A company may collapse for many reasons, but Wang Yumeng never expected that the last straw would be 'low prices.' Not long ago, her original leaf tea brand Chabiubiu was removed by Hema, because Hema was transforming into a 'discount store' model. In Hema's new story of 'low prices,' Chabiubiu's mid-to-high-end positioning became incompatible with Hema's 'back to basics' approach. Once, Hema was an ally in the same camp of consumption upgrading, but now, seeing her product priced at 79 yuan sold on Hema's shelves at a 'loss-leading price' of 39.98 yuan, under the banner of 'Everyday Low Prices, Every Item a Hit,' Wang sighed, 'What a bitter irony.' The logic of consumption has clearly flipped 360 degrees. The consumption views of middle-class families and young people in first- and second-tier cities supported the 'premium' imagination of the last round of consumption upgrading. Internet professional Zhang Bing described his past spending habits with a classic line from the movie 'Big Shot's Funeral': 'Not the best, but the most expensive.' He would buy expensive creams and new iPhones without blinking, believing 'expensive has its reasons,' and salads at 60-70 yuan and coffees or milk teas at 30-40 yuan were commonplace. But this consumption view was tied to stable cash flow and ever-rising family assets. Once the stable foundation began to shake, this group became like birds startled by the mere twang of a bowstring. They chose to live within their means and return to frugality, hence household savings hit new highs. As Japanese scholar Kenichi Ohmae proposed in his 'M-shaped society' consumption characteristics, the once-largest middle-income class mostly fell into low-income or lower-middle-income, the original middle class sank and became very small, so society looks like a stretched 'M.' In saving mode, most people prefer affordable brands. Companies that can meet these needs grow rapidly; Saizeriya and Uniqlo were consumption champions that rode through the cycles of Japan's Great Recession starting in the 1990s. A similar story is unfolding in China. New consumption that believed in 'consumption upgrading' has cooled; sodas at 7-8 yuan a bottle, ramen at 30-40 yuan a bowl, and ice cream at over 10 yuan a piece, along with the companies behind them, are ignored. Affordable snack brands like Lingshi Henmang, Tastien, and Guoquan Huishi have quietly grown into hidden giants, and 'ten-yuan store' Miniso is enjoying a second spring. Big-ticket consumption is no exception. While Li Auto, Xpeng, and NIO sold over 400,000 new energy vehicles combined this year, BYD alone, with its 'more features, lower price' killer move, is approaching its annual target of 3 million vehicles, becoming a top student earning 100 million yuan a day, studied by both old and new car companies. Several e-commerce giants have unanimously made 'low prices' a strategic priority this year, engaging in a series of price competitions. Pinduoduo, which has always emphasized 'price power,' has been most favored by the capital market this year, with its market value rising from a low of $40 billion in the first half of last year to $150 billion, closing in on Alibaba. All these signals point to one fact: welcome to the era of affordable prices.
Overcoming the inertia of consumption upgrading 'China will definitely give birth to its own luxury brands.' A few years ago, consumer investor Henry said this with confidence, and based on this judgment, he invested in a domestic luxury bag brand. At that time, new consumption was surging, and Henry was not alone in thinking this way. Then, the highest-valued new consumption brands—Pop Mart, Heytea, Genki Forest, and Perfect Diary—seemed to confirm the significance of 'premium pricing.' In the eyes of the founders mentioned above, 'Among the four companies, Perfect Diary is the only one that did poorly, and it is also the only one that made cheap products.' In the mood of the times, Pinduoduo's rise seemed more like an accident. In 2019, Tang Binsen, founder of Genki Forest, who had won a round by 'upgrading' sugar substitutes, bet with investors on whether Pinduoduo would succeed; he bet it wouldn't. Tang Binsen is definitely a proponent of consumption upgrading. And the Challenger Capital he founded mostly seeks to bet on brands with similar genes, such as Guanyun Baijiu, Lamian Shuo, Wangxiaolu, and Duanmu Liangjin. 'Boss Tang bets that ordinary people will definitely get richer, and the entire Genki system of brands is about making things expensive,' said a founder of a Genki-affiliated brand. Qicheng Capital, founded in 2017, was one of the few institutions at the time keen on mass essential consumer goods, with projects focusing on high cost-performance, including Shiyue Daotian, Guoquan Huishi, Yuanshi Muyu, and Lingshi Henmang. Compared to those 'high-premium' brands that are hard to win shares in, Qicheng Capital revealed that many of their 'affordable' deals were rarely contested. During the time when Heytea, representing consumption-upgrading tea drinks, was continuously raising funds and its valuation was climbing step by step, Mixue Bingcheng was a missed opportunity. According to insiders, in the years before 2020, Mixue Bingcheng had almost no capital attention; 'No brand, no fame, in everyone's eyes (Mixue) might just be grassroots.' It wasn't until it quietly grew to a scale of 10,000 stores that capital came to its senses. The wind began to shift during the pandemic. 'People seemed to stop buying; originally, a regular store in Beijing could achieve daily sales of 60,000 yuan, but gradually dropped to 30,000-40,000.' From mid-2020, regional manager Li Fei felt something was wrong; although stores were still expanding rapidly, milk tea at over 30 yuan a cup was no longer as popular as before. On the low-to-mid price side, brands priced within 20 yuan, such as Shuyi Shao Xiancao, Guming, Shanghai Auntie, and Tianlala, all surpassed 5,000 stores during the three years of the pandemic. Mixue Bingcheng, which had no rivals in the under-10-yuan price band, doubled its store count from 10,000 to 20,000 in just over a year. Anxiety spread within Heytea, but whether to change pricing and positioning was a difficult decision. At the 2022 annual meeting, Heytea founder Nie Yunchen proactively mentioned Mixue Bingcheng, telling employees that Heytea and Mixue have different styles and should not blindly follow; even if they go down to third- and fourth-tier cities, Heytea would still be a mid-to-high-end beverage brand, not what everyone sees as Mixue. However, a month later, Heytea suddenly announced a price cut across the board, bringing over 90% of its drinks under 20 yuan. Li Fei felt the price cut came without any warning and was very swift. Not long after, the news of Heytea opening franchising came out of the blue, which shocked a former Heytea executive. The successive decisions may be related to strong pressure from investors. In the story of Heytea's rapid growth, Nie Yunchen had an almost 'stubborn' insistence on direct operation, products, and pricing; price cuts and franchising were contrary to this, and rumors circulated that he had a very unpleasant dispute with investors over this. The body is honest; a company overcoming inertia and truly stepping out of its 'comfort zone' is always full of pain and entanglement.
Learn to save money before getting big The most headache-inducing problem is right in front of us: in the new consumption rules, burning money on subsidies can easily lower prices, but when capital stops providing blood, how can low prices be achieved? The consumption champions that have ridden through cycles have actually revealed the answer: affordable brands must first learn to save money like their own users. 'Barrels of syrup in different flavors, all boiled by ourselves: dice strawberries or other fruits, add sugar, boil in a pot until sticky, then pack them in bottles and jars, and transport them to the store by tricycle.' Zhang Hongfu, general manager of Mixue Bingcheng, recalled in his entrepreneurial diary the early days of the 'Hanliu Shaved Ice' shop (the predecessor of Mixue Bingcheng), mentioning that the two brothers made all the equipment and raw materials themselves; there was no concept of supply chain at that time, but they knew they had to save money. To this day, 'saving money' is ingrained in Mixue Bingcheng's DNA. Online, customers often ask: Why are there so many cooking oil containers in Mixue Bingcheng stores? Does Mixue need oil to make drinks? In the photos they post, either shelves are stacked with barrels of 'cooking oil,' or staff are pouring 'oil' into equipment. Bystanders' answers vary: making ice cream cones definitely needs oil; adding oil helps ice cream set; cream is oil plus eggs. In fact, that is the syrup used to make drinks. To produce the bottles for the syrup, Mixue Bingcheng set up a bottle-blowing workshop in its huge factory, producing over 70,000 pieces a day, saving 0.5 yuan per bottle compared to outsourcing. Calculated, just the bottle material saves Mixue nearly 150,000 yuan a day. Mixue has countless such cost-control stories, and the affordable snack brand Zhao Yiming has similar insights. Changing the display boxes in snack stores from slanted to square saves about 4 minutes per item in restocking time, and 100 items is equivalent to saving one labor force; replacing colored boxes with kraft paper boxes saves two to three yuan each; modifying boxes to be expandable, from 5 jin to 10 jin, only increases packaging material by about 1.5 times, saving a few more yuan. This is not what Heytea was good at in the past. Previously, to grab fruits, Heytea could pay high prices; for example, for grapes, no matter what others offered, Heytea could pay 30% more; when perfume lemons first became popular, Heytea even raised prices so high that competitors gave up. This kind of extravagance is no longer appropriate. Li Fei told the author that Heytea changed its original rough ordering method and rebuilt an ordering logic: inputting sales revenue can calculate how much material is needed, and stores adjust slightly after receiving the suggested order quantity, which is much better for cost control than before. Heytea also created a scheduling system based on product and flow adjustments to increase per-person sales. Product configuration was also adjusted: originally a drink cost 32 yuan with 8 ingredients, now it's 19 yuan with only 6, and the remaining can be added as extra toppings; the standard cup size also changed from 700ml to 500ml. Different industries, stages, and links have different points where savings can be made; you can control costs by hiring fewer people in stores, or by purchasing cheaper ingredients and packaging materials, or by using lower logistics costs. However, careful budgeting alone is not enough; for an affordable business to last, it ultimately needs scale. In 2023, when several thousand-store tea brands are all striving toward '10,000 stores,' close combat is inevitable, and stories of grabbing storefronts happen every day. Once, a franchisee in Shijiazhuang had his eye on a prime location, but someone else got there first. When the person in charge of Tianlala's franchise recruitment department learned of this, he rushed from Hohhot, where he was on a business trip, to Shijiazhuang, negotiated multiple times with the landlord, and finally helped the franchisee secure the store by paying a high transfer fee, allowing it to open smoothly. When the smoke isn't too thick, careful selection is good, but in the past three years, on commercial streets across China, good locations have become scarce; 'even restrained brands have become unrestrained, opening stores in places they could and couldn't,' an industry insider told the author. Not only do you need to grab good locations, but you also need to grab franchisees—letting more partners 'bring capital' in can undoubtedly help brands scale up faster. Cudi Coffee, which has already opened 5,000 stores, has always used the label of Luckin's founder's brand in the franchise market, seizing the gap when Luckin hadn't opened secondary franchising, attracting a large number of franchisees. Under pressure, Luckin announced this year that it would open 'store-with-store franchising.' 'This year is very critical.' Tianlala's general manager Xu Zhou already feels that offline recruitment is more intense than in previous years; not only are competitors spending big on advertising and grabbing customers, but other chain brands in different tracks are also trying to divert franchisees. He gave an example: some catering brands will fake milk tea recruitment ads to attract interested franchisees, then persuade them to join their own brand by citing reasons like high risk and low average order value in milk tea. Managing franchisees well is another profound knowledge in the affordable business. 'You have to persuade them in their language system, provide emotional value, and create a culture like home.' A founder of an affordable tea brand said he has been learning from peer Guming, a tea brand from Zhejiang that is frequently mentioned in the industry for its good franchisee recognition. Of course, in the end, it comes down to one thing: you have to help franchisees make money.
The trap of 'affordable' Although more and more winners are emerging, more often than not, the affordable business is 'beautiful in appearance.' A few years ago, after Pinduoduo grew wildly in the blind spots of Tmall and JD.com, an institutional investor who missed it was deeply regretful of his misjudgment. To ease his frustration, he kept looking for similar targets and later invested in a consumer goods company focused on low prices, learning from Pinduoduo's low-price, high-volume approach, but ended up losing more with each sale and had to close down. After reflection, the team realized they had fallen into a misunderstanding—focusing too much on low prices while ignoring other factors. 'Low price means low gross margin; if the platform or supply chain squeezes, it becomes negative profit. The more you sell, the more you lose.' The harsher reality is that not all brands have the ability to lower prices while maintaining quality; they often slide into the abyss of low price and low quality. 'Low price, but not necessarily high quality, was a shortcoming of our previous projects.' Later, the institution suggested that another low-price brand it invested in make some innovative changes to its products, so that users wouldn't have a sensory experience of quality degradation, and appropriately raise prices a bit, still cheaper than traditional big brands, but with substantially improved profit margins. A consensus about the affordable business is gradually forming: affordable doesn't mean absolutely cheap, but making people feel 'great value.' 'Even if you sell for a few yuan, you need to have quality beyond a few yuan,' said a tea brand founder. Similarly, don't think low price is a universal weapon and that having a price advantage means you can rest easy. Tojiro Kataya, senior researcher at Qicheng Capital, said that compressing supply chain links or gritting your teeth can temporarily lower prices, but such a simple low-price strategy cannot last. 'Consumers pay for good products; they need better taste, better drinks, and more choices—these are basic prerequisites. On this basis, companies need to continuously deepen affordability through innovations in processes or models, so as to infinitely expand the momentum of affordability.' Don't think Mixue Bingcheng is invincible; its challengers have never stopped. There is a brand in Shandong called Ice Time, which resembles Mixue from name to products; for example, its lemonade can't match Mixue's taste. When Cudi challenged Luckin with 9.9 yuan, it attracted many people to try, but online, wherever the two appear together, many voices say it's not as good as Luckin, and people flock back. After Heytea cut prices, the sales of the multiple stores managed by Li Fei rebounded significantly. After opening franchising, Heytea's store count expanded from over 800 to over 2,000 this year. Additionally, according to a senior executive of a tea brand, Heytea's profit performance in the first half of the year was also good. This is precisely because it held a bottom line: never become bad-tasting because of price cuts. 'Consumer stickiness is ultimately determined by product competitiveness—not absolute low price, but the product,' a consumer investor who insists on investing in affordable told the author. This is a correct cliché, but it is also the truth of consumption.
(Henry is a pseudonym) (Cover source: Visual China)