snack food distributor in Chongqing, deeply rooted in the local market for nearly two decades, and also runs a dozen convenience stores. He says he is not optimistic about the current snack collection store model. The following is an interview transcript with Mr. Yang by 'New Distribution' (first-person narrative). Why am I not optimistic about low-price snack stores? Looking at the development of snack channels over the years, whether it's Bestore or Lai Yifen, those following the retail chain specialty store model have not developed well. Their revenue scale and net profit are completely disproportionate, and their profit margins cannot compare with traditional giants like Qiaqia. I am not optimistic about the low-price snack specialty model, mainly for several reasons: First, snacks have never been a high-frequency consumption category. Snack stores often need other daily necessities to drive traffic, unless they are in locations with very high foot traffic, where there can be enough customer flow and consumption. But high-traffic locations are extremely expensive, and low-price, low-frequency snack stores find it hard to survive long-term. Looking at the Chongqing market, many snack stores have died. There is a local brand called 'Zuishang Snacks' that imitates 'Snack Busy', which had over 200 stores at its peak, but now nearly 30% of its stores have closed, and it continues to close more. So, low-price snack stores often face a dilemma: either no customer flow and die from poverty, or costs are too high and die from losses. Second, low-price snack collection stores are not an innovative model, and there is a cost paradox. Snack collection stores and Bestore share the same model: upstream factories and downstream specialty stores. Bestore also removed the middleman, sells at higher prices, yet its net profit margin is only one or two percentage points. Snack collection stores have not reduced any steps, but prices are lower—where does the money come from? Additionally, low-price snack collection stores face huge quality risks. The low prices offered to consumers mean that upstream, it is difficult to implement strict quality management like Bestore; they all choose lower-cost producers. But snacks are a category where quality control is very difficult. Even listed companies like Lai Yifen and Bestore have repeatedly faced quality issues, let alone these snack collection store brands? The economy is not good now, consumers have less money in their pockets, and consumption of non-essential items like snacks will decrease, while quality remains high-risk. How long can the snack collection store model stay hot? I think a large number of franchise stores will soon suffer losses and close. Third, the franchisor's profits mainly come from cutting franchisees' leeks. How much investment is needed to franchise a snack collection store? Let's do the math. A 50-60 square meter snack store has no competitiveness; they need to be relatively larger. Stores with some brand presence are generally 100 to 200 square meters. Recently, the franchise fee for one store was 28,800 yuan. A 100-square-meter simple renovation costs at least 100,000 yuan, plus shelves at 100,000 yuan, stocking goods at 150,000 yuan, and initial rent for half a year at 100,000 yuan, totaling about 500,000 yuan. Such an investment is very stressful to recoup by selling low-price snacks. I have learned about some franchisees; they basically don't make much money, and the money is taken by the franchisor. What kind of low-price retail has a future? I have been in the distribution business for over a decade and have opened over a dozen supermarkets and convenience stores. I believe the most promising retail format in the future is the 'discount store + local internet' model. The era of high economic growth is over, and it is very difficult to achieve high growth again in the short term. Retail formats that focus on high quality and low prices for daily necessities will definitely become a trend. Therefore, I am very optimistic about the local development of the Aldi discount model popular in Europe. There is a 'Tiaoma' discount store in Chongqing that focuses on 'hard discount', keeping SKUs at around 500 best-selling items, all daily necessities for families. I am also a core supplier to 'Tiaoma', so I know its situation well. In recent years, 'Tiaoma' has developed very quickly. Currently, it has about 150 stores in Chongqing, with average monthly sales per store exceeding 1 million yuan, about five times that of traditional stores of the same size, and average monthly profit per store is about 50,000 yuan. The 'Tiaoma' model's profitability is also good. It deeply cooperates with upstream food and beverage distributors or manufacturers, leveraging scale procurement advantages to get the best prices for best-selling products, gaining traffic and revenue scale; then it implements OEM production strategies in categories with low brand concentration, such as snacks, to obtain profits. At the same time, it keeps SKUs at around 500 best-sellers, greatly compressing management and supply chain costs, improving capital turnover efficiency, and ensuring store profitability on a low gross margin basis. In the low-price retail model, the retailer is the consumer's buyer; every product is a necessity and a fast-moving item, pursuing the highest transaction efficiency. At this point, having too many products causes confusion; fewer is clearer. Additionally, when opening such 'discount stores', one must be good at using WeChat and local internet platforms to continuously cultivate a loyal customer base and expand the store's influence radius. The initial success of the 'Tiaoma' model in Chongqing is the success of overall commercial efficiency. It is a business model with lower costs, higher efficiency, guaranteed quality, and more consumer-friendly, proving that pursuing the ultimate 'quality-price ratio' has a future. Why do I think retail collection stores cannot succeed? Compared with the 'discount store' model, its categories are non-essential, more complex, and harder to control quality. It is not a 'low-price' model that truly benefits consumers. Unless current snack collection stores change their approach and move toward the hard discount convenience store model for daily necessities, they have no future. Final thoughts: Whether the snack collection store model is a flash in the pan or sustainable remains to be seen, but its current development trend also represents, to some extent, the existence of market demand. To see how it will develop in the future, you can come to the 2023 China FMCG Innovation Conference and talk with industry head brand executives and excellent distributors. If you are planning to enter the snack collection store market, I believe this conference will bring you great gains. From April 6-8, 2023, the 2023 China FMCG Innovation Conference will be held grandly in [Chengdu]. This conference will focus on the theme 'New World, New FMCG', with 3 days, 130 guests, and 13 parallel forums, bringing together industry head brand executives, platform founders, and excellent distributors from across the country to discuss the latest trends in the FMCG industry, the latest changes in channels, and the latest market development trends in the new world era, learning how to respond to new changes, achieve new growth, and become new FMCG in the new world!**