How far can the “overheated” ad hoc market go?

This may not be a good business.

How large-scale market can the ad hoc products run out? Offline chain impending discount stores, such as Hao Special Sale and Little Elephant Life , are rushing to answer this question by opening stores, attracting investment, and financing quickly. However, the industry still has “mutilated injuries” in the supply chain and lacks corresponding supervision and rules. At the same time, the “cut leek”-style new franchise brands are quickly grabbing the “mind” of individual entrepreneurs. Every practitioner wants to be a “reaper”, but inadvertently, they may have been harvested by their peers.

Outside a temporary warehouse in Langfang, Hebei, the self-employed entrepreneur Zhao Yuan (pseudonym) saw Chengshan’s express boxes, piles after piles, like a mountain of garbage.

In the warehouse, an internet celebrity with 500,000 fans is broadcasting live. Placed in front of her camera are dozens of products produced by well-known first- and second-tier manufacturers, including snacks, daily chemicals, etc. Because some of the shelf life has passed halfway, and some have only 1 to 3 months left, the selling price of these products is only about 50% off the regular-priced products.

But what was not entered by the camera was 95% of niche foods, and there were many “counterfeit” groceries.

If you want to understand the temporary discount market, many network anchors and franchisees will tell a high-margin story: warehouses collect temporary goods at a discount of 1%, sell them at a discount of 2 to 30%, and sell them at a 50% discount to consumers.

On the consumer side, more and more young people regard purchasing impending products as “exquisite and poor” rational consumption. The group “I Love Temporary Food” established by Douban last September has grown to 77,000 people today.

These foods that are about to expire and are thrown away may be propping up a tens of billions market. According to the “Market Analysis and Consumer Research Report on China’s Temporary Food Industry in 2020” released by iiMedia Consulting, the total output value of China’s snack food industry in 2020 will exceed 3 trillion yuan. As long as 1% of the inventory enters the temporary market, it will also have a scale of 30 billion.

Chain discount retail brands such as Hao Special Sale and Little Elephant Life are expanding their stores drastically, and capital is also following up. A person in the temporary industry said that although the capitalization of the industry is still in its infancy, the intention of investment institutions to “occupy a seat” is very obvious.

How far can the "overheated" ad hoc market go?

All-weather technology filming

Under this storm, practitioners want to maximize their benefits, and new franchise brands in the form of “cut leek” are also emerging in large numbers. “You can make money after a few years of doing it, and you are still worried about what profit is behind?” A business investment manager of a certain brand confessed to All Weather Technology. They gave an optimistic signal to try to attract more people into the game.

But the ceiling of the industry has become prominent, and sane people are beginning to worry about the near future. “According to the (current) (market) volume, it is impossible for them all to survive in the end.” Zhao Yuan said.

Too hot, go back empty-handed

In October 2020, Tian Yun and a few friends established the temporary commodity warehouse platform “Super Supply Warehouse”.

Previously, several founders of imported food business was done, it was done at home installed the appliance industry, involve Advent goods. They wanted to find the source of goods, but found that although there are temporary commodity warehouses all over the country, they are very scattered and not easy to find. So a few people came up with the idea of ​​building a platform, integrating the sources of goods from all over the country, and connecting with various warehouses on the platform.

In less than 9 months, more than 1,000 warehouses have settled in super supply warehouses, “basically covering about 40% of the warehouses in the country.” Tian Yun said.

Among these warehouses, there are many temporary warehouses that have been in operation for more than 10 years, but more are newly established warehouses. “Someone initially looked for sources of goods on the platform to open a store, but later they got bigger and they just built their own warehouse.” According to Tian Yun, when the wholesale circulation of the warehouse is large enough, the flow of funds will also be greater. In fact, It is more profitable than opening a discount store by yourself.

Zhao Yuan, who lives in Tangshan, is an entrepreneur in a community group buying business and has many connections with the temporary market. He observed that in this year, a large number of newly established temporary warehouses appeared around Hebei. “There is an area full of warehouses, and it is swarming with the wind.”

This gust of wind is considered by many practitioners to be brought up by a good sale. Shanghai Xinguo Technology Co., Ltd. launched Hao Sale in 2019. According to its project manager, Hao Sale currently has more than 200 stores across the country, with 120 stores in Shanghai alone. According to the Beijing News , “Good Sale” entered Beijing at the end of 2020 and opened more than 30 stores in more than half a year.

Before the good sale, it was not that there was no impending commodity market, but many offline stores did not realize brand operation, and they were rarely paid attention to on a large scale. At the moment, with the rise of the concepts of “exquisite poverty” and “rational consumption”, the purchase of impending discounted goods has also become a “consumer fashion.”

How far can the "overheated" ad hoc market go?

All-weather technology filming

In the good sale store of Beijing R&F Plaza, a large number of customers are crowded in a space of 100 square meters. Even if it is already nine o’clock in the evening, customers still come to the store in an endless stream. White-collar workers after get off work compare the production date and price of the goods, often buying a bag of goods, and the cost has not exceeded 100 yuan.

The good sale project manager told All Weather Technology that some of its stores can achieve a turnover of more than 1 million in a month. In terms of gross profit, “we count it around 30%.”

With users and profit margins, such a good sale is favored by capital. According to data from Enniu , Haotemai has completed 3 rounds of financing, but the amount of financing has not been disclosed.

How far can the "overheated" ad hoc market go?

Many newly established brands have also received the attention of capital. The newly established “Little Elephant Life” in October 2020 has currently opened 27 stores in Nanjing, Yangzhou, and Hefei, and more than ten stores are in preparation for business. In April of this year, Elephant Life completed an angel round of financing of tens of millions of yuan, of which Joy Capital was the lead investor and Angel Bay Capital followed in the investment.

In addition, the Boom Boom Mart, established in August 2020, completed the Pre-A round invested by Challenger Capital in March this year. In the same month, Tianjin’s “Shihuibang” also completed an angel round of financing of tens of millions of yuan.

New players from different fields are also entering the game. The online discount platform ” Good Food Period “, established in 2016 , has won Alibaba ‘s investment for three consecutive rounds ; Zhuanzhuan, a second-hand trading platform owned by 58 also ended up as a temporary food warehouse…

An investor in the consumer field told All Weather Technology that after the emergence of good deals, many “players” have appeared in this field. “I think this market is not not being noticed, but overheated.”

The financing of most brands in the industry is still in the angel round or A round, and the investment amount is not large. A person in the temporary industry said: “At present, the capitalization of this industry is still in its infancy, but the intention of investment institutions to’occupy a seat’ is very obvious.”

Under this gust, some unknown brands are “harvesting the market” in the form of franchising. After all-weather technology reporters expressed their willingness to consult on temporary discount stores on social platforms, they received calls from project managers of two unknown brands within an hour.

A project manager called “Zhemanhui” introduced that its brand was just established in early June and is currently recruiting franchisees across the country. He claimed that the gross profit after joining is about 40%-50%, even if rent, water, electricity, and labor are excluded, there will be more than 25% of net profit. If you are a regional agency, you can still collect the franchise fee yourself. “The market is so hot now, you only need to recruit 5 people to join, and the agency cost will be recovered immediately.”

When asked if the market can last, the investment manager said bluntly: “Don’t worry about profits. After a few years of work, you have made money, but you are still worried about what profits will follow? Isn’t it enough to upgrade as the market upgrades?”

Zhao Yuan is not optimistic about this kind of brand that is following the trend. “The risk of joining is inherently great. Once the water recedes, anyone in the nude can see it. As far as the volume of temporary food is concerned. , They cannot all survive in the end.”

Tian Yun also believes: “If there is no strong supply chain, joining is basically like cutting leek, because it can’t support it.”

It is more risky to start a business without joining a brand. From the actual situation of Zhao Yuan’s own provisional discount, he still has the advantage of not more than 7% when he has the advantage of receiving the goods channels, has the “group leader” to bring the goods, and does not have to open a store without having to bear the rent. He believes that “Xiaobai” entrepreneurs follow the trend, because they cannot grab good products and do not have a stable passenger flow, and the risk of loss is huge.

Zhao Yuan once guarded several temporary discount stores in Hebei, and found that even on Saturday, the passenger flow was not large, and many customers returned empty-handed after entering the store.

“A lot of Xiaobai didn’t do it, and the money was cheated.” Zhao Yuan said.

High volatility and high risk

Why is it difficult for Xiaobai to start the business of impending commodities? Respondents said that the source of goods is their most critical issue.

There are three main channels for the supply of temporary goods:

One is the products whose shelf life is not within the scope of the “allowable sale period” in large supermarket chains and shopping malls, that is, products whose shelf life expires more than 1/3. Some high-end supermarket products will be removed from the shelves if there is 1/2 shelf life left. Part of the products that are off the shelves will be placed on special “special shelves” for promotion, but if too many products are off the shelves, they will be returned to the manufacturer or distributor. It is then sold to various temporary warehouses at a low price by the manufacturer or distributor.

The second is the import warehouse. Different from domestic first- and second-tier manufacturers who produce goods in quantities based on dealer orders, the phenomenon of imported snacks and merchandise is more serious, and the threshold for over-sales is higher. When the shelf life has passed the “sale period”, it will flow into various temporary warehouses. .

The third is the return of online shopping. Some products with damaged packaging or other problems are returned by consumers. After the manufacturers and the express company have made clear their responsibilities, the products enter the transit warehouse, and then finally flow into the discount market.

The temporary warehouse acts as an “intermediary” and sells the goods to the store through its own channels after receiving the goods. Some mom-and-pop shops in the form of commissaries will buy a small amount of temporary goods to attract traffic. In some county-level cities and towns, shopping malls and squares, you can often see the promotional products placed by vendors, mostly from temporary warehouses.

In addition, according to industry sources, many low-priced products sold at discounts on e-commerce platforms also come from temporary warehouses. In the past two years, the opening of a large number of temporary discount stores has brought more sales channels to the warehouse.

The entire industrial chain is not complicated and easy to get through, but the biggest problem lies in the unstable supply of goods.

The above-mentioned investor said, “Theoretically, the more detailed the operations of the manufacturers and distributors, the less the provision of food for the period. If they have a stable supply of food for the period, it proves that there is a problem with their operations.”

A practitioner in the temporary industry also added that too many products flow into the temporary market, which will also affect the sales of regular-priced products, which many brands are unwilling to see.

“The impending food industry is determined based on the market. Some products will not sell well this month, and more will flow into the impending market; if they sell well next month, this product may not be available in the impending market.” Tian Yun said.

This also means that a large number of products that can enter the temporary warehouse are often products that are not sold well. When Zhao Yuan visited a warehouse in Langfang, Hebei, he saw that 95% of the goods were unknown niche or imported goods.

As for the best-selling well-known brands, once the warehouse arrives, the store still needs to grab the goods in advance. In order to maintain large customers, some warehouses will give priority to providing better goods to “relationship customers.” And the inexperienced “Xiaobai” store will increase the investment risk after getting the niche products.

An analyst from the consumer group of an investment institution told All Weather Technology: “Popular food consumers are closer to the mentality of buying goods, and temporary stores are more like treasure stores in the eyes of consumers, mostly impulsive consumption and joint consumption.”

Once the merchant fails to select the product and fails to guess the preferences of the mass consumers, it will miss the short sales window period during the impending period, causing all the products to be unsold and obsolete, and they will also have to bear the expenses of processing expired products.

Practitioners also said that this is a “fast-in and fast-out” industry, where the goods are pledged in which link has to bear these risks. This also makes warehouses more willing to cooperate with large discount stores.

In addition, “fleeing goods” is also a gray area in the temporary industry. Some large brands have a very clear division of the distribution area, and strictly grasp the “sweeping” behavior that may undermine the price system. However, these are lack of corresponding supervision in the ad hoc market.

Grab time and scale

To reduce the risk of supply, more Kuaiqiang of the market, a discount retail chain brand chose a different style of play.

Good sale, Little Elephant Life, etc. bypass the temporary warehouse and directly connect with dealers, manufacturers, and brands. But even so, “stable supply” of every product cannot be achieved.

In this regard, the best way to sell is to update the products quickly. Its project manager: “We want to basically one week on 3-4 substandard goods will be on every stock adjustment was the same kind of products a brand we can not guarantee always have, but not the brand, but also something else. Brands .” In order to enrich the goods, Hao Sale docked with more than 500 brands and manufacturers.

How far can the "overheated" ad hoc market go?

All-weather technology filming

According to 36 krypton reports, the total number of SKUs for the baby elephant’s life is controlled at about 1,000. However, according to its “operating partners”, unknown brands also account for about 30%.

For chain discount stores, scale and supply chain are closely linked. There are many sources of goods, which ensured the supply of the store and supported the expansion of the store. And when the scale is large and sales increase, there will be more supply channels willing to cooperate with it.

In addition, chain discount stores with scale advantages also have stronger bargaining power over the supply chain. “Some peers basically can only do 50~60% off, but we can do 3.5% off.” Good sale project manager said.

And when capital enters, the brand advantage of a small scale becomes more prominent. And the fate of capital has made competition in this industry into fierce heat.

This year, Little Elephant Life started to attract investment in the three cities of Nanjing, Yangzhou and Hefei as a “business partner”. The so-called business partners are more like financial investors. The partners need to pay 150,000 yuan in franchise fee, 150,000 yuan in deposit to Little Elephant Life, and bear the rent and decoration costs of the store. Xiaoxiang Life is responsible for the operation and labor of the back door store, and the operating partners share 18% of the day’s operating income every day.

According to a “business partner” of Little Elephant Life, the turnover of a store has a great relationship with location selection, and some can achieve a turnover of 15,000 yuan a day, and some can only achieve 5,000 yuan. The gross profit of Little Elephant Life is more than 35%. Excluding the profit sharing of the business partners, as well as the cost of manpower, water and electricity, there is still a certain profit margin.

“The company wants to expand its scale and occupy the market, but the company itself does not have the basis for rapid expansion, so it adopts this asset-light model.” Xiaoxiang Life Project Manager introduced.

The investment promotion of good deals was also carried out in the early stage of “whole store trustee” business partners, and the franchise cost was as high as more than 800,000 yuan. In this year, Hao Sale re-adjusted its investment model.

All-weather Technology learned from the good sale project manager that now the company requires its partners to operate full-time as store managers, and the company is only responsible for the supply chain part. The store manager does not need to pay the franchise fee. Instead, each store manager pays a deposit of 340,000 yuan and a training fee of 19,800 yuan. After 6 weeks of training by the company, the store managers were assigned to different stores.

And for the stores with a monthly revenue of 250,000 to 300,000 yuan in the Shanghai area, each store can recruit two “store managers.” The two partners will get a total of 12% of the turnover each month and will be responsible for the three costs of employee salaries, water and electricity, and cargo damage. The rent and the cost of goods will be borne by Goodsale.

The project manager said: “Our store with a monthly turnover of 1 million yuan does not need to attract investment; the company will optimize the store that is too bad. And like this kind of store in the middle, it has room for improvement. We hope to increase the turnover through the operation and management of the store manager.”

Whether it’s the life of a baby elephant or the investment promotion model of a good sale, in fact, it is possible for “business partners” and “store managers” to share the operating risks of the ad hoc market, while the company mainly integrates the supply chain, manages channels, and strengthens The comprehensive ability of digitization and marketing to acquire customers.

The above-mentioned analyst believes that “in the current immature market, the industry has no standards, and the seller has a’dividend’ with asymmetric information, which allows retailers to have flexible pricing space and considerable short-term profit margins. However, from the perspective of long-term development, temporary retail The track is full of challenges.”

Consumers’ “earlier” consumption of impending commodities has brought huge uncertainty to the development of the impending market; the exclusiveness of manufacturers and distributors selling “regular-priced” commodities also restricts the development of this industry.

In addition, not only ad hoc discounters are rivals to each other, “competitors also have community group-buying platforms, with various types of selections, and many categories.” Zhao Yuan said.

It is difficult to judge the scale of the chain brands in the temporary market, both inside and outside the industry. But at present, no one wants to miss a possible outlet.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-far-can-the-overheated-ad-hoc-market-go/
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