In 2015, McDonald’s closed 80 restaurants in China; South Beauty closed more than a dozen; Caffe bene shut down 14.6% of its shops. In the same year, the turnover of Tmall on Double-11 festival reached 90 billion, and JD finally went out of the red. It seems that the era when McDonald’s and KFC were mentioned in almost every report about the catering business has gone. In contrast, e-commerce platforms are where investors nowadays are stampeding towards.
While people are pessimistic about the catering industry, Jack Ma saw something different. During APSARA Conference 2016, he proposed the concept of New Retail, which restructured the catering industry and pointed a way out for it.
Thanks to the concept, restaurants bid farewell to their past and once again draw tremendous attention from the public. Hema Fresh, owned by Jack Ma, opened many stores in a short time. Tencent also joined the race by investing Super Species of Yonghui, which currently operates 36 stores in 11 cities. Along with the efforts of the once sluggish catering industry to embrace the internet, the “catering + New Retail” model is being well-recognized.
I. What is “catering + New Retail”
New Retail does not only combine online and offline businesses, but also rebuild scenarios: consumers, goods and places are changed so that people instantly get what they see. The ecosystem of consumption has been changed by the rapid development of mobile social network. Physical stores that used to be places where goods are sold have become warehouses, customer experience centers or logistic centers. Technological development and the awakening of latent consumption demands are refining and extending the three elements of consumers, goods and places.Traditionally, buyers search for desired products. They usually have clear targets in mind. For example, a person who fancies coffee would go to the nearest Starbucks, make an order, pay for it, and the deal is done.
In New Retail, however, the roles are reversed. In the catering industry where goods are highly similar, business owners should try to utilize social e-commerce platforms (places) to reach target audience (consumers) so that their foods (goods) don’t get drowned out by competitors. If you are a coffee person who are exhausted after a day’s meeting, you may get enticed by a Luckin coffee coupon sent to you on WeChat. You then make the order in Luckin’s app or its WeChat Mini Program and in no time your well-packaged coffee is sent to your desk. That is to say, New Retail catering can extend the scenarios of consumption to your workplace or home, thereby heightening the chance of purchase.
II. Case Analysis
By the end of 2018, Luckin runs 2073 coffee houses with 89.68 million cups sold to 12.54 million people. The dark horse that claims to have billions of RMB in hand is prevailing in the New Retail coffee market where people scramble for capital.
Luckin Coffee is no traditional coffee brand: it has internet genes running in its blood. In 2018, it started to work with Tencent to build Smart Retail resolutions. Tencent brought WeChat Mini Program, a traffic reaper, to Luckin Coffee. The applet can help it reach more customers. WeChat Mini Programs are lightweight social platforms where customers, goods and services are integrated. Payments on applets are settled through WeChat Pay, therefore, businesses can use them to accumulate private traffic. WeChat, with its billion-plus monthly active users, can help Luckin boost exposure and brand recognition so that more orders will be made.
After ordering on Luckin’s Mini Program, customers can choose to get the coffee in stores or wait for delivery. They can view products on the applet and quickly find what they want. The pleasant user experience can help convert some customers into loyal patrons.Thanks to the data analysis function on the Mini Program, Luckin can do targeted marketing by personalizing customers’ flavor recommendations and menus.
In New Retail, “APP + WeChat” is the model people want to build. Due to its abilities to reach and interact with customers, it is utilized by those retail companies with the most aggressive strategies and the fastest growth. The essence of competition in New Retail is efficiency and user experience. The digitalization abilities of smart retail can help companies win the race by boosting operation efficiency and user experience, lowering cost, and integrating online and offline operation.
Nayuki gained popularity with its tea and bakery products in the end of 2015. In March of 2018, it finished Series A+ round of financing at hundreds of millions RMB. After two rounds of investment from Tiantu Capital, it is valued at RMB 60 billion. The exquisite interior design of its stores has attracted many female customers. In addition, it is spending more efforts online, building its WeChat Mini Program, in particular.
The applet with ordering functions also allows customers to choose self-pickup or delivery. Either way, it has made ordering more convenient for customers. By adding online operation to its physical stores, the costs to lead traffic and acquire customers are greatly reduced. The operation through channels of its own can enhance repurchase rate and keep the leading status of Nayuki in the beverage sector.
During the epidemic, Nayuki held activities to cut delivery fee and provided “contact-free” delivery services. Customers that go to its stores can scan the QR Code and make orders on its applet, thus sparing the need to touch things in stores. Managers said that orders made on applet after “contact-free” delivery was introduced went up by 50% month-on-month.
Huang Ji Huang
At present, Huang Ji Huang has over 600 restaurants in more than 200 cities, and it has successfully set foot on foreign markets. What’s more, following the New Retail trend, it announced plans to pool quality resources so that it could enter the New Retail area. It will manufacture signature dishes and sell the packed food to customers through more convenient channels.
New Retail in catering is gaining momentum, which brings both opportunities and challenges. The operation model in the past won’t accurately collect information about consumers, so restaurant chains can only set up more the physical stores repeatedly. The transformation to New Retail means that they need to perform in-depth combination of offline and online traffic.
Because restaurants have lower customer retainment rate and customer acquirement rate, accumulating private traffic is of extra importance. Public traffic to private traffic is like seas to lakes. The former brings huge flows of customers, while the latter serves physical stores. Mini Programs, with their multiple online and offline entrances, are powerful junctions of traffic, digital operation and membership services.
In the internet+ era, catering companies can promote their brands with online media and lower customer acquirement costs by establishing traffic entrances through contents and activities; they can also accumulate traffic through interactions with customers in physical stores. By doing so, catering companies can forge enclosed loops of traffic.