Taking price reduction as a spear, good shops want last stand.

Text |Connect Insight　Xiangzhen

Edit | Midnight

The high-end snack brand Liangpin shop has finally reduced its price.

On November 30th, just three days after Liangpin Store announced that Yang Yinfen had succeeded Yang Hongchun as the company’s chairman and general manager, Liangpin Store announced the largest price reduction in 17 years. The average price of more than 300 products sold in the store was reduced by 22%, with the highest drop of 45%.

Externally, in the era of rational consumption, which pays more and more attention to cost performance, the whole platform is rolling towards "low price". Not only are e-commerce platforms learning from Pinduoduo, but consumer brands are also cutting prices, including Zhong Xuegao and Xicha, which also focus on high-end. Even in the snack track where the good shop is located, the three squirrels in the same trade also put forward the strategy of "high-end cost performance" and adjusted their own price system.

Internally, since 2023, good shops are facing multiple dilemmas such as stalled performance growth, frequent reduction of major shareholders’ holdings, weak growth of new business and evaporation of market value. At this time, changing coaches and reducing prices is the initiative of good shops to change under heavy pressure.

Judging from the stock price performance, the capital market is paying for this news. On the two trading days (December 1st and December 4th) after the news was released, the stock price of Liangpin Store went up continuously. As of the close of December 5th, the stock price of Liangpin Store rose by 23.84% in three days.

However, returning to the business of good shops, there is still great uncertainty about the effectiveness of this price reduction.

1, change coaches, reduce prices, and good shops look for a "way out"

Good shops have been moving frequently recently. First, after the change of the board of directors on November 27th, Yang Yinfen, who resigned as the general manager in September last year, returned to the stage to replace Yang Hongchun as the general manager and the new chairman. Then, on November 30th, Yang Yinfen, who just took office for three days, announced in an internal letter that he would start major reforms and implement the largest price reduction in 17 years.

Good shop products, Tuyuan good shop official Weibo.

Inside the good shop, Yang Yinfen’s nickname is "Yang Yidao", which is taken from his decisiveness and courage. According to the evaluation of insiders of good shops, unlike Yang Hongchun’s "partial idealism", Yang Yinfen’s style is "more pragmatic".

Yang Yinfen’s most famous record is to lead the team to win the e-commerce transformation. In 2012, with the number of stores in Liangpin Store exceeding 1,000, and the emergence of online snack brands such as three squirrels, Liangpin Store began to plan the layout of e-commerce. Yang Yinfen undertook the operation of e-commerce and successfully turned online into the second growth engine of good shops-in 2016, online revenue reached 1.425 billion yuan, accounting for over 30% of revenue.

Yang Yinfen has a deep understanding of the snack track and the retail industry, and he also understands that the market environment and industry situation faced by good shops are different now. Yang Yinfen bluntly said in her internal letter that the 17-year-old boutique shop is facing the most difficult challenge since it started its business. "It is not only a difficult problem to live, but a question of whether it can live or not."

Indeed, the current situation of good shops can be said to be internal and external difficulties.

Externally, industry competition is intensifying. Offline snacks are very busy, Zhao Yiming snacks and other discount snack shops, as well as special sales shops such as good sale and hi-special purchase, continue to impact the market share of good shops. Before online, there are online celebrity brands such as Wang Xiaolu and a1 Snack Research Institute, and later, there are white brands such as Bibizan with "cheap bowls", which have a considerable growth rate, which also intensifies the competition faced by good shops on the e-commerce platform.

Internally, the performance of good shops is getting worse. After years of increasing income without increasing profits, the revenue of good shops has declined year-on-year for three consecutive quarters this year. The financial report shows that the revenue of the good shop in the third quarter was 2.013 billion yuan, down 4.53% year-on-year; The net profit was 19.98 million, a year-on-year decrease of 97.88%; Deducting non-net profit loss was 2,078,800 yuan, down 102.31% year-on-year.

At the same time, major shareholders, including Today Capital and Gaoyao Capital, reduced their holdings of good shops and chose to cash out. In particular, today’s capital, which was invested as an early investor in 2010, has been firmly held for more than ten years. Since this year, it has also significantly reduced its holdings of the company’s shares, which has aggravated the market’s concerns about good shops.

At the time of internal and external difficulties, the good shop was replaced by Yang Yinfen, who can fight hard, and the first thing that Newspeak did after taking office was to cut the knife inward and try to force the organization to improve efficiency and reverse the current passive situation through an unprecedented price reduction measure.

It is reported that in order to ensure that "the price reduction does not degrade the quality", the products that good shops take the lead in reducing prices are mainly concentrated on 300 snacks with cost optimization but high repurchase rate, with an average decrease of 22% and the highest price decrease of 45%.

Good shop products, Tuyuan good shop official Weibo.

It is worth noting that this is not a simple price reduction promotion, but a price reduction based on reducing costs and increasing efficiency. Behind this is a comprehensive reform of the cost pricing strategy of the good shop in the past years.

Yang Yinfen believes that in the past, under the concept of high-quality snacks, the company failed to balance the relationship between quality and price, and made some qualities that consumers didn’t care about, which caused misunderstandings to users. He demanded that every penny spent on quality in the future should be felt and recognized by consumers. In short, the quality that consumers can’t see or feel, no matter how good it is, is useless.

Yang Yinfen intends to adjust according to the three types of products: high-quality, intermediate layer and bottom, and to lay down the standards that consumers in the intermediate layer don’t care about raw materials and auxiliary materials.

Take nuts as an example. In the past, this raw material-based product used to purchase products with specified specifications from suppliers. Because of its high grade, the procurement cost has remained high. After the reform, on the one hand, the good shop brought the purchase of bulk nut raw materials into the direct procurement system with suppliers, on the other hand, it changed the strategy of raw material acquisition, and the raw materials were used in different grades after being collected by the market, and different types of products were made with different types and grades of raw materials.

For example, the raw materials of macadamia nuts are changed from imported to domestic, and at the same time, according to the different specifications of the products, they are used to produce canned nuts, bagged products and comprehensive nuts. Small fruit has the advantage of high kernel opening rate and fullness, so it is used in comprehensive kernel products. According to public reports, by maximizing the use of raw materials, the price of each type of products has dropped by 5-10 yuan.

At the same time, in order to fully support the price reduction strategy, good shops have also made many innovations in the supply chain. For example, for cake baking products, good shops and suppliers have cooperated in the production of special lines and exclusive production lines, and nearly 30 SKUs have been reduced in price.

More than that, from the practice of "squeezing water" in different links, even to the material of express carton. It is reported that on the basis of the 18.4% reduction in the cost of logistics cartons in the New Year Festival, good shops expect to reduce the cost by another 8.62 million yuan in 2024.

But can the price reduction measures really help the good shops reverse the situation as they wish? From many aspects, it is not enough to just reduce the price. What good shops need is a more systematic breakthrough.

2. Price reduction is only the first spear, and good shops have more to do.

The competition for the "lowest price" has intensified in recent years. Pinduoduo’s brilliant financial report proves that consumers are increasingly sensitive to prices. Ali upgraded 1688 to the first-class business of Taotian Group, and JD.COM also launched a low-price strategy. Consumer brands at different tracks either announced price cuts or launched low-price sub-brands, and the trend of low prices has swept the entire consumer industry.

Specific to the leisure snack track, in recent years, it has been highly sought after by the capital market, and most of them are snack discount stores and special sales stores that focus on cost performance and low price discounts. These new snack brands have greatly affected the status of the old snack giants in the rivers and lakes, and even have the trend of overtaking.

On the one hand, the price reduction measures of good shops are to deal with the impact of various new snack models on the offline business of good shops, on the other hand, it is also necessary to solve a problem, that is, the balance between high-end positioning and price reduction strategies.

In fact, if you simply compare the price, it is difficult for a good shop to compete with a snack shop. According to the White Paper on Hard Discount of Snacks in China released by new distributors in October, the price of discount snack shops sinking into the community is 20%-40% cheaper than that of traditional retail stores.

According to the research report of Everbright Securities, by the end of 2022, the customer unit price of a good shop was in 70 yuan, while the snacks were only 30-40 yuan when they were busy, but at the same time, the daily income of a good shop was only 6,000 yuan, while the snacks were as high as over 10,000 yuan when they were busy. This means that snacks are very busy, and snack hypermarkets really use low prices as weapons, which has successfully increased the revenue of single stores.

Snacks are very busy in the store, and Tuyuan snacks are very busy in the official Weibo

Although the gross profit margin of high-end snack brands such as good shops is relatively high because of high pricing, with the loss of customers and the decline in revenue, it is difficult for good shops without scale advantages to maintain high gross profit. According to the financial report, in the third quarter of this year, the gross profit margin of good shops from franchise business and direct retail business decreased by 3.01 and 4.97 percentage points respectively, and the profitability continued to decline.

After the overall price reduction, it will inevitably further impact the profit space of good shops, which puts forward higher requirements for the supply chain efficiency and cost control of good shops.

Different from the pursuit of low prices in snack shops, Yang Yinfen has repeatedly stressed the need to adhere to the road of "high-quality snacks" while announcing the overall price reduction. From the action point of view, the good shop also landed the first "Snack Kingdom" store in Wuhan Economic Development Zone in July, with a store area of 1,200 square meters and over 3,000 SKUs.

Price reduction and high-end, good shops seem to have to pay attention to both. Compared with the main brand, it still needs to carry high-quality positioning, and it needs big stores and image stores to establish brands. It seems that the snack shop brand "Snacks Hard Home" launched by good shops at the end of last year is used for low-cost volume and scale. The latter focuses on opening stores in Hubei with the slogan "Cheap is the last word". According to official data, as of October 13th, there were more than 300 stores in Hubei Province, covering the whole area of Hubei Province.

According to public information, the daily turnover of Snacks Hard Home is 10,000-15,000 yuan, the comprehensive gross profit margin is 22%, and the customer unit price is 33-35 yuan, which is equivalent to other snack discount stores. If it develops smoothly, the snack stubborn family is expected to become a new growth engine for good shops.

But the problem is that it seems that the positioning between the two is not clear inside the good shop. Although stubborn snacks mainly sell third-party brands, they are directly supplied by docking snacks and water drinks brands, but many products sold in stores originate from the existing supply chain of good shops, and the only difference is whether they are branded or not.

Although the shared supply chain provides convenience for the expansion of snack stubborn families, consumers can buy the same products at a lower price, which will inevitably affect the sales of good shops. After the large-scale price reduction of good shops, the price band is gradually approaching the stubborn snack family, and the competition between the two may bring greater internal friction.

After the "high-end snacks" strategy was put forward in 2019, Liangpin Shop also launched a number of high-end sub-brands, including the brand "Xiaoshixian", which focuses on children’s snacks, "Liangpin Feiyang" and "Controlled Multi-card", which focus on healthy meal replacement, and "solving Tang’s worries" for diabetic patients. With the large-scale price reduction of good shops, there are still many problems to be solved in how to position and coordinate the development of these sub-brands with the main brands.

Good shop "snack fairy" products, Tuyuan good snack fairy official Weibo.

For good shops, it is still a top priority to sort out the positioning and boundaries between internal brands and think about the effectiveness of the "price reduction" strategy at the level of the whole group to maximize the efficiency of the overall business.

3, the market has changed, and good shops have to go through "pain"

When discussing the price reduction measures of good shops, a big background that cannot be ignored is that the situation of snack track is different from the past.

In recent years, the overall growth of snack track has slowed down. According to the consulting report of Ai Media, the market size of snack food industry in China will increase from 410 billion yuan to 1,165.4 billion yuan from 2010 to 2022, and it is estimated that the market size of snack food industry in China will reach 1,237.8 billion yuan in 2027, and the snack food market will change from a rapid incremental market to a slight incremental market. Based on this, Ai Media Consulting believes that the leisure snack market will be more competitive in the future, and innovative products will replace old-fashioned products.

The intensity of competition on the track can be seen from the price. Another important signal is that the fierce competition of snack track has reached the turning point, especially the snack supermarket track with the highest price, and industry mergers and acquisitions have begun to appear frequently.

On November 10th, the track leader Snacks was very busy and announced a strategic merger with Zhao Yiming Snacks. After the merger, the number of stores will exceed 6,500, making it the company with the largest number of discount snack chain brands.

In addition, the mergers and acquisitions of small and medium-sized players in the industry are also endless-Wanchen Group integrates its four brands: Lu Xiaochan, Ya Didi, Haoxianglai and Laiyoupin, and unifies them into "Haoxianglai"; Hunan "Love Snacks" successively won four snack brands: Hu Weihong, Dinosaur, Teddy and Snack Bubble. South China’s discount snacks represent the brand "snack cabin" and strategically integrate the Guangdong chain "snacks".

The homogenization of snack track determines that low-price competition is the norm, and only scale can bring profit space and keep the brand alive. Behind this series of actions, it is the snack brand that tries to unite Lian Heng, expand its scale advantage and seize the right to exist.

The delay in realizing large-scale profit of snacks introduced by good shops stems from the lack of scale. At the performance conference in the first half of 2023, Liangpin Store once said that the profits of stubborn snacks can only be basically tied, because the company entered the discount snack format late and has not yet formed a scale advantage, and there will be a scale effect after more than 500 stores. Therefore, the good shop put forward the plan of opening 500 new stores in 2023.

However, the problem is that even if the number of stubborn snacks stores is expanded to 500, the scale effect is still a drop in the bucket compared with the merged snacks that are busy and Zhao Yiming snacks. Even if snacks are busy and Zhao Yiming snacks fail to form an absolute leading edge, which means that the price and scale competition in the industry will continue.

Tuyuan Zhao Yiming Snacks official website

At present, snack shops that are still struggling are still rapidly expanding their stores. For good shops, price reduction is an active choice and a passive challenge. Snacks are an optional consumer product with obvious homogenization. Consumers lack loyalty to the brand, and the price is often the core competitiveness. At this time, there is still a chance to compete with snack mass-market stores by reducing the price. If we continue to stick to the high-end positioning, the good shop may become a "small and beautiful" brand, but the market share will inevitably decline.

Interestingly, after two consecutive daily limit stops, Liangpin Store issued an announcement on the evening of December 4, saying that the products covered by the price reduction measures accounted for only 13.5% of the total revenue in the first half of the year.

The implication is that this price adjustment is only an adjustment within the controllable risk. It is conceivable that if the price reduction measures take effect, the good shops will inevitably implement the price reduction measures on a larger scale, which will surely set off a new round of "price war" in the industry, and the good shops themselves will have to undergo top-down reforms, and it may be inevitable to experience "pain", but only by finding a way out can the good shops not fall behind in the highly competitive industry.