Many famous catering brands are entering the sinking market with high profile.As they are reaching ceiling of first tier and second tier cities, they are actively exploring the sinking market. What brands? KFC, McDonald’s, Haidilao, Heytea, Starbucks, you name it.
They try to copy their business models formed in the first and second tier cities here. However, they find that their successful experiences in the past have failed here one after another. As a result,they are struggling in the sinking market.
The sinking market needs a different business ecology
Although there are different reasons behind this, I’m afraid that the root cause is the business ecology. These catering brands underestimate the business ecology of the sinking market. That’s a lot different from that of first and second tier cities.
The sinking market is an acquaintance society composed of acquaintances. Those catering brands need to pay more attention to the cultivation of acquaintances.Otherwise, it’s pretty hard to get steady clients.
Doing business is to bring new customers with familiar customers. And then the store owner and new customers get to know each other. After that, new customers continue to bring people here to enjoy the good service. This is more practical than issuing coupons to attract people.
The sinking market is price sensitive however product sensitive too
In addition, price sensitivity is a major feature of the sinking market population. Different from the first and second tier cities where high consumption prevails, the relatively limited economic income makes consumers in the third and fourth tier cities more rational in consumption.
However, when thinking about sinking the market, we should try to avoid simple low prices, small stores, reduction, fragmentation and demotion. In terms of taste, service, scale, viscosity, reputation, gathering and other aspects, the catering form of third tier and fourth tier cities is not only not simpler than that of first tier and second tier cities, but also often higher than that of first tier and second tier cities.
Strong local catering brands
Local catering brands often take the lead in developing business in the sinking market.
A typical example is Tianlala. As a catering brand emerging from Bengbu, Anhui, Tianlala has opened more than 6000 stores in just seven years. Locations include 31 provincial regions and more than 200 cities, with a strong development momentum.
In order to establish a stable low price advantage, Tianlala established its own production base in Bengbu in 2016.
Under the combined influence of various factors, Tianlala has a good consumption base and reputation in the underdeveloped regions.
This also gives those catering brands seeking to sink a headache, such as Heytea.
In the end, what the consumer care most?
When Internet was not popular, there was limited influence of the sinking market and the top market on each other. They can also maintain the situation of ‘harmony’to a certain extent. With the increasing popularity of the Internet, the younger generation have deeply into to the Internet. As a result, the gap between different economic regions is becoming smallerand smaller.
However, consumers pay more attention to products and cost-effectiveness. This is especially true today when the economy continues to decline.
Deep Digital China will keep reporting on chain-store franchises in China.