---
title: "These 6,000 Words Explain the Rules of Opening Stores in County Towns"
description: "The article discusses the challenges and opportunities of opening physical stores in China, particularly in lower-tier cities. It emphasizes that offline retail is saturated and requires a different approach than online, with key factors including location, naming, font, content, and customer flow pricing. The author shares insights from Ma Yingyao, founder of Shangmei Life Group, who has 6,000 stores, on how to succeed in county towns."
author: "沈帅波"
publisher: "New Distribution"
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published: "2019-05-11"
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# These 6,000 Words Explain the Rules of Opening Stores in County Towns

> The article discusses the challenges and opportunities of opening physical stores in China, particularly in lower-tier cities. It emphasizes that offline retail is saturated and requires a different approach than online, with key factors including location, naming, font, content, and customer flow pricing. The author shares insights from Ma Yingyao, founder of Shangmei Life Group, who has 6,000 stores, on how to succeed in county towns.

Author: Shen Shuaibo
Source: Jinbo Finance (ID: jinbubo)

The business world is always so wonderful. It is both spiraling upward and cyclical.
Take opening a store, for example. A few years ago, if someone mentioned opening a physical store to an investor, the investor would think you were crazy. But today, the investment community is eagerly looking for people and projects that can open stores, are good at opening stores, and can open many stores. The saying "thirty years east of the river, thirty years west of the river" probably describes this situation.
On one hand, capital is looking for offline projects; on the other hand, former offline giants have suffered setbacks globally, especially in China.
In 2017 alone, GAP closed over 50 net stores, with severe inventory backlog; the former catering giant Golden Jaguar is no longer glorious; Muji has cut prices repeatedly; IKEA's net profit plummeted by 40%...
Opening a store has never been an easy task. Even if you are a world-class giant, in today's Chinese offline market, there is a high probability you will end in failure.
Stores are also the oldest business model. As early as the Eastern Zhou period, China had already led the world with many stores, the oldest and most vital being inns and taverns.
So a huge difference between offline entrepreneurship and online innovation is that it is more like a proof problem: you need to use new-era methods to solve the eternal business's new answer, rather than proving your hypothesis online.
Today, we will delve into the matter of opening stores, exploring it from various levels and dimensions. Our guest today is Ma Yingyao, founder of Shangmei Life Group & ONE ZONE, who has 6,000 stores, covering hotels, KTV, and Nordic home lifestyle store ONE ZONE.
The following content is a deep processing of our conversation. We have eliminated fragments, clarified logic, made appropriate arrangements, and preserved 100% of the collision of ideas as much as possible.

Offline is irreplaceable,
but offline has long been a red ocean.
Shen Shuaibo: Why has the business world's enthusiasm returned to stores today? Because online is saturated. But this logic has a major flaw: if online is saturated, who says offline is not saturated? Ten years ago, offline was already saturated, which is why people turned to e-commerce. Hence, today, most who return to offline end in failure, because offline is even more brutal and difficult.
The so-called cross-border strike exists, but the premise is that in the industry you are entering, you understand what others understand, and you also understand what they don't. Then you can strike. If they understand what you don't, then before you can use your skills, you will be killed. Most retail projects that died this year are due to this.
So your reason for going offline should never be that online is hard.
Ma Yingyao: In the past decade, the media and capital did not pay attention, but that does not mean there were no opportunities offline. In the past 10 years, Huazhu went from billions to nearly 100 billion in market value; Anta went from billions to 150 billion Hong Kong dollars; Semir, by laying out children's clothing and seizing the traffic dividend of street shops transitioning to shopping malls, successfully surpassed its mentor Meters/bonwe, achieving over 2 billion in net profit; Shangmei Life started from small towns and became China's fifth-largest hotel group in just ten years.
These vigorous, billion-level evolutions were ignored by the so-called mainstream. But they always existed, not because of today's traffic changes, but because the mainstream discovered a new low-lying area.
When the internet economy hit, we also went through a stage of self-denial, anxious about being disrupted, worried that our moat would suddenly disappear. Then we hurriedly spent over 100 million on O2O and so-called internet projects, but later found they were all fake demands. In the end, we discovered that the essence of offline has never changed; only adhering to the essence is the core value. Almost all offline giants have had such confusion.

Is the best time to enter offline now?
Ma Yingyao: Entering traditional offline industries is definitely not feasible, and the timing is completely wrong.
The best time for traditional industries was 6 or 7 years ago, when street shops transitioned to shopping malls and service industries became branded. That was the traffic dividend period for opening small stores of 50-300 square meters. Brands that made money quietly completed their initial accumulation during this period.
In the offline street shop industry, hotels, KTV, and catering brands achieved explosive growth, but in 2018, almost all apparel brands saw a decline in same-store sales, rents were rising, and hotel investment returns were stabilizing, no longer a lucrative industry.

What kind of stores are suitable to open now?
I see three opportunities: first, using advanced internet management, technology, and data capabilities to integrate and empower small merchants who originally opened stores, i.e., B2B business, such as OYO and convenience stores. Second, service transformation in traditional industries, such as Yipin Fresh. Third, re-finding differentiated products or services in traditional industries. ONE ZONE home and Aikucun offline stores are typical examples.

On how to conduct research
Shen Shuaibo: When I opened stores before, I had a failed research experience worth a million. I asked hundreds of women of different occupations, ages, and regions what drinks they wanted, and they all said healthy drinks. So I believed them and opened a healthy juice store. Later, I found that their behavior was to occasionally eat a salad and juice, take a photo, post it on social media, say "Today is a healthy day, Fighting," and add a selfie. Then their so-called weight loss was often skipping lunch, and at 4 o'clock, they would drink milk tea and eat fried chicken chops together.
So traditional linear consumer research is almost always a failure. So when you go offline, how do you conduct research in county towns and get real data and demand feedback?
Ford said, "If you ask consumers what they need, they will only tell me they need a faster horse." But in reality, what users truly want is to cover the same distance in less time.
Ma Yingyao: To get real data, you first need to figure out in what scenarios they will tell the truth to whom. If you ask a friend who runs a hotel, "How's business?" He might worry you'll borrow money, so he says he's about to go bankrupt; or he wants to show off, so he says business is booming.
A few days ago, I went to see a property in Qingdao Wanda Star Island. The head of Wanda said that during the May Day holiday, all hotels on the island were fully booked.
Every time I go to a city, I take the latest bus, arriving at midnight. That is the best time to get hotel occupancy rates, because after midnight, except for rare emergencies, most hotel guests have already booked and gone to sleep. So I always dress up as a travel agency guide and ask the hotel: "How many rooms do you have left? I have a group of travelers who need rooms temporarily." At that time, the front desk will seriously calculate how many rooms are left. Then I ask, "How many rooms do you have in total? I have another group coming in a few days." Then they will tell you the real data. You can calculate the occupancy rate for that day.
If you visit all the hotels in a county town in one night, you will know the general situation of that county. So, a few days ago, when I heard Wanda was fully booked, I asked my assistant to book 10 rooms at Star Island. The hotel readily agreed, which scared me, so I quickly canceled the reservation.

The essential difference between first- and second-tier cities and third- and fourth-tier cities
Shen Shuaibo: It's roughly similar to group first-tier, new first-tier, and second-tier together, but many people put second-tier and third-tier together. I think this is a big mistake. The essential difference between second-tier and third-tier is that second-tier cities generally have some industrial clusters. Only with industry can there be large-scale talent introduction, while third-tier cities mostly lack large-scale industry. Second-tier cities also have the ability to do demolition, while third-tier cities don't like demolition; they just circle a piece of land on the edge and build a new city. Purchasing power is mainly local, which determines the essential difference in opening stores.
Ma Yingyao: After the golden development period, many operators began to blindly try to go down-market. The word "down-market" is, from a certain perspective, a false proposition: there is no down-market; there are only segmented markets. Applying business models from first- and second-tier cities to third- and fourth-tier cities or even small county towns will have tragic consequences.
At the same time, first-tier city brands copying something from abroad and bringing it to China is called "borrowing," but they say third- and fourth-tier brands copying a first-tier brand is "counterfeiting." This is a wrong concept; it's prejudice, essentially arrogance.
Opening stores in third- and fourth-tier cities cannot do without higher markup rates and stronger sales communication. Without these two, you are doomed.
If you use first-tier methods to directly go to third- and fourth-tier cities with several hundred square meters and the same prices, you will die without even leaving bones. Why? Because there is no incoming population; it's all fixed traffic.

Differences in consumer behavior
Ma Yingyao: In first- and second-tier cities, consumers usually have clear consumption purposes and clear consumption paths, because time is money. But in many small cities, this premise does not exist.
In our Thank You Hotel, over 60% of customers come from offline store price inquiries, while reservation customers account for less than 40%.
Those who wander around the county town with suitcases until 10 p.m. don't know where they will stay tonight, nor do they have a plan for when to leave. They think, "It's dark, so I'll stay here. I won't go back tonight; I'll decide tomorrow."
This highly random consumption personality has caused countless brands to die miserably on the so-called down-market path.
Shen Shuaibo: Let me add one detail. When I was on a business trip to a small county town, I noticed in an underwear store: in big cities, luxurious underwear stores often have few customers, but what really sells well are small stores with a few baskets at the door, colorful underwear stuffed inside, and a sign on top saying "3 for 100."
Such stores, in the eyes of first- and second-tier cities, are not even considered decent. Many people might not even want to enter. What is the basic psychological characteristic here? Ordinary girls and women in small county towns live in ordinariness all their lives. They feel nervous about particularly luxurious stores and salespeople who surround you more than customers, which leads them to give up buying.

The five core elements of a store: indispensable
Ma Yingyao: The success or failure of a business cannot have only one cause. Looking deeper, there are at least five dimensions.
I believe there are five elements that play a crucial role in the success or failure of a store: location, naming, font, content, and customer flow markup rate.

7.1 Location
The relationship between store rent and location is always proportional: the better the location, the more expensive the rent, and the greater the impact and pressure on store profitability. Location is always the most important thing for a store. There is no low-lying area, no secret. Six words summarize the key to opening a store: location, location, location.
In the past decade of rapid economic growth, the total area of commercial real estate nationwide has soared. According to the "2018 China Commercial Real Estate Development White Paper" released by the China Index Academy, in the first half of 2018 alone, the planned construction area of commercial office land in 300 cities nationwide reached 120 million square meters, a year-on-year increase of 15.6%, with transactions of 90 million square meters, up 11.8% year-on-year.
The rapid development of commercial real estate has brought opportunities to many brands. As a "standard facade" with the ability to attract customer traffic, many shopping malls, in the early stages of operation, offer large chain brands preferential services such as low commission rates, no minimum rent, long payment cycles, prime locations, and large advertisements to reduce vacancy rates.
After the initial operation period, malls prefer diversified consumption scenarios and are no longer willing to keep large prime locations at low prices for these chain stores. So preferential terms are canceled, and the pressure on store profitability immediately rises.
Financial reports show that in 2018, ZARA's store rent expenses accounted for 10% of total brand revenue, nearly 2.4 billion euros. Forever 21's rent in Causeway Bay, Hong Kong, was as high as 11 million Hong Kong dollars. Under such rent pressure, Forever 21 needed monthly sales of over 60 million Hong Kong dollars to ensure profitability. Based on its unit price, it needed to sell 5 items per minute.
Is that possible?
In the first half of 2018, the average floor price for commercial real estate transactions in China was 2,334 yuan per square meter, down 7.4% year-on-year. The overall supply of domestic commercial real estate has been oversupplied. This can be felt in our daily lives: there are more and more large shopping malls around us. In Shanghai, almost every subway station has a large mall nearby, and shopping centers near new developments are standard.
The pressure on shopping centers is directly transferred to brands. Many chain brands see their commission rates rise. On one hand, they lose their ability to attract traffic; on the other hand, they lose the benefits given by the mall. Under this double blow, the game between stores and shopping centers begins to collapse. Under this premise, location selection must be carefully considered, and you should try to choose the best and most cost-effective location for the brand.

7.2 Naming
Naming is the second most important detail after location.
When naming my brand, I chose Thank You Hotel, which is a homophone for "thank you." Looking at this name, the Spanish women's clothing giant Stradivarius, which has never succeeded in China, might want to think about it.
In today's malls, how many brands can you not even pronounce?
How many brands can you remember after seeing them once?

7.3 Font
The core memory point for customers comes from the logo. When seeing brands like Muji, H&M, and IKEA, most people can directly recall their font logos. This is the influence of fonts. In the most popular business districts, among the rows of signs, these designed fonts and colors are deeply imprinted in your mind. For consumers, this is the most cost-effective advertising.
As we said earlier, 60% of Thank You Hotel's customers come from offline store price inquiries, walking in with suitcases. Why do they walk into Thank You Hotel? Not only because of our location, but also because our sign is big and memorable. The big red sign can be seen from far away, and once seen, it is remembered. Maybe he was busy in the city all day, and when looking for a place to stay at night, he suddenly remembered seeing a hotel called Thank You Hotel during the day, and then he walked in with his suitcase.

7.4 Content
For a store, content mainly refers to the store's control over the consumption process.
Having multiple lines in a single store is likely to confuse consumers.
Can you imagine selling socks in a coffee shop? Would you buy a pair of socks while buying coffee? Most people wouldn't, but buying a coffee cup or a sandwich while buying coffee is quite possible.
Increasing or decreasing store content can have a big impact. Twenty years ago in China, there were many three-star hotels. These hotels generally had gyms, meeting rooms, laundry rooms, restaurants, and cafes, but these were not profitable and were likely redundant content. Guests with such high-end needs would often directly stay in five-star hotels, while for ordinary tourists or light business people, the needs for fitness, laundry, and coffee were unnecessary premiums.
As a result, three-star hotels cooled down nationwide, and budget hotels rose, opening across the country with lower prices and simpler services. That is to say, twenty years ago, a hotel that removed gyms and meeting rooms might have been wise.
But twenty years later, the demand has returned. People generally need these again. Fitness, meetings, laundry, and breakfast have become points of concern for guests. Hotels with these facilities are the basic embodiment of service and class.
Therefore, grasping and timely adjusting store content is very important. Changes in it can directly affect store quality and user consumption frequency.

7.5 Customer flow markup rate
Price is the key to profitability. According to different customer flows, prices must also be adjusted. Stores with different customer flows have different markup rates. A scallion pancake at the train station entrance costs 3 yuan each, while at the entrance of an old residential community, it might sell for 5 yuan each. Why? Different customer flows.
When doing business, you need to know what kind of traffic you are facing. In first-tier cities, you can open ZARA and H&M, large low-price stores, because consumption frequency is high, there are many people, and traffic is large; in fourth- and fifth-tier cities, this approach won't work. There are few people, consumption frequency is not high, and if the average transaction and gross profit are low, there will be a crisis.
Adjust the average transaction price according to customer flow, cooperate with different strengths of sales, and flexibly define your own business model.
So sometimes we can see that in small county towns, many women's clothing unit prices are higher than in big cities, because selling one piece a day can break even, two pieces can make a profit. In the case of insufficient customer flow, selling 100 pieces a day is unrealistic.
Under some conditions, standardization may actually be a drag on stores, because the more standardized, the harder it is to go down-market. Be flexible in life, and be flexible in opening stores.

The power of dreams
In 2019, the four hottest retail markets are home life, fresh food, light-standard chain hotels, and inventory clearance in the apparel industry. The most tragic failures and the most brilliant successes in the future may be born in these four fields.
Shen Shuaibo: Mao Yan, CEO of Maoyan, once said in a sharing session: "When you are strong enough, the ecosystem will also choose you." Have you ever met any benefactors?
Ma Yingyao: I have met many benefactors in my life. When I opened my first store in Qingdao, the hotel owner who was willing to hang the Thank You Hotel sign for free was a benefactor. When I was looking for franchisees, the bald man who ate buns with me and drank mineral water and gave me the franchise fee in cash was also a benefactor.
But that's because I helped that lady in Qingdao solve a series of problems, such as poor management, old facilities, inability to pay rent, and low occupancy. Where there are problems, there are anomalies; where there are anomalies, there are opportunities. The franchisee dared to invest in me because I sat under a big tree on a small stool, talked to them for a whole day about my business model, my hotel design, and drew blueprints for them. Only then did they dare to eat buns with me and drink mineral water and say, "I trust you, Boss Ma, this thing can succeed."
When you are hardworking enough, strong enough, and your business is trustworthy enough, you will meet benefactors every day. This is the inevitable in the accidental.
I am now doing ONE ZONE because I believe what I am doing is right and in line with future trends. I tell my employees, "Three years from now, I don't know if you will still be here, but I will definitely be here. As long as I am alive, I will sell my house and continue. Why? Because I believe."
Alibaba has a saying called "opening the heavenly eye," which means you need to have a big imagination and dare to think of things that sound impossible. I always say I am a super salesperson. Actually, the key to being a super salesperson is to be "inflated."
When I first started doing hotels, in the market environment at that time, opening 50 in a year was already impressive, but I said I wanted to open 200 in a year, and let employees think of ways and do business according to the goal of 200. The final result was that we opened over 100 that year. If my goal had been the same as others, 50, then we might have opened at most 40 in a whole year.
Now some people ask me how big I plan to make ONE ZONE. I say I want to make it one trillion. The current retail market is 25 trillion. If I do one twenty-fifth of it, that's one trillion. The heart must be big.

Final words
— Shen Shuaibo
I have opened and closed many stores. The years of closure gave me the deepest inspiration. From the moment the water and electricity were cut off, my pride in intelligence collapsed instantly. I rebuilt another set of values: that this world does not necessarily belong to the so-called elite.
Ground-level business must be hardworking, tenacious, resilient, stupid enough, and wise enough.
To be blunt: I don't think people who are used to sitting in offices are suitable for offline business on their first try. I don't think people who spend money lavishly are suitable for offline business on their first try. I don't think people who talk big are suitable for offline business on their first try. They must pay enough tuition, pay until it hurts, pay until they reform, and if they haven't collapsed, there is still hope.
I prefer people who are born there, grow up there, fight there, and also have a big vision. This is my lesson and insight, not much, not little, a million yuan.
In the article "Yunji Listing: A Great Victory for Ordinary People and Mothers | Change Prejudice Here," I said, "Perhaps the world does belong to those who are pragmatic, down-to-earth, persistent, and have an expansive personality."
Ma Yingyao is such a person. This is also one of the important reasons I have been following him. He has the chivalrous spirit of a grassroots hero, and also the strategic maneuvering of a warlord. Their starting point is low in the dust, but in the dust, they see another set of operating rules in the business world. These rules are different from the high-sounding models, with Chinese characteristics and local flavor, yet so effective.
When people reach a certain age, some values are set. I admit there are thousands of ways to succeed. But what I admire most are those who are born ordinary but unwilling to be ordinary. I always believe in the magical power hidden in ordinary Chinese people. It is this power that keeps us going, and it is this power that brings tears to our eyes.
Above, Mr. Ma Yingyao and I, with this article, pay tribute to all those who open stores, and extend our sincere blessings to all those who want to open stores. Whether you have one store or ten thousand stores, in our hearts, you are the loveliest people.
Reference: "2018 China Commercial Real Estate Development White Paper"
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