Controversy Mingchuang Premium: Finally making money, but it is difficult for franchisees

Image source @ Visual China

The article | most talked about FunTalk, written by | Gao Huanhuan, Editor | Wang Fangjie

The venue was obviously very cold, and at first there were only a few people sitting in the small banquet hall of the China World Hotel. But the people on the stage turned a blind eye to this, and his mouth was hanging, and he knew exactly what the audience wanted to hear, such as the hot Diss Dong Mingzhu, who said that her rice cooker was too dirty. So those who just came to the scene stayed, and also used WeChat to call friends, and later more and more people, some stood at the gate.

At that moment, I felt that this little man named Ye Guofu had a realistic distortion force field.

I don't know if this force field has played a role, since the first store opened in Guangzhou in 2013, in less than a decade, Mingchuang Premium, founded by Ye Guofu, has opened 5,045 stores around the world, including 3,168 in China and 1,877 overseas (as of the end of 2021).

Moreover, in the second half of 2021, Miniso Premium products are finally profitable. In those six months, Minchuang Premium's total revenue was 5.427 billion yuan, an increase of 24.2% year-on-year, and its net profit was 339 million yuan, achieving its first profit since its disclosure of financial data.

But some people are surprised by this profit, such as The franchisee of Mingchuang Premium Product (Mingchuang Premium product is called a partner) Wang Li (pseudonym): "In the years when our franchisees were making money (2015-2019), Mingchuang Excellent Product was actually losing money continuously. ”

It should be known that in the model of Minchuang Premium Products, the role of franchisees is crucial, and more than 95% of its global stores are franchisees and agent stores. Taking the data of December 31, 2021 as an example, of the 3168 stores in the country, 3146 are franchise stores, and only 5 are official direct stores.

It is precisely by relying on this franchise model that Mingchuang Premium products have expanded rapidly around the world in the form of light assets.

In its prospectus to the HKEx, a sullivan report was published defining it as the boss of a certain market segment. Specifically, in 2021, it achieved 10.8 billion yuan of GMV in the Chinese market, ranking first in China's private brand integrated retail market, and achieving 18 billion yuan of GMV in the global market, ranking first in the global private label integrated retail market.

Some franchisees have accompanied Mingchuang Premium products for a long time, such as Wang Li, who is one of the earliest franchisees of the brand, and has participated in or led more than a dozen franchise stores of Mingchuang Excellent Products. In the early years, I did drink too much soup. But now, she has closed some stores one after another, "the more she opens, the greater the loss, and even loses the money she earned in previous years."

In fact, not only Wang Li, but other franchisees have also expressed similar feelings to "The Most Talking". Around them, there are more and more Mingchuang premium franchise stores, there are other brands of franchise stores opened next door, and those online giants have also joined the battlefield of ten yuan stores. Even Mingchuang Premium products themselves have opened an online store. And, of course, there's the outbreak that lasted for more than two years.

These elements of different dimensions are forming a net, and the denser the net, the smaller the profit margin left for them.

Store expansion

To open a retail store, you generally need to prepare three elements: goods, yards, and people, and the people here refer to the clerks.

In the franchise model of Mingchuang Premium Products, the goods are responsible for Minchuang Premium Products, and the cost of the field and people is borne by the franchisee. A franchisee customer service leader in charge of eight provinces in the northwest region of Mingchuang Premium in Guangzhou headquarters told "The Most Talking" that all operating costs are borne by franchisees, and Mingchuang Excellent Products mainly provides goods and staff training.

Therefore, in the prospectus of Mingchuang Premium Products, the franchisee is defined as the company's customer, that is, the franchisee purchases goods from the company, and the subsequent store operation is responsible for the franchisee.

This way looks no different from traditional franchises. However, according to Wang Li's description, the above cooperation model is only nominal, and in the actual operation process, franchisees participate in very few links.

According to her, the franchise chamber of commerce is responsible for finding a store suitable for opening a mingchuang product, the general city requirement is 200 square meters, and the county seat can be slightly smaller, about 150 square meters. After passing the on-site assessment of the brand side, the two sides can reach a cooperative relationship. At this time, the franchisee needs to pay three fees to the brand side, the first year of the franchised trademark use fee, a one-time security deposit for the goods, and decoration costs, generally 2800 yuan / square meter.

Yes, even the store decoration is uniformly responsible for Mingchuang Premium, and the subsequent recruitment and management of personnel, including the formulation of these standards, are also done by the brand side, but the cost is borne by the franchisee.

Therefore, for Wang Li, she only needs to prepare shops and money, and the rest will not be left alone. This kind of "hand-throwing" type of joining is also an important reason why she chose Mingchuang premium products a few years ago.

Today, even though she already has a dozen franchises, she still only needs one finance. Every day, the store will send a portion of the previous day's turnover to her account, 38% of the daily groceries and 33% of the food. Wang Li used the money to pay the rent, the clerk's salary and the dormitory rent. If it can be covered and there is a surplus, it is making money, it cannot be a loss of money.

This way for Mingchuang excellent products, baili and harmless, it can not only achieve the traditional franchise of light asset operation, but also to avoid the traditional franchise model, franchisees themselves operate, resulting in the brand side is difficult to effectively manage the storefront, the market is gradually more and more chaotic, the brand is getting worse and worse.

In fact, this new franchise model of Mingchuang Premium is very similar to finance, such as asset management, the franchisee is the LP, and the brand side is the GP. It can also be said to be a kind of crowdfunding, but the brand side crowdfunds the cost of store operation. The customer service of the above-mentioned Mingchuang Premium products refers to this model as the hosting model.

On the surface, under this hosting model, the interests of franchisees and brand parties are the same, because only when the store is well operated, the brand side can sell more goods and franchisees can make more money. However, upon closer examination, it is inevitable that there will be a deep conflict of interest between the two.

Because from the perspective of Mingchuang Premium, its ultimate goal is the GMV of the entire brand, so it has the impulse to open more stores for a long time. In 2018, Miniso Premium launched the "100 Million Stores Plan" in a high profile, planning to expand the number of stores to 10,000 by 2022. However, if the store is opened too much, the operating efficiency of a single store will decline, and the interests of franchisees will be damaged.

The data supports this view. According to the prospectus, with the increase in the number of stores, the revenue of a single store of Minchuang Premium Products has decreased year by year. From June 30, 2018 to June 30, 2019, this figure was 2.7 million yuan, which was reduced to 2.2 million yuan the following year, and then to 1.9 million yuan in the following year. However, in the second half of 2021, the revenue of miniso premium products increased by 66,000 yuan year-on-year, the company explained that this is mainly due to the recovery of international market sales, it should be noted that overseas, the expansion of Mingchuang premium products is mainly through agents, of its 1877 overseas stores, only 203 are franchise stores (as of the end of 2021).

On the franchisee side, the microscopic perception is like this. Wang Li told us that from 2015 to 2018, whether it is the revenue of a single store or the entire brand of Mingchuang Premium, it is on the rise, and the momentum at that time is getting better and better. But from 2019 to now, it has been declining. "All of our store sales fell by 20 to 30 percent."

Sales decline to a certain extent, will break through the franchisee's break-even line, such as some stores in Shanghai monthly rent is 150,000 yuan, then to achieve monthly sales of 400,000 yuan to achieve profit and loss flat, "obviously it is impossible to achieve such revenue now." Wang Li said.

From 2020 to now, she basically did not expand the store, this year originally planned to open a new store in a third-tier city, is still renovating, "originally planned to open in the near future, but now it is pending." The speed and number of stores opened by the epidemic and Mingchuang have affected us too much, and we have not made any money at all, or even lost money. ”

In fact, this is not only Wang Li's feelings alone. Zhejiang franchisee Nie Pan (pseudonym) told us that in the past two years, the more the stores of Mingchuang Excellent Products have opened more and more, the sales of single stores have not risen much, and some are still declining.

"In fact, at the beginning, it was still profitable, but later with the opening of the Mingchuang premium product franchise, the business circle of the city was aging, the competition was large, and the performance of a single store declined more." Nie Pan said that last year he closed all Mingchuang premium franchise stores.

sink

In China's private label retail market, Mingchuang Premium is known as the "premium ten-yuan store", which is born out of the real ten-yuan store, with a brand identity that resembles importation to capture the minds of users, while convincing them to buy at a relatively competitive price. In essence, Mingchuang Excellent Products seizes a time window, that is, in the process of consumption upgrading, people's consumption desire has been upgraded, but the ability to pay has not yet caught up.

At one time, in first- and second-tier cities, Mingchuang Excellent Products cut deep in this difference, so it was visible to the naked eye that it occupied a major position in major shopping malls. It is only with the passage of time that in first- and second-tier cities, similar brands have sprung up and competition has intensified.

For example, KK Group, which has provided prospectuses to the Hong Kong Stock Exchange, has many similarities with Mingchuang Premium Products, with four major brands of KKV, THE COLORIST Colorist, X11 and KK Pavilion, and its product portfolio covers a variety of product categories, including beauty, fashion play, food and beverages, household products and stationery.

According to the prospectus, from 2018 to 2020, its sales rose rapidly from 156 million yuan to 1.646 billion yuan, and in the first half of 2021, in 6 months, it sold another 1.683 billion yuan, up more than 200% year-on-year. It is worth mentioning that the product positioning and core user groups of KK Group are highly similar to those of Mingchuang Excellent Products.

At the same time, in the process of getting along with the "high-end ten-yuan store", the freshness of residents in first- and second-tier cities is gradually consumed. Wang Li confessed that once she went to her store in Beijing, she would buy several large bags of goods every time, at least a few hundred pieces, but now when she went to the store, nothing could arouse the desire to buy.

In contrast, the sinking market looks like there is still a lot of opportunity. First of all, the difference between local consumption desire and purchasing power is still large, and because the speed of brand sinking is different, in the low-line market, similar to Mingchuang Premium, there are not many brands with TV advertising and celebrity endorsements, and locals generally believe that it is a big brand.

Therefore, in the strategy of Mingchuang Premium, the development of low-line markets is its very core goal. At present, for municipal store investment, the concessionary trademark use fee is 29,800 yuan / year, the one-time goods deposit is 350,000 yuan, for the county-level store investment, the franchise trademark use fee is 19,800 yuan / year, and the one-time goods deposit is 250,000 yuan.

Since more than a dozen stores in her hands are all over the first, second, and third-tier cities, Wang Li has this account in mind. She feels that in the past few years, third-tier cities have really done better. For example, a store in a city in northern China, June to September is the peak sales season, and it can achieve more than 500,000 sales every month. This year, this year, this store can only sell more than 200,000 yuan per month, and what is distributed to her own hand is 60,000 or 70,000 yuan, but the rent has really risen, and now the rent of this store is 90,000 yuan.

Nie Pan also inspected the situation of the county-level market. In a county town in Zhejiang, if you want to break even, the daily sales must reach 6,000 to 8,000 yuan. But he felt that it could not be done at all, the entire county only had a population of more than 100,000 people, and the main group of people who consumed mingchuang excellent products were students. But after all, students have limited purchasing power, and they like to go to the grocery store next door, the lattice shop, because the price is cheaper.

"One of the big killers of Mingchuang Premium is the new rate, in fact, it is exactly the same product that keeps changing shells, a storage, today is Disney, tomorrow is Hellokitty." For the sinking market, this kind of new is the same as not new, and everyone's awareness of IP is not high. He laughed.

E-commerce

Objectively speaking, in terms of competitiveness, Mingchuang Excellent Products is not only cost-effective, but also has strong capabilities on the supply chain side.

Miniso Premium is an asset-light company that does not really produce products, but through the supply chain procurement method to achieve products. The manufacturers found by Mingchuang Excellent Products are usually white-label manufacturers, and the two sides use OEM/ODM to cooperate with THE OEM, and because of the huge purchase volume, Mingchuang Excellent Products can often get lower factory prices and longer payment cycles. As of the end of 2021, the brand's inventory turnover cycle is 68 days, but its payment cycle for the upstream is 30 to 60 days, that is, the goods have been in the warehouse for a period of time and are about to be sold, and Mingchuang Excellent Products will give money to the upstream factory.

Obviously, this is the bargaining power that small brands do not have, and this ability will also be transmitted to the price and category of the terminal, and all along, Mingchuang Excellent Product implements the "711 concept", that is, about 100 new SKUs are launched every 7 days, about 550 per month.

However, now, enterprises with higher dimensional capabilities than Mingchuang Premium products have successively joined the battle of their own brands, mainly from online e-commerce platforms.

For example, JD.com and Amoy have both realized their own brands in the form of OEM/ODM, and have invested heavily in this business. In October 2021, the Beijing-Tokyo Formation Business Group became an independent business unit at the same level as JD Retail, and the following month's Double Eleven, Kyoto-Tokyo-made sales increased by 156% year-on-year. At the moment, Taobao Xinxuan has also iterated and upgraded to its own brand "Meow Full Score" in Tmall Supermarket.

In the more accurate "Ten Yuan Shop" track, each family has also made some moves. Kyo-zo Tokyo launched the "Kyozo Ten Yen Store" in July 2019. Mainly for young, third- and fourth-tier users. On March 23, Taote, which has mastered a massive white-label supply chain, also launched a ten-yuan store, in addition, although there is no targeted strategy, Pinduoduo originally started from the online ten-yuan store, and the nine-piece nine-pack mail is the brand mentality that Pinduoduo handed over to people.

In Wang Li's view, the dimensionality reduction blow of the Internet platform will definitely have an impact on the offline stores of Mingchuang Premium, but she feels that what is more contradictory is that Mingchuang Excellent Products itself has also opened online direct sales stores, and online direct sales stores often have discounts, full reductions and other activities.

For many consecutive days, "The Most Talking" has found that the Tmall flagship store of Mingchuang Premium products does have many products in discount promotion.

Minchuang Premium is making efforts to develop its online e-commerce business, and its online sales scale is rapidly expanding, which can be seen from its logistics costs. Before June 30, 2020, its logistics expenditure generated by sales through e-commerce channels was zero, and from June 30, 2020 to June 30, 2021, the company obviously began to work online, and this expenditure reached 56.8 million yuan in that year, and then, in the second half of 2021, in six months, this expenditure reached 67.6 million yuan.

Of course, it cannot be said that Mingchuang Excellent Products has not taken into account the development of franchisees, for example, in fact, in recent years, the security deposit of goods it collects from franchisees has been declining, from a maximum of 750,000 yuan to 600,000 yuan, and in early 2022 it has been cut to 350,000 yuan.

At the same time, Ye Guofu's "100 countries and 100 stores plan" has not been realized as scheduled, and now that the time has come, the KPI is only half completed.

When we asked the person in charge of the franchise customer service region of Mingchuang Premium products whether there was a risk of loss when joining, she said that there is a certain proportion of money loss in any business, and it is impossible to make 100% money. However, the proportion of Miniso premium products making money is 85%, and the proportion of losing money is 15%. Mainly because the shop is not good enough, the location is not right, the decoration is not good, the customer source is scattered, etc.

You see, most of the above problems can be attributed to franchisees, in fact, franchisees themselves also feel so, "the store is your own willingness to open, not open well, and you are looking for a store has a relationship, to find the reason from yourself." Wang Li said.

She is closing some of the shops of Mingchuang Premium, but what will she do in the future? Turning around, she went to join some other brands. Now, more and more new brands have chosen the model of mingchuang and excellent products, such as like a gust of wind, strange hair washing shops and string bars are opened on the street.

In fact, Wang Li herself is also very clear, "Mingchuang is the best in the industry, and many others are here to cut leeks." "But over the years, she has been a treasurer for too long, and she has not yet plucked up the courage to step out of this circle."