Go where there is a market.
Editor’s note: This article is from the WeChat public account “Forefront of Entrepreneurship” (ID:chuangyezuiqianxian), author : Li Xiaofan, Editor: Feng Yu.
The concept of sinking markets is being blurred.
Nowadays, “small town youths” have changed-both in their consumption habits and willingness to spend money, they have begun to become more and more like white-collar workers in first- and second-tier cities.
Therefore, the sinking market has also become a battleground for military strategists. In addition to the giants, a large number of entrepreneurs are chasing the outlet and flooding into the sinking market.
Is the hot sinking market still a blue ocean? How do entrepreneurs live? “Forefront of Entrepreneurship” chatted with 3 entrepreneurs and found that there may be a sinking market. Known ABtwo sides.
On side A, a catering practitioner opened a 16-square-meter shop in Xining to sell fried skewers. During the peak period, the monthly income was 450,000; on side B, 90% of to C products have disappeared, and 80% of them died because of the broken capital chain.
The concept of sinking markets is also being blurred. Many practitioners said that wherever there is a market, go wherever it is, and whether it sinks becomes no longer important.
1 The “town youth” of consumption upgrading
During the National Day, Fan Yu, who returned to his hometown in Fujian, found that compared with his relatives and friends, he had become the “worst mixed” one.
“Because others have houses, cars, and leisure, although I earn no less than them in Beijing, I have nothing.” Fan Yu said to the “frontline of entrepreneurship.”
She was surprised that compared with her more conservative consumption concept, friends in her hometown were experiencing “consumption upgrade”.
“My friends in my hometown are all very expensive, and they are never merciless when buying all kinds of luxury goods. In the eyes of others, Bei Piao is a “little pitiful”.”
Fan Yu’s sister lives in the village, but she takes her children to the mall to have a big meal every weekend. The brands she usually shop at and the Taobao stores she usually visits are almost the same as her usual in Beijing.
She also discovered that the consumption habits of her hometown are also moving closer to first-tier cities such as Beijing, Shanghai and Guangzhou.
For example, the village has a courier service, and everyone starts shopping online; the village can also order takeaways. Are you hungry? Meituan has them.
“The average price of a cup of milk tea is 15 yuan, and a takeaway starts at 15 yuan. The price is not much different from that in Beijing. Every time my friends from my hometown go out to eat, they also choose restaurants like Haidilao and Xiaolongkan.” Fan Yu said.
For friends from my hometown, traveling abroad is also very casual. “I have a friend who started working after graduating from high school and took his younger brother to Thailand for a few years.” Although most of the destinations for his friends from his hometown to travel abroad are Southeast Asian countries, they are much better than those who have never traveled abroad. The rain is getting better.
The booming movie market also reflects the “bursting” consumption desire of young people in small towns. In the past two years, with the wave of returning home and the habit of family watching movies during the Spring Festival and National Day, the cinemas in many third- and fourth-tier cities are almost full, and even a ticket is hard to find.
In recent years, community group buying, which has been popular in third- and fourth-tier cities, is gradually closing the gap with first- and second-tier cities. Seafood and imported fruits are also appearing on their tables.
These are all small townsa miniature of annual life. They don’t have much pressure and costs, and their disposable incomeMany, the overall consumption of food, clothing, housing and transportation may be better than users in first- and second-tier cities.
In November 2019, Yaoke Research Institute and JD.com jointly released the “2019 China Small Town Youth Luxury Consumption Report”. The report shows that young people in small towns are becoming consumers of luxury goods new force, they dare to spend money and make decisions In the short term, the way of living, consumption and entertainment has gradually been in line with first-tier cities.
During the epidemic, young people set off a “homecoming wave”. To a certain extent, they are also expected to become opinion leaders in the sinking market in their hometown, thus narrowing the consumption gap between users in different cities.
The increase in the disposable income of young people in small towns and the increase in consumption potential, coupled with the disappearance of traffic dividends in first- and second-tier cities, have caused many brands to begin to sink.
2 Go to the vast sinking market
In recent years, the huge growth of the sinking market can largely be found in companies such as Pinduoduo and Qutoutiao. Their “rushing to the market” is even more a fire of hope, allowing entrepreneurs who are distressed by the exhaustion of traffic to see the light and flood the sinking market.
So, how profitable is the sinking market? How did the brave gold diggers gain?
“The sinking market is even more profitable than the first- and second-tier cities.”Kwafu Fried String Group Founder Yuan Zelu said to the “frontline of entrepreneurship”. “We have a 16-square-meter store in Xining, which sold 450,000 a month during the peak summer season,” he said.
One of the main reasons is the lower rent and labor cost of the sinking market. For example, it is also a tea company that has a daily turnover of 100,000 yuan for opening a store in Sanlitun, but its monthly rent may be 300,000 yuan. In the county town, although the daily turnover is only 2,000 yuan, the monthly rent here may be only 2,000 yuan.
In the county town, it is not difficult to sell enough for 2,000 yuan a day, but if you want to sell enough for 300,000 yuan a day in Sanlitun, it is a bit difficult.
Another reason is that the income and education level of users in the sinking market may be different from those in first- and second-tier cities, but their willingness to consume is not low.
“We found that in any city, there is a gap between things that can be leveled as quickly as possible. This is aesthetics.” Yuan Zelu said.
Thanks to the popularity of the Internet and short videos, the information gap between regions is being smoothed out. Although some people are in a small county, they also want to have the same things as the first-tier cities, such as drinking a cup of hi tea, eating a design of fried skewers, etc.
“My two little nieces go to calligraphy, ballet, painting and other courses every weekend.” Fan Yu said, “For parents in the county, spending a few hundred yuan a month on children’s education is fundamental Not a problem.”
This is the common state of county parents—although their income and purchasing power between them and first- and second-line users have not been completely equalized, they already have the consciousness and willingness to consume. The consumer space in the sinking market is gradually being opened up.
3 90% of to C products disappeared
In the beginning, practitioners believed that the sinking market was a blue ocean, and gold could definitely be dug out. It is a pity that in a normal industry ecology, some people are destined to live well, but some people have to end in business failure.
Scene marketing and social interaction platform “Red Letter Circle” founder Li Yuanhang still remembers his fight in the past Tragic.
“The twoIn 2009, a large number of entrepreneurs took the concept of sinking the market to do to C business. “Li Yuanhang said to the “frontline of entrepreneurship.” He found that during that time, there were nearly 300 products imitating them.
Many entrepreneurs at the time began to subsidize users to buy traffic after getting financing. Although the product quickly attracted a wave of users, there was no reasonable business model to support it. Once subsidies slowed down or stopped, they would soon be abandoned by users.
All companies also face an ultimate problem-monetization.
“I see that 90% of to C products have disappeared, and about 80% of them are because of the broken capital chain.” Li Yuanhang said.
In addition to followers, more companies have to sink for long-term development.
For example, brands such as Heytea, Naixue’s tea, and Starbucks, which have slowed down in the first and second tiers, directly opened their stores in third and fourth tier cities. In June of this year, data released by DT Finance showed that the number of stores opened by these three brands in third-tier cities and below has surpassed that of second-tier cities and is approaching first-tier cities.
Another brand with a clear sinking trend is Haidilao. According to its financial report, as of the end of 2019, Haidilao had opened more than 700 stores on the mainland, of which more than 500 were in second- and third-tier cities and below, and the number of stores in first-tier cities was less than 200, and most of them were before 2015. It’s open.
In addition, JD.com, Tmall, Meituan, Suning…Almost all the giants are sinking.
For start-up companies, sinking is a last resort, but being mixed in the torrent of the times also means opportunity.
“The mid-to-high-end market has become a red sea. It is difficult for start-ups to break through. If you go the other way, you may have a chance to compete with the giants if you polish your products.” Li Yuanhang said.
In Yuan Zelu’s view, only when enterprises in the consumer sector form a super scale can they reduce costs and generate more Dolly Run, and then become a super brand.
As for how to form a super scale? The answer is still sinking.
He said that in Beijing, a brand can open up to 200 stores, and the Michelle Ice City has nearly 10,000 stores.
Large Chinese online education brand “Export into a chapter” founder Wu Jianning also said that from the perspective of the K12 education industry, On the contrary, the most users are sinking the market. This can be seen from the number of pupils in each region.
He pointed out that there are about 103 million elementary school students in China, of which there are about 900,000 in Beijing, about 900,000 in Shenzhen, and about 800,000 in Shanghai. In the non-first-tier areas, Henan has 9.5 million primary school students, Sichuan has 9.2 million, and Shandong has nearly 10 million. In Henan, Guangdong, Shandong, and Sichuan, K12 users account for 40% of the country in these four provinces.
“From the perspective of user scale, the K12 education market is not in the first-tier cities.” Wu Jianning said. “Currently unicorn companies in the education industry are actually sinking, and a large part of their users are sinking the market.”
Different from chasing the outlet in the first place, companies are sinking more to seek a broader market. The fact is that the concept of sinking markets is also being blurred.
“In our opinion, there is no absolute sinking market, only unmet needs.” Li Yuanhang said. Wu Jianning also said, “The education industry has no sinking trend. Where there are many users, we should go wherever we go.”
Brands that once focused on first- and second-tier cities are busy sinking, and those brands that have taken root in the sinking market from the beginning will find ways to advance into first- and second-tier cities in the future.
After all, “Go where there is a market” is the ultimate creed of entrepreneurs.