Why did Haidilao close 300 stores?

Why did Haidilao close 300 stores?

Why did Haidilao close 300 stores? In 2019 alone, Haidilao opened 308 new restaurants, bringing the total number of stores to 768. Faced with With the turnover rate continuing to decline, Haidilao chose to close some stores. Why did Haidilao close 300 stores? Why did Haidilao close 300 stores1

On November 5, Haidilao issued an announcement stating that it had decided to gradually close 300 Haidilao stores before December 31 with relatively low customer traffic and operating performance not as good as expected. store.

At the same time, Haidilao also released a "Woodpecker" plan aimed at rectifying stores with poor operating performance.

This is the first time Haidilao has embarked on such a large-scale store closing trend since its listing. According to Haidilao’s previous financial report, as of June 30, 2021, Haidilao had 1,597 stores worldwide. Based on this calculation, the stores closed this time accounted for approximately 18.8% of its total stores.

Haidilao released a letter "to friends who care about Haidilao" through its official Weibo. The letter explained the main reasons why the operation of some of the company's stores did not meet expectations.

Including unreasonable location selection for some newly opened stores, internal organizational structure changes that make managers at all levels “incomprehensible and exhausted”, insufficient number of outstanding store managers, and excessive belief in KPI indicators of “continuing profits”. And the lack of corporate culture construction have become the reasons why Haidilao needs to slow down.

However, will closing 300 stores solve these problems?

Haidilao’s “Woodpecker” Plan

Financial reports show that in 2019 alone, Haidilao opened 308 new restaurants, bringing the total number of stores to 768. The table turnover rate is stable at 4.8 times/day. By 2021, Haidilao has 1,597 stores, and its layout has gradually shifted from first-tier cities to second-, third-tier and below cities, but the turnover rate has dropped to 3 times/day.

Faced with the continued decline in turnover rates, Haidilao chose to close some stores.

In terms of closure standards, Haidilao stated that it will comprehensively consider three dimensions: the maturity and customer flow of the external business district where the store is located, the density around the store, and the financial indicators of a single store. "The average table turnover rate has not reached 4 times per day. In principle, new branches will not be opened on a large scale."

While shrinking stores, Haidilao will also make a series of internal structural adjustments. This includes strengthening some functional departments and restoring the regional management system, and strengthening internal management and assessment mechanisms.

Haidilao calls this attempt to survive with a broken arm the "Woodpecker Plan." "The specialty of woodpeckers is that they are good at finding pests under the surface of trees and are tenacious. The person in charge of Haidilao said so when talking about this plan.

Nowadays, many Haidilao stores have already opened The prosperous scene of long queues is gone. All this may be attributed to the original expansion strategy. Why Haidilao closed 300 stores 2

The industry in which Haidilao is located is moving forward. iiMedia Consulting data. It shows that the market size of China's hot pot industry will reach 499.8 billion yuan in 2021, a year-on-year increase of 18%, and the hot pot catering market size is expected to reach 641.3 billion yuan in 2024.

The prospects for hot pot seem to be very good, but in fact, the prospects for hot pot are promising. The category industry concentration is very low. According to a report by the China Commercial Industry Research Institute, the industry concentration CR5 of China's hot pot market is only 5.5%. Giants such as Haidilao only occupy 2.2% of the market share. This is destined to be a hot market. < /p>

“The biggest dilemma currently facing hot pot catering is serious homogeneity and fierce competition. Therefore, the hot pot category has been extremely segmented, and almost every single product has a main segmented brand. Su Peng, an observer of the catering industry and the founder of "Chopstick Wan Si", told AI Finance and Economics that hot pot is the largest category of Chinese food. The track of this category is wide enough, the market capacity is large, the industrial chain is mature and easy to copy, and in terms of business formats There is no need for a chef, and the degree of standardization is high, so everyone flocks to the hot pot.

From a product perspective, Xiabuxiabu, which is in the same poor condition as Haidilao, has made a comeback by relying on its high-end hot pot brands, including the newly launched crab meat and yellow croaker pot this year, in order to hunt for novelties. Its ingredients have attracted the attention of many young consumers; Laowang has gained a lot of fans by relying on its healthy sub-categories of Cantonese hot pot and imported dishes.

Banu, the old rival who is eyeing him with eagerness, clearly emphasizes productism, reduces SKUs, eliminates large and complete dishes, focuses on hairy tripe, and even directly opens stores in multiple shopping malls in first-tier cities in Beijing, Shanghai and Guangzhou. Next to Haidilao. Banu founder Du Zhongbing also revealed that Haidilao’s main high-consumer group is also the target that Banu hopes to cover.

Emerging rivals are also emerging and starting to compete for creativity. Jiumaojiu, the parent company of "Tai Er Pickled Fish", entered Sichuan and Chongqing hot pot, the largest subcategory in the hot pot industry, in August 2020, and launched the "Chongqing Hot Pot Factory", emphasizing that there is no charge for tea seats, no charges for paper towels, and no charge for seasonings. TOLL. In September 2020, Hema also registered the "Hema Hot Pot" trademark and entered the hot pot market, focusing on creative pot bases such as pickled radish old duck, spring water lamb, lamb chops and lamb tail pot base.

In addition to hot pot restaurants, retail hot pot is also gaining momentum. Take Guoquan Shihui as an example. The brand has opened more than 7,000 stores and promotes "eating hotpot at home". It claims that its prices are 40%-60% lower than restaurants and 30%-40% lower than supermarkets. It has gained popularity. Yin International, Tiantu Capital and other capital placed bets.

Many brands choose to start from segmented tracks and focus on differentiated operations, but Haidilao is still the same Haidilao. At the investor exchange meeting in June this year, an investor asked Zhang Yong that Haidilao has good service but average taste. How do you consider the taste?

Zhang Yong’s answer is, “There is a difference between the catering industry and the rocket industry. The rocket industry has standards, but catering has no standards. It’s just that some companies emphasize taste, and we don’t pay attention to it. Looking at the reports, we The marketing expenses are zero.” The implication is that Haidilao just did not spend money to promote its products.

In October this year, strategic positioning expert Xu Xiongjun told the media that if a hot pot brand wants to remain invincible, it should always be consumer-centered and provide high-end value. If there are only high-end prices, but the service, management, dishes, catering, standardization, etc. cannot keep up, it will eventually decline.

Currently, Haidilao’s price system remains high among similar brands. According to the company's financial report, Haidilao's per capita consumption increased to 110 yuan in 2020, and in first-tier cities it reached 116 yuan. The 2021 "Hot Pot Market Survival Report" pointed out that in the entire hot pot category, only 33% of hot pot brands have a per capita consumption of 80-100 yuan, and 46% of hot pot stores have a per capita consumption level of 50-80 yuan.

Zhang Yong clearly discovered this in 2018, "If customers say that Haidilao is not delicious, they may actually think the price is too expensive." In March 2020, the epidemic hit hard and the business was closed for two months. Haidilao has raised the price of food ingredients. A diner in Beijing found that a half portion of Xuewang has increased from 16 yuan to 23 yuan, and a half portion of potato chips is 13 yuan, so a potato is 1.5 yuan; self-service condiments are 10 yuan per person; and a bowl of rice is 7 yuan.

From a business perspective, with costs rising during the epidemic, it seems reasonable for Haidilao to increase prices, but consumers are very price sensitive. After the incident was exposed, Haidilao had no choice but to continue its usual style and immediately apologized, saying that the price increase was a wrong decision by the management and restored the price to the level before the closure.

According to data from Haidilao’s mid-term report this year, as of June 30, the per-customer unit price of the store has dropped from 112.8 yuan in the same period last year to 107.3 yuan.

From an operational perspective, after deciding to adjust and shrink stores and stop opening new stores on a large scale when the average table turnover rate is less than 4 times/day, the price increase channel is relatively narrow. From the product direction of peers In comparison, Haidilao has relatively few new dishes, and has not yet found an irreplaceable place in the segmented fields. Now it relies more on service and sentiment to move forward.

But for some diners, Haidilao is still the choice that although it lacks special features, it can’t go wrong.

At 11 o’clock in the evening on November 5, the familiar birthday greeting song rang out in the Haidilao store on the East Fifth Ring Road in Beijing. The clerks held up light signs and waved them as usual, and helped customers celebrate their birthdays with smiles. .

At the table, the young diners were not surprised by this, but at least, tonight would go through without any mistakes. Why Haidilao closed 300 stores3

Many years ago, Haidilao put Haidilao on the altar with a book called "Haidilao, Can You Learn?"

From then on, people will pay much more attention to Haidilao. Any unexpected services provided by Haidilao will be recorded by netizens.

For example: some time ago, some Haidilao employees actually helped their children with their homework in a restaurant. This kind of service is probably what parents want. After all, homework tutoring is a big problem. What's even more outrageous is that the restaurant waiter came to tutor me, which was really surprising, and it became a hot search.

However, please don’t neglect the good and the bad. The core competitiveness of a hot pot restaurant must be the food itself. If the food isn't delicious, no matter how good the service is, it probably won't matter.

Unfortunately, Haidilao does not give many surprises in terms of the taste of the food itself. Many netizens said that it is no different from other hot pot restaurants and the taste can only be said to be average.

For many socially anxious consumers, they don’t want to be overserved. They want to eat better-tasting food than their peers, and that’s it.

This is the difficulty of hot pot restaurants. It is really difficult to differentiate the products. After all, they are all raw products. The only place that can really differentiate is the snacks, desserts and seasonings in the restaurant. .

Some consumers who are familiar with Haidilao said that the variety of seasonings in Haidilao is not as rich as before, and many free snacks have been cancelled.

There is really not much room left for Haidilao to play. It is a pity that Haidilao is not aware of this problem.

In addition, when there were relatively few Haidilao shops, people could show their taste and personality by eating Haidilao. But when Haidilao opened everywhere, Haidilao had become an ordinary restaurant, and the previous advantages were gone. What is even more cruel is that competition will also form between Haidilao stores and stores, resulting in a continued decline in the turnover rate.

It is understood that Haidilao’s average turnover rate in 2019 was 4.8 times/day. Affected by the epidemic in 2020, it dropped to 3.5 times/day. In 2021, the turnover rate dropped to 3 times/day.

Haidilao without a turnover rate is like a fish without air, with only one way to die.

In the Chinese catering industry, don’t believe in myths. Every brand will encounter bottlenecks. How to break through is an eternal topic!