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Text/Rickzhang
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In 2022, black swans and gray rhinos will dance together, and the world index of uncertainty will be highlighted.
The uncertainty of the world today is far from the “uncertain” state that Drucker said back then. It is a black swan lake with black swans flying all over the sky.
At present, what entrepreneurs are most concerned about has changed from how to maintain the continuity of profitability to how to find certainty from uncertainty. Everyone wants to go through this dark cycle.
Ray Dalio, author of the book Principles and founder of Bridgewater Fund, said: “Everything works because of the underlying principles, which is a series of cause-and-effect relationships that determine the world. Towards. If you explore the cause and effect relationship, although not all, but preferably most of it. Then you will undoubtedly hold the key to open the treasure chest of this world.”
This means that entrepreneurs who want to start a business or upgrade must understand the nature of this cycle in order to find the laws and derive their own strategies and tactics.
Fortunately, some companies have found the rules and ran to the front of the industry. Studying their cases will bring certain reference to the development of other companies in the industry.
For example, in the consumer and retail industries, which have suffered considerable losses due to the epidemic, one company has recently been in the limelight.
A green frog with drooping eyelids and “thick sausage”-like lips that seems to be curved but not curved made Luckin Coffee’s “Tanabata Package” out of the sky.
The fact that such a hot sales reality is superimposed on the background of the repeated epidemics in China in the first half of the year makes people feel a little unreal, but it can be seen from the data of the second quarterly report just released by Ruixing that in the case of the industry’s general performance due to the epidemic, Ruixing Fortunately, it has achieved a year-on-year increase of 72.4% in turnover.
According to the data of the second quarterly report, as of June 30, 2022, Luckin’s operating income in the second quarter was 3.2987 billion yuan, and its operating profit under GAAP in the second quarter was 241.6 million yuan, with a profit margin of more than 7.3%, compared with the same period last year. It was a loss of 47.5 million yuan.
In particular, all self-operated stores were profitable. The profit of self-operated stores in the second quarter was 712.2 million yuan, with a profit margin of more than 30%, an increase of more than 101.64% over the same period last year.
In the second quarter, Luckin opened 615 new stores, and the total number of stores increased by 9.3% from the previous quarter, reaching 7,195 stores at the end of the quarter.
And with the efforts of direct and affiliated stores, Ruixing has expanded into the low-tier market and began to continuously extend its market reach.
On the other hand, comparing the data of old opponents can bring out the difficulty of Ruixing achieving such results in such a situation.
Just a day before the Chinese Valentine’s Day, Starbucks released its latest quarterly financial report. Although the overall performance achieved a 9% increase, the Chinese market revenue fell by 40% year-on-year, the same-store sales shrank by 44%, and the transaction volume fell by 43% year-on-year. , the average unit price decreased by 1%.
The reality of this comparison can show that even though many offline catering companies have been affected on a large scale under the influence of the epidemic, Ruixing, which has used network thinking to create a business model and relies on “self-pickup + takeaway” to link customers for sales since its establishment, has instead Go against the trend and enter a positive cycle of development.
Economists agree that now is the beginning of a new economic cycle. Surviving in the cycle is the ability, and it is the ability to survive the cycle.
Ruixing’s second quarterly report data shows that he already has the ability to cross the cycle, and he also relies on the ability of digital intelligence to establish a moat system for the coffee track.
Behind this performance, it actually means that Luckin has already found the underlying logic of this industry by using big data capabilities.
To some extent, this underlying logic starts with clarifying customer needs.
1. When crossing the cycle, we must first identify customers
In order to understand how Ruixing has the ability to cross the cycle, we must first understand what a cycle is.
Economist Schumpeter put forward the theory of economic management in World War II, and for the first time proposed three business cycles of “innovation”, some people call it “Schumpeter cycle”, so economic development is cyclical.
The so-called leadership through the cycle is to require leaders to be able to see through the curve of the life cycle, which is actually the process of finding the underlying logic of an industry.
Generally speaking, only the similarities among the differences or the unchanged things behind the changes are the underlying logic. Only by mastering the underlying logic can we dynamically and continuously see the essence of things.
Therefore, if an enterprise wants to go through the cycle, it is the key to grasp the nature of the industry. The conditions for deriving the entrepreneurial cycle from the nature of the industry and the law of development are actually the return of the enterprise to the growth of value, rather than relying on various other models.
To look at Ruixing’s success with this theory, we must first find the underlying logic of the coffee track.
Historically speaking, coffee is an imported product. Although it has deeply rooted in China, in the impression of Chinese consumers, it still represents an international concept of life.
Even foreign coffee giants, such as Nestlé and Maxwell, who were previously exploring this new market, have spared no effort to increase consumers’ awareness of the concept of “coffee = international style” through advertising and other means.
Similarly, Starbucks, Costa and other internationally renowned coffee chain brands based on such cognitions have achieved widespread success in China by refining coffee to create a consumption concept that conforms to consumers’ perceptions in the industry track.
After all, these international giants who generally choose high-end shopping malls, communities, and office buildings to open their stores have used high-end decoration and unified storefront image to raise the boutique setting of cafes to a very high level.
But in fact, people’s perception of coffee has been polarized for a long time. On the one hand, there is very convenient instant coffee. The problem is that these coffees are not related to life and quality, and are only considered by consumers as a beverage; On the one hand, it is the exquisite life and the third space created by the international coffee chain giants, but behind this kind of life is the price of a cup of coffee that can easily exceed 30 yuan, and the limitations of the audience are also relatively obvious.
The key is that the consumption scenarios created by these international giants have no elements that can make consumers “addicted”. For many consumers, the high-end offered by the environment and price alone is not a necessity.
Plus, these international giants ignore a huge consumer base, which is the key to their setbacks in the Chinese coffee market.
After all, coffee is an imported product, and it is relatively young for traditional Chinese tea. In addition, in order to attract consumers, each company has to launch new coffee with various accessories. This kind of “deviant” product arrangement is actually not The so-called “traditional elite” likes.
This puts traditional coffee companies in a dilemma.
On the one hand, selling traditional American, latte and other products alone, the profit margin is not high, and the repurchase rate of the audience is also declining.
Coffee belongs to food. The owner of a food store knows that innovation is the secret of this kind of business. If you only rely on a few old products to live, the development speed will not be too fast.
On the other hand, most of the traditional elites have conservative consumption concepts, and it is difficult for them to accept many new products.
However, it is young people who are really willing to try new coffee drinks, especially urban white-collar workers and students. But the problem now is that major manufacturers have not found a balance point in the middle that meets their needs, and can provide a coffee brand that not only provides a similar exquisite life concept but also provides the convenience of instant coffee.
This is one of the most important cornerstones of Luckin’s success.
Because Ruixing has found a huge blue ocean market that has been ignored by others, and the laws and basic cognitions related to this market are precisely the underlying logic of the popularization of the coffee track in China.
2. Use digital to gain insight into customer needs
After recognizing this underlying logic, Ruixing has made corresponding designs in terms of business model, technology, product development, culture, etc. In fact, it is an upgrade to the traditional coffee business, and it occupies an absolute position in the competition. Advantage.
First of all, Luckin’s business model is based on Internet-based thinking and data-based operations, which is different from the business model of traditional coffee entities.
All decisions are based on the collection, mining and judgment of data, which greatly reduces the risk of business operations.
At present, Ruixing has the characteristics of standardization and industrialization of traditional retail industry, but also has stronger Internet attributes. From store location selection to store operation, it is all driven by data.
According to news reports, through the front-end interactive system, operation system, and data analysis system to build a ONE SYSTEM comprehensive and systematic management covering business functions such as store location, store operation management cycle, and talent training, Ruixing has achieved online management. , Simple operation, data visualization.
“Take expanding the store as an example, data + application can achieve sustainable, orderly and efficient store expansion. We will combine internal and external data to generate a heat map for food delivery to improve the quality of location selection. We do not ask customers to find stores, but Let the store find customers, and we will open stores wherever the customers are.” Cao Wenbao, senior vice president of Ruixing Coffee, said in an interview with the media.
The data from the second quarterly report also confirms that this digital management system has brought real benefits to Luckin.
According to the data, with the support of this system, as of the end of the second quarter, Luckin had a total of 7,195 stores, a net increase of 615 stores in the second quarter, a net increase of 322 joint stores, and entered 11 low-tier cities. There were 293 new self-operated stores and 3 new low-tier cities.
(Image source: Ruixing Coffee’s official Weibo)In addition, it is precisely due to the support of digitalization that Luckin’s newly opened stores can continue to drive revenue growth while expanding their scale and operating leverage. This quarter, the profit margin of self-operated stores exceeded 30%, and the reported operating profit margin exceeded 30%. 7%.
Therefore, Guo Jinyi, chairman and CEO of Ruixing Coffee, told the media after the release of the second quarterly report, “We are proud to announce that although the adverse impact of the epidemic still exists, Ruixing Coffee achieved another outstanding quarter of financial and operational performance. .”
Secondly, the development of hot products based on big data has accelerated the iteration of Luckin’s products, and also reduced the cost of trial and error. For example, the popular raw coconut coffee, and the rise of Yeyun coffee.
(Image source: Ruixing Coffee’s official Weibo)Ruixing has a whole set of logic in the development of popular products. They don’t believe in luck, they only believe in data.
According to the introduction, Ruixing’s R&D personnel will digitize various raw materials and flavors to quantify and track the popular trend of beverages.
Through these data, Ruixing’s R&D personnel can come up with countless product combinations, and can also see which milk coffee and fruit coffee products have not been developed and can be tried.
Moreover, during the research and development process, the product manager of Ruixing will not use words such as “scent and sweet” to describe the flavor, but change all of them into various numbers, so that the corresponding raw materials can be found through these numbers when developing products in the later stage.
For example, the flavor of peach contains the aroma, sourness, sweetness, etc. of the peach itself. The R&D personnel decomposed a map based on these flavors to see if it can be combined with the flavor of coffee.
After such data is obtained, it is combined with the user portraits obtained by the store and the user’s order preference data, and finally an index of whether the product can become a popular item will be generated, and such data will guide the product development to the market. process to minimize product development risks and capital waste.
According to the data of the second quarterly report, in terms of products, Luckin launched a total of 34 new products this quarter, of which the coconut cloud latte has sold more than 24 million cups since its launch in April to the end of the second quarter.
In this regard, Zhou Weiming, senior vice president of Ruixing and head of Ruixing Coffee’s product line, said in an interview with the media that launching a good product quickly does not reflect competitiveness. What is really useful is the mechanism that can quickly launch a good product.
This mechanism is based on Ruixing’s full set of digital data. It is this massive data that supports this innovative mechanism, which in turn feeds back more comprehensive and detailed data.
Without data, even with this logic, it would not be possible to build such a system.
Furthermore, a consumption model that conforms to the habits of consumers, especially young consumers, is another cornerstone of Luckin’s success.
Consumers who grew up in the mobile Internet stage do not care whether they are like the senior “white-collar workers” in Starbucks who have a tasteful place to drink coffee leisurely. They care more about the taste of coffee itself and the convenience of obtaining coffee.
Therefore, from the very beginning, Luckin has formulated a business model that does not rely on offline store marketing, but puts more spending power online.
According to the latest survey results of China Business News, among the proportion of coffee consumers aged 18-24 in first-tier and second-tier cities in China, Ruixing has reached more than 25%, while Starbucks has 12.04% and 15.72%. .
This means that Ruixing is rapidly becoming one of the most recognized coffee brands in the minds of young people in China, and the just-released second quarterly report proves this.
According to the data, the average number of monthly trading customers of Luckin in this quarter increased by 68.6% compared with the same period last year, reaching 20.7 million.
In addition, for the management of supply chain and operations, Ruixing is also based on Internet thinking and big data methods, and various adjustments at any time can closely combine these with its own product capabilities.
For example, if Luckin stores use fully automatic coffee machines, how to ensure that the coffee produced by the automatic coffee machines will eventually form a uniform and stable flavor and meet the product manager’s settings, which depends on digital research and development and background program tuning.
The implementation of this system is actually inseparable from the digital operation capability.
The key is that the continuous growth of various indicators, especially the steady growth of profit margins, shows that the development of Ruixing has gradually entered a positive cycle.
Therefore, these data prove that this operating model is an upgrade for traditional coffee chain companies.
This dimensional upgrade is actually a reconstruction of the coffee track, which just highlights the digital and intelligent retail model.
3. The value of digital and intelligent retail
Luckin has entered a positive development cycle, which is not only meaningful to itself, but also has profound cognitive significance for companies in the entire coffee track and even companies in the retail industry.
This is a practice of reconstructing the capabilities of retail enterprises based on digital intelligence capabilities, and the success of this practice just highlights the advanced experience, and the experience can be replicated.
The so-called digital intelligence refers to the new generation of ICT technology, especially the six major technologies of mobile Internet, cloud computing, big data, artificial intelligence, Internet of Things and blockchain, which are driving a new round of business innovation.
In the retail industry, the core of digital and intelligent innovation is actually the ability to reconstruct the human and goods market. Of course, among people, goods and markets, “people” has always been the core concern of retail companies.
According to the “Research Report on Digital Operation of Smart Business” issued by the Information Committee of China Electronic Chamber of Commerce and other institutions, 91.28% of retail enterprises believe that the core digital advantage of retail enterprises lies in the digital operation system, such as membership system, middle and Taiwan construction, etc. .
Specifically, in the context of digital-intelligence transformation, retail brands need to build a consumer-centric marketing system.
On the one hand, retail companies can use AI, big data and other technologies to mine consumption data and gain insight into the core needs of existing consumers; on the other hand, retail companies can also use digital intelligence capabilities to accurately connect potential consumers and reduce costs. Achieve high conversions.
However, for most retail enterprises, building this set of digital and intelligent systems is often easier said than done. In the business logic of technology companies, these digital and intelligent systems can be seen everywhere.
This is also the reason why Ruixing can take the lead on the road of digital intelligence.
Benefiting from the Internet thinking that has existed since its establishment, Ruixing has deployed its digital intelligence capabilities to all aspects of its operations in advance, and has already formed its own development advantages.
Cao Wenbao, senior vice president of Luckin, said in an interview with the media, “We do not ask customers to find stores, but let stores find customers, and we open stores wherever customers are.”
In his view, Ruixing is not a single link of dataization. From the beginning of the brand’s establishment, it is driven by the whole chain of data.
From 0-1, from 1-100, from 100-thousands, all have data precipitation. Therefore, it is possible to continuously improve the accuracy of store expansion, quickly obtain consumer feedback, and improve operational optimization space.
In fact, due to the fact that they are both retail companies, Luckin’s basic model, normalized growth, and gradually recognized experience can help retail companies accelerate digital and intelligent transformation and leapfrog development.
in conclusion
At present, the world economy has entered the era of Uka, the complexity of the enterprise is the complexity of the enterprise in an ecosystem, and the complexity of the interaction with other market players.
Therefore, enterprises need to grow in the interaction between open organizations and enterprises, not alone.
The evolution of the times requires enterprise innovation, which must evolve from the most primitive linear innovation in the past to an innovation system and an innovation ecosystem, so as to better cope with the new challenges posed by the uncertain environment to the development of enterprises, and finally realize the cycle through.
We can see from Ruixing’s entry into a positive cycle state that traversing cycles and coping with uncertain challenges requires underlying logic, and it is even more necessary to use the latest technologies and thinking methods to conduct overall cognition and analysis of this logic in order to find a leap forward pattern of development.
The transformation of digital and intelligent means to retail is no less than a new revolution, and the end point of this revolution is likely to solve the problem of how Internet e-commerce and offline e-commerce coexist.
The key is that this mode of thinking is also a mode to find the consumption power and cognitive points of young people.
This is very important for any business.
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