Many traditional industries are adopting the franchise chain model, but when it comes to expansion in other regions, many companies find themselves in a dilemma.
The recent annual report of Quanjude showed: apart from making a profit of 100 million yuan in the Beijing area, only the Shanghai store made a profit, while all other regional flagship stores suffered losses. Clearly, this kind of almost total failure in expansion cannot simply be attributed to the overall environment or rising prices.
Looking at the characteristics of Chinese traditional culture and brand chain industries, we can see that the problems encountered by Quanjude in its expansion also exist in most other chain industries expanding into different regions.
Many companies, before entering target markets, lack accurate data, scientific research, and analysis, and rely solely on experience and intuition for decision-making. This is not only true when expanding to other regions but also applies when opening new stores within the same region. This is a hard weakness for expanding enterprises.
In contrast, foreign brands conduct market research very thoroughly. McDonald's and KFC even analyze the生活垃圾 (living garbage) of a region to understand the lifestyle and consumption capacity, seeking relevant data.
Location selection is a strategic issue; specifically, it is about choosing a location, and more broadly, it is about selecting a strategic high ground.
Firstly, consider which level of city to choose; secondly, consider which area to choose. Location selection is inseparable from market positioning; what kind of positioning determines what kind of store location to choose.
Chinese taste preferences have obvious regional characteristics. For example, the northern market has different tastes for rich and fragrant Tieguanyin tea. However, some branded tea companies, when expanding to other regions, use income standards or other criteria to divide the country into several economic zones, establishing flagship stores in core cities within each economic zone, and then expanding to surrounding smaller cities after gaining a foothold.
This method may seem step-by-step, but it actually hides irretrievable risks. Firstly, market positioning, i.e., whether the consumer groups in these regions are your target customers; secondly, taste, whether they will accept your tea flavor; thirdly, brand value, whether they will become loyal supporters of your brand. Many old-established brands have gone through a century of business operations. However, once they expand to other regions, their business situation becomes less optimistic.
They share two common characteristics: firstly, operating products are单一 (single); secondly, regional characteristics are evident, making it difficult to find suitable populations who recognize the taste once they leave the brand's origin.
Chinese people have a herd mentality and a suspicious mindset. Herd mentality means more people give a sense of security; suspicion means trusting one’s own superficial judgment and not listening to others' explanations.
All industries have such an introduction period. During the introduction period, it is both about giving confidence to the enterprise itself and trying to establish confidence among new customers. If the introduction period is not done well, and the occupancy rate does not keep up, the herd mentality of Chinese people kicks in: fewer people means they are less likely to go; the fewer people go, the fewer people there are. When there are fewer people, they start to doubt: Is this a flagship store? Are the quality and the original store the same? Has something gone wrong?
Before market expansion, finding a suitable market research company is a better approach; if not feasible, one must spend considerable effort to deeply understand the market conditions they are about to enter, such as market capacity, group characteristics, competitors, potential entrants, strengths and weaknesses of oneself and competitors, market changes and competitive landscape over three to five years.
For chain industries expanding to other regions, the consumption habits of the target group are the most important, followed by consumption ability. If consumers do not recognize your product, no matter how hard you try, it won't work.
A company that wants to grow big and strong must reserve talent. Talent reserve must be completed one to two years before opening a store. If the new store has already opened, but the store manager is still undecided, then such a company is also in trouble, and the result of the expansion is terrifying.
The growth of chain enterprises in other regions mainly depends on human management rather than institutional management. People-oriented is the key to driving the enterprise forward. If this person is right, then the enterprise will also be right; if this person is wrong, no matter how correct the system is, it cannot save the tragedy caused by human error.
The idea of blindly pursuing size is not advisable, which is a known truth, but in any industry, there are not a few such enterprises.
When expanding and growing bigger, it is essential to understand the relationship between individual stores and the overall business. Only when individual stores perform well will the whole continue to grow. If one only pursues scale, speed, market share, superficial gilding, or quantity increase without considering the survival status of individual stores, once the cash flow becomes abnormal, at best, it will cause significant damage and abandonment halfway, and at worst, it will lead to instant collapse and total loss.
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